BIR Ruling No. 425-2020

REPUBLIC QF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869: Secs.109 & 27 of

BIR Ruling No.1090-18 NIRC

0-0425-2020

W 2.7 2020

BANIQUED LAYUG & BELLO

8/F Jollibee Center, San Miguel Avenue

Ortigas Center, Pasig City

Attention: Attys. Suzette A. Celicious- Sy

Kathleen Mae M. Villamin

Ana Margaret T. Dahilig

Gentlemen:

This refers to your letters dated November 29, 2018 and September 4, 2019 requesting

on behalf of your client, TOPMOST GAMING CORPORATION (doing business under

the name and style of Bingo sa Nova) ("TOPMOST, for brevity), for confirmation of your

opinion that income derived from bingo games operations conducted by TOPMOST, as a

licensee of the Philippine Amusement and Gaming Corporation (PAGCOR), shall be subject

to 5% franchise tax, in lieu of all kinds of taxes, pursuant toSection 13(2)(b) of Presidential

Decree (PD) No. 1869, as amended by Republic Act (RA No. 9487

It is represented that TOPMOST, with Tax Identification Number is

a corporation duly organized under the laws of the Philippines, the primary purpose of which

is to furnish amusement and recreation to the public, such as but not limited to bingo games,

basketball games, concerts and other similar related business activities. TOPMOST is a holder

of various Gaming Licenses1 for its Bingo Games Operations which were issued by PAGCOR

pursuant to PD No. 1869, as amended by RA No. 9487.

In reply, please be informed that Section 13(2) of PD No. 1869, as amended by RA No

9487, provides, viz:

"SEC. 13. Exemptions.

(2) Income and other taxes -- (a) Franchise Holder: No tax of any kind or form.

income or otherwise, as well as fees, charges or levies of whatever nature,

whether National or Local, shall be assessed and collected under this

Franchise from the Corporation, nor shall any form of tax or charge attach

in any way to the earnings of the Corporation, except a Franchise Tax of five

(5%) percent of the gross revenue or earnings derived by the Corporation

from its operation under this Franchise. Such tax shall be due and payable

quarterly to the National Government and shall be in lieu of all kinds of taxes,

1 Please see attached Annex "A" for the list of Gaming Licenses issued to Topmost O

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levies,fees or assessments of any kind, nature or description, levied, established

or collected by any municipal, provincial, or national government authority.

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(b) Others: The exemption herein granted for earnings derived from the

operations conducted under the franchise, specifically from the payment of any

tax, income or otherwise, as well as any form of charges, fees or levies, shall

inure to the benefit of and extend to corporation(s), association(s),

agency(ies), or individual(s) with whom the Corporation or operator has any

contractual relationship in connection with the operations of the casino(s)

authorized to be conducted under this Franchiseand to those receiving

compensation or other remuneration from the Corporation or operator as a

result of essential facilities furnished and/or technical services rendered to

the Corporation or operator. (Emphasis and underscoring supplied)

In the case of Bloomberry Resorts and Hotels, Inc. vs. Bureau of Internal Revenue,2 the

Supreme Court affirmed the applicability of the tax exemption provisions of PD No. 1869, as

amended by RA No. 9487, to PAGCOR's licensees. Thus, the Supreme Court ruled that:

"As the PAGCOR Charter states in unequivocal terms that exemptions

granted for earnings derived from the operations conducted under the franchise

specifically from the payment of any tax, income or otherwise, as well as any

form of charges, fees or levies, shall inure to the benefit of and extend to

corporation(s), association(s), agency(ies), or individual(s) with whom the

PAGCOR or operator has any contractual relationship in connection with the

operations of the casino(s) authorized to be conducted under this Franchise, so

it must be that all contractees and licensees of PAGCOR, upon payment of the

5% franchise tax, shall likewise be exempted from all other taxes, including

corporate income tax realized from the operation of casinos.

For the same reasons that made us conclude in the December 10, 2014

Decision of the Court sitting En Banc in G.R. No. 215427 that PAGCOR is

subject to corporate income tax for "other related services, " we find it logical

that its contractees and licensees shall likewise pay corporate income tax for

income derived from such "related services. "

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Plainly, too, upon payment of the 5% franchise tax, petitioner's income

from its gaming operations of gambling casinos, gaming clubs and other similar

recreation or amusement places, and gaming pools, defined within the purview

of the aforesaid section, is not subject to corporate income tax. " (Emphasis and

underscoring supplied) With regard to the VAT exemption of TOPMOST, Section 109 (1) (K) of the National

Internal Revenue Code of 1997, as amended, provides:

"SEC. 109.Exempt Transactions. (l) Subject to the provisions of

R

2 G.R. No. 212530 dated August 10, 2016.

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Subsection (2) hereof, the following transactions shall be exempt from the value- added tax:

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which the Philippines is a signatory or under'special laws, except those under (K) Transactions which are exempt under international agreements to

Presidential Decree No. 529; (Emphasis supplied)

PAGCOR's charter, PD No. 1869, is a special law that grants the latter exemption from taxes Thus, PAGCOR and its licensees are exempt from the payment of VAT because

and such exemptions extend or inure to the benefit of its licensees.3

Premises considered, this Office hereby rules that since TOPMOST is a holder of

Gaming Licenses for its Bingo Games Operations issued byPAGCOR, the exemption from taxes, fees and charges enjoyed by PAGCOR is extended toTOPMOST pursuant to Section 13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the income derived by TOPMOST solely from its Bingo Games Operations, during the validity period of its Gaming Licenses on the specified gaming sites, is subject only to the 5% franchise tax, and shall be exempted from corporate income tax and VAT. However, for the purpose of applying the 5%

franchise tax, any income that may be realized by TOPMO$T from related services or such

services not falling under gaming operations, shall be subject to corporate income tax and

VAT.4

This ruling is being issued on the basis of the foregoing facts as represented. However.

if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be

considered null and void.

Very truly yours 1asaa CAESAR R. DULAY Commissioner of Internal Revenue

035966 C

K-1 gps(topmost)

3 Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue, G.R.No.172087 dated March

4 Section 14 (5 of PD No.1869,as amended by RA No.9487. 15,2011.

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ng Sites MING CORPORATION JUL 2 7 202 Annex "A"

Tax Identification No. Unit 240 SM City Novaliches, Bartolome Novaliches, Quezon City TOPMOST GAMING CORP. Registered Address /Location Gaming License No. June 25, 2021 Valid Unti

2nd Fr., SM Hypermaret,EDSA cor Main Ave.Brgy Socorro 3, Cubao,Queon City January 29, 2021

Fortune Plaza, MacArthur Highway, Brgy. Wawa, Balagtas, Bulacan December 17,2021

2F SM Hypermarket F.P.Felix Avenue, Brgy. Sto. Domingo, Cainta,Rizal November 17, 2022

Sapphire Bldg., Zone I, Iba, Zambales December 17,2021