RMC No. 132-2024 — Further clarifying the tax treatment of the Philippine Amusement and Gaming Corporation, its Licensees and Contractees

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

Bringing In Revenues for Nation-Building DEC 0 9 2024 PILIPINAS BAGONG

REVENUE MEMORANDUM CIRCULAR NO 132-2024

SUBJECT: Further Clarifying the Tax Treatment of the Philippine Amusement and

Gaming Corporation, its Licensees and Contractees

TO: All Internal Revenue Officers, Employees, and Others concerned

This Circular is hereby issued to further clarify the franchise tax, income tax and value-added tax (VAT) due from the Philippine Amusement and Gaming Corporation (PAGCOR), its Licensees and Contractees based on existing laws and recent jurisprudence.

I.Tax Treatment of PAGCOR @rubeads rFinternanfevendr

N 28 JES Sections 13 and 14 of Presidential Decree (PD) No. 1869 state: DEC 09 2024

"Section 13. Exemptions. - XXX XXX xxx BY ADMIN UNIT w IIME. E

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

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Section 14. Other Conditions.

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necessary and related services, shows and entertainment. Any income that may be (5) Operation of related services The Corporation is authorized to operate such

1 July 11, 1983. BUREAU OF TNTERNALREVENUE INTERNALCOMMUNICATIONS DIVISION OSSYOT

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BIR National Office Bldg.,Senator Miriam Defensor-Santiago Avenue,DilimanQuezon City Trunkline: 8981-7000 ; 8929-7676 Website: www.bir.gov.ph

realized from these related services shall not be included as part of the income of the considered as a separate income of the Corporation and shall be subject to income tax. Corporation for the purpose of applying the franchise tax, but the same shall be (Emphases and underscoring supplied)

Below is PAGCOR's income classifications and their respective taxability:

1.Income from operations under PAGCOR's franchise/gaming operations

Income from operations under PAGCOR's franchise/gaming operations refers to income derived from issuing and/or granting the license to operate casinos, i.e., basketball, football, bingo, etc. except jai-alai, whether on land or sea, within Contractees and Licensees, as well as earnings derived by PAGCOR from its own includes, among others: gaming clubs and other similar recreation or amusement places, gaming pools, the territorial jurisdiction of the Republic of the Philippines; to PAGCOR's operations under its franchise (Sections 10and 13(2 of PD No. 1869. This

(d) Income from mobile bingo operations operated by it, with agents on a) Income from its casino operations (b) Income from dollar pit operations; (c) Income from regular bingo operations; and.

commission basis. Provided, however, that the agents' commission income shall be subject to regular income tax, and consequently, to withholding tax under existing regulations.

or levies of whatever nature, which necessarily include corporate income tax and The above income is subject to five percent (5%) franchise tax under PD No. 1869, as amended, in lieu of all taxes of any kind or form, as well as fees, charges VAT.

Considering that the "gaming operations" include granting of licenses to operate casinos, gaming clubs and etc., regulatory/license fees received by PAGCOR from its Licensees shall be considered income from PAGCOR's operations under its

of all other taxes, including VAT. franchise or gaming operations subject to five percent (5%) franchise tax, in lieu

2. Income from other related services/operations or from non-gaming operations

related services, shows and entertainment are subject' to corporate income tax PAGCOR's income from other related services/operations or from non-gaming operations, such as, but not limited to, income from operating necessary and

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pursuant to Section 14(5) of PD No. 1869,2 which provides that income derived by PAGCOR from"other related services" shall not be included as part of the income of PAGCOR for the purpose of applying the franchise tax, but the same shall be considered as a separate income of PAGCOR and shall be subject to income tax. This shall also be subject to VAT under the National Internal Revenue Code of 1997, as amended (Tax Code).

3. Collection and remittance of qualifying fee from players

accordance with Executive Order No. 48, series of 1993,3 Revenue Regulations PAGCOR must also collect a qualifying fee from players and remit the same in

No. 06-1993 and Revenue Memorandum Order No. 14-1993. Pursuant to the mentioned law and revenue issuances, PAGCOR shall issue a check, payable to

Revenue (BIR), equivalent to the amount of collections for a particular week the Bureau of Treasury and to the credit of the account of the Bureau of Internal

journal voucher and any other necessary documents in favor of the BIR for the latter to record the amount of collections in its book of accounts. This check, together with the necessary supporting documents prescribed by the BIR, shall be issued to the Bureau of Treasury not later than Tuesday following each week. The Bureau of Treasury shall then prepare monthly the corresponding

it within thirty (30) days after the close of the taxable year, summarizing all PAGCOR shall file an annual report with the BIR Office having jurisdiction over qualifying fees it has collected from its players for the taxable period.

II. Tax Treatment of PAGCOR Licensees and Contractees

To reiterate, Sections 13(2) of PD No. 1869 states:

"Section 13. Exemptions. -

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payable quarterly to the National Government and shall be in lieu of all kinds of taxes, 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 the Corporation from its operation under this Franchise. Such tax shall be due and levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. (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 except a Franchise Tax of five (5%)_percent of the_gross revenue or earnings derived by

2 Philippine Amusement and Gaming Corp. v. Commissioner of Internal Revenue, G.R. Nos. 210689-90, 3 Requiring the Collection of Qualifying Fees for Players Entering the Casino, January 19, 1993. 210704 & 210725, November 22, 2017.

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operations of the casino(s) authorized to be conducted under this Franchise and to those (b) Others: The exemptions 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 Corporation or operator has any contractual relationship in connection with the 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, xxx " (Underscoring supplied) extend to corporation(s), association(s), agency(ies), or individual(s) with whom the

Wealth Ltd., v. Bureau of Internal Revenue and Marco Polo Enterprises Limited v. Secretary In the recent en banc decision of the Supreme Court in the consolidated cases of Saint

provisions of PD No. 1869, as amended, to both PAGCOR's Contractees and Licensees, to Revenue, the Supreme Court unequivocally affirmed the applicability of the tax exemption of Finance, citing also the case of Bloomberry Resorts and Hotels, Inc. v. Bureau of Internal

Wit:

paying only a five percent (5%) franchise tax for income generated from its gaming Hotels, Inc. v. Bureau of Internal Revenue (Bloomberry), that PAGCOR's tax privilege of Operations, in lieu of all other taxes, inures to the benefit of PAGCOR's licensees: "Considering the above-cited provisions, this Court clarified in Bloomberry Resorts and

shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or 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, 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 the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos. As the PAGCOR Charter states in uneguivocal terms that exemptions granted for Franchise, so it must be that all contractees and licensees of PAGCOR, upon payment of

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subject to corporate income tax. "" (Underscoring supplied) 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

gaming operations; and (2) PAGCOR's Contractees and Licensees from their gaming operations, is subject to five percent (5%) franchise tax, in lieu of all other national and local taxes, including indirect taxes such as VAT. In light of the recent jurisprudence, income received by: (1) PAGCOR from its

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On'the other hand, income derived by PAGCOR, its Licensees and Contractees from other related services/operations or from non-gaming operations shall be subject to corporate income tax and VAT.

I. Tax Treatment of PAGCOR's Licensees Located in Ecozones/Freeports

For Licensees that are located in Ecozones/Freeports, their income realized from:

I. Income from gaming operations.

Income from gaming operations shall not be subject to the Special Corporate :Income Tax (SCIT), Income Tax Holiday (ITH), or corporate income tax but remains subject to five percent (5%) franchise tax, in lieu of all other taxes. including VAT, in accordance with PD No. 1869, as amended, and the aforecited jurisprudence.

2. Other related services/operations, or non-gaming operations, that are covered by 'their registered activity with the concerned Investment Promotion Agency (IPA).

If PAGCOR's Licensee is under the five percent (5%) SCIT, such income shall be exempt from regular corporate income tax and VAT.

b. If PAGCOR's Licensee is under the ITH, such income shall be exempt from corporate income tax. The same, however, shall be subject to VAT.

3. Other related services/operations, or non-gaming operations, that are not covered by their registered activity with the concerned IPA.

the concerned IPA shall be subject to regular corporate income tax, VAT and other applicable taxes under the Tax Code. Income received by PAGCOR Licensees from other related services/operations or from non-gaming operations that are not covered by their registered activity with

IV. Remittance of the Franchise Tax to the BIR

PAGCOR's Licensees/Contractees shall remit the five percent (5%) franchise tax to the BIR and shall be made directly to the Revenue District Office where the licensee or contractee is registered. The licensee and contractee shall remit the franchise tax to the BIR using BIR Form No. 2553 indicating the AIphanumeric Tax Code OT 010.

paid by virtue of the license entered into by and between the licensees and PAGCOR based on the aggregate gross gaming revenue. Said fee is the consideration for the authority granted by PAGCOR to its licensees to establish and operate a casino. On the other hand, the five percent (5%) franchise tax is the tax incentive provided to PAGCOR and its licensees and contractees for its income from gaming operations, which is properly collected by and within License fees are different and distinct from franchise tax. The license fee is being

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the jurisdiction of the BIR and concerned Local Government Units pursuant to Department of Finance Department Order No: 03-08 issued on February 13, 2008.6

amended, modified or revoked accordingly. This Circular. however, shall apply prospectively. All revenue circulars and BIR rulings inconsistent herewith are hereby considered

strictly implement the provision of this Circular. All internal revenue officers, employees and others concerned are hereby enjoined to

This Circular takes effect immediately.

R

a Essioner of Internal Revenue

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6 Rules and Regulations to Implement Republic Act No. 9400, "An Act Amending Republic Act No. 7227, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes.

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