The 20 per cent mandated discount for senior citizens does not apply to membership dues in non-profit, stock golf and country clubs, the Supreme Court (SC) has ruled.

However, the SC said the discount applies to fees for locker rentals and other charges on the use of the club’s facilities and equipment, like golf carts.

The ruling was contained in a decision written by Associate Justice Jose Midas P. Marquez.  The SC partially granted both the petitions filed by the Department of Social Welfare and Development (DSWD) and the Manila Southwoods Golf and Country Club, Inc.

Case records showed that Carlos T. Santos Jr. is a regular member of Manila Southwoods.  In 2010, Santos asked the golf club to apply his senior citizen’s discount on his monthly dues, locker rentals, and other fees and charges on his use of the club’s golf facilities and equipment.  

Santos invoked Section 4(a) of Republic Act No. 9257, the law on senior citizens' benefits.

When Manila Southwoods denied his request citing the Implementing Rules and Regulations crafted by the DSWD for non-profit, stock gold and country clubs under RA 9994, the Expanded Senior Citizens Act, Santos filed a case before the trial court against the club and DSWD.

He asked the Quezon City regional trial court (RTC) to invalidate Rule IV, Article 7, Section 4 (2) of the IRR of RA 9994. The section in the IRR provides that non-profit, stock golf and country clubs, which are not open to the general public and are private and for exclusive membership only, are exempted from giving the 20 percent senior citizens’ discount.

In 2012, the RTC ruled in Santos’ favor as it declared the assailed IRR provision invalid. The trial court ordered Manila Southwoods to grant Santos the “the 20 percent discount for the exclusive use, utilization and enjoyment or availment of the services of the defendant’s (Manila Southwoods) recreation centers.”

DSWD and Manila Southwoods challenged the trial court’s decision directly before the SC.

In granting partially the petition, the SC clarified the scope of the 20 percent discount of senior citizens under Section 4(a) of the Expanded Senior Citizens Act.

It pointed out that the discount under Section 4(a) expressly applies to the sale of goods and services. “The plain language of the law thus requires the sale of a good or service for the 20 percent discount to apply. Absent the sale of a good or service, the 20 percent senior citizen discount does not apply.”

On membership fees, the SC reiterated its 2019 ruling in the case denominated as “Association of Non-Profit Clubs, Inc. vs Bureau of Internal Revenue.” The ruling in the 2019 case stated that when a club collects membership fees, it is not selling its service to the members.

“Conversely, the members are not buying services from the club when dues are paid…. As such, there could be no ‘sale, barter or exchange of goods or properties, or sale of a service’ to speak of, which would then be subject to [the Value Added Tax (VAT)],” it stressed.

Thus, it said, the 2019 ruling that membership fees or dues do not involve the sale of a good or service for purposes of VAT liability under the Tax Code equally holds true with respect to the 20 percent senior citizen discount. “Such [membership] fees are paid for the privilege of membership, and not for the purchase of a good or service,” it also said.

“In contrast, the payment of fees for locker rentals and other charges pertaining to the use of golf facilities and equipment involves the sale by the golf and country club of services to the availing member. In paying these fees, the purchasing member is availing of the club’s services, and not for the privilege of membership in the club,” it pointed out.

The SC also said: “Considering this essential distinction between membership dues and fees collected by golf and country clubs for the rendition of services, the treatment of these fees under RA 9994 must likewise be distinguished as follows:

“1. Sec. 4(a)(7), RA 9994, does not apply to membership dues, because such dues are not payment for the sale of a service. While the assailed IRR provision is invalid for being beyond the scope of RA 9994 and Sec. 4(a)(7) thereof, associations charging membership dues are not required to give the 20 percent senior citizen discount on such dues. This is not an exemption drawn from the invalid assailed IRR provision or any other administrative rule. Rather, it is based on the clear language of Sec. 4(a), RA 9994, which mandates the grant of the 20 percent senior citizen discount on the sale of the goods and services enumerated by the same law but not on the collection of dues for the privilege of membership.

“2. However, Sec. 4(a)(7) applies to the payment of fees for locker rentals as well as other charges pertaining to the members' purchase of services provided by the club. In paying these fees, the purchasing member is availing of the club's services, and not for the privilege of membership in the club. Thus, there is a sale of service as contemplated in Sec. 4(a)(7), and golf and country clubs are required to provide qualified members with the 20% senior citizen discount mandated by RA 9994.”

With its ruling, the SC ordered Manila Southwoods “to grant its qualified members a 20 percent discount on the sale of its services, but not on the collection of membership dues and other fees collected for the privilege of membership.”