BIR Ruling No. 367-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869; Secs.109 & 27 of NIRC

BIR Ruling No.1090-18 0T0 3 6702 U 2u JUL 0 2 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:

on behalf of your client, TOPNOTCH BINGO TREND INC. (doing business under the opinion that income derived from bingo games operations conducted by TOPNOTCH, as a licensee of the Philippine Amusement and Gaming Corporation (PAGCOR), shall be subject name and style of Extremebingo) ("TOPNOTCH", for brevity), for confirmation of your to 5% franchise tax, in lieu of all kinds of taxes, pursuant to Section 13(2)(b) of Presidential Decree ("PD) No. 1869, as amended by Republic Act ("RA) No. 9487. This refers to your letters dated November 29, 2018 and September 4, 2019.requesting

is a corporation duly organized under the laws of the Philippines, the primary purpose of which is to purchase, acquire, establish, own, hold, sell, lease, conduct, operate, manage general amusement and recreation enterprises of every kind and nature; to furnish amusement and recreation to the public, and other similar related business activities, including the establishment and operation of information center, technology facility and production studios; and to carry on any lawful activities and to do any and everything necessary, suitable, to the powers of the corporation. TOPNOTCH is a holder of various Gaming Licenses' for its Bingo Games Operations which was issued by PAGCOR pursuant to PD No. 1869, as amended convenient or proper for the accomplishment of any of the purposes enumerated or incidental by RA No.9487. It is represented that TOPNOTCH, with Tax Identification Number

9487, provides, viz: In reply, please be informed that Section 13(2) of PD No. 1869, as amended.by RA No.

"SEC. 13. Exemptions.

income or otherwise, as well as fees, charges or levies of whatever nature. Franchise from the Corporation, nor shall any form of tax or charge attach (2) Income and other taxes -- (a) Franchise Holder: No tax of any kind or form. whether National or Local, shall be assessed and collected under this

1 Please see attached Annex "A" for the list of Gaming Licenses issued to Topnotch M

C0367-2020

JUL 0 2 2020

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,

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

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

XXX XXX XXX

(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 Franchise and 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. "

XXX XXX XXX

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)

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

OT- 0 3 7o 2 0 2 0 JUL 0 2 2020

Internal Revenue Code of 1997, as amended, provides: With regard to the V AT exemption of TOPNOTCH, Section 109 (1) (K) of the National

Subsection (2) hereof, the following transactions shall be exempt from the value- added tax: "SEC. 109. Exempt Transactions. - (l) Subject to the provisions of

XXX XXX XXX

(K) Trans..-tions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under

Presidential Decree No. 529; (Emphasis supplied)

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

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

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

Gaming Licenses for its Bingo Games Operations issued by PAGCOR, the exemption from

taxes, fees and charges enjoyed by PAGCOR is extended to TOPNOTCH pursuant to Section

13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the income derived by

TOPNOTCH 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 TOPNOTCH 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,

awa

CAESAR R.DULAY

Commissioner of Internal Revenue

035616

K-1 gps(topnotch)

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

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

BIG TIME GAMING CORPORATION List of Gaming Sites Annex "A"

No.Tax Identification No. SM City Batangas, Pallocan West, Batangas City TOPNOTCH BINGO TREND, INC. Registered Address / Location Gaming License No. Valid Until

2/F SM City Clark,M.A.Roxas Highway BrgyMalabanias, Angeles City, Pampanga SM City Tayay,Manl East Road,Brgy.DoloreTayay,Rial SM City Lipa, Ayala Highway, Brgy Maraouy, Lipa City, Batangas 2nd Level U 246 SM City Rosario, Gen. Trias Drive, Brgy. Tejero Convention, Rosario, LGF SM City San Lazaro. Sta. Cruz, Manila Metropoint Mall, Edsa cor. Taft Avenue, Brgy. 097, Pasay City 2/F SM City Marcos Highway, Brgy. Calumpang, Marikina City Cavite City SM City Rosales, Mc Arhur Highway, Camen East Rosales, Pangasinan December 17, 2021 November 14, 2021 September 29, 2021 September 08, 2021 November 16, 2020 February 03, 2021 March 31, 2020 March 31, 2017 June 29, 2021