BIR Ruling No. 364-2020

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869: Secs.109 & 27 of

NRC

BIR Ruling No.1090-18 T-0364-2027 JL 0 2 2U2U

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, ALPHA ONE AMUSEMENT AND RECREATION CORP bingo games operations conducted by ALPHA ONE, as a licensee of the Philippine ("ALPHA ONE", for brevity), for confirmation of your opinion that income derived from This refers to your letters dated November 29, 2018 and September 4, 2019 requesting

Amusement and Gaming Corporation (PAGCOR), shall be subject 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.

It is represented that ALPHA ONE, with Tax Identification Number is a corporation duly organized under the laws of the Philippines, the primary purpose of which is to conduct and operate traditional and/or electronic bingo games and general amusement and recreation enterprises of every kind and nature; and to carry on any lawful activities and to do

holder of various Gaming Licenses' for its Bingo Games Operations which was issued by the purposes enumerated or incidental to the powers of the corporation. ALPHA ONE is a any and everything necessary, suitable, convenient or proper for the accomplishment of any of 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

1Please see attached AnnexA"for the list of Gaming Licenses issued to Alpha One

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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.

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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 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. "

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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 ALPHA ONE,Section 109 (1) (K) of the

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

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National Internal Revenue Code of 1997, as amended, provides:

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

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(K) Transactions 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 ALPHA ONE 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 ALPHA ONE pursuant to Section 13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the income derived by ALPHA ONE 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 ALPHA ONE 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,

Aaawa

CAESAR R.DULAY

Commissioner of Internal Revenue

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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.