RMC No. 102-2017 — Clarifies the taxation of taxpayers engaged in Philippine Offshore Gaming Operations Digest | Full Text

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE AU OF INTER}.IAL REVENUE D,,i:t;emher 27, 21j17 2OI? REVENI.JE MEMORANDUM CIRCULAR NO. IO2.- SUBJECT Taxation of Taxpayers Engaged in Philippine offshore Gaming Operations TO All lnternal Revenue Officers and Others Concerned Background l. On September 1,2016, the Philippine Amusement and Gaming Corporation (PAGCOR) issued Rules and Regulations for Philippine Offshore Gaming Operations (POGO), clearly defining the concept, components, operations and regulation, among others, of Offshore Gaming. This gaming activity basically refers to the offering by a licensee of PAGCOR of online games of chance via the internet, using a network and software or program, exclusively to offshore authorized players, excluding Fili[inos abroad, who have registered and established an online gaming account with the licensee. The Bureau of lnternal Revenue (BlR), not a newcomer to the workings and tax issues presented by online business transactions through the internet, feels that the challenge in gaming operations ii now to implement a fair and equitable taxation of online gaming businesses, how to monitor the revenues and revenue-generating activities of POGO and how to adapt existing taxes to pOGO so as to lessen the so-called "lost potential tax revenues". This is the perspective from which the current issue of taxing taxpayers engaged in POGO should be viewed. Given this perspective, this Circular is being issued to clarify the taxability of POGO and its gaming components, mindful of BIR's basic taxation framework spelled out in Revenue Memorandum Lircutar (RMC) No. 33-2013 dated April 17,2013, that applies to operations of PAGCOR licensees and contractees. To be sure, clue consideration is given to relevant jurisprudence, the accepted recognition that online activity is sufficient to constitute doing business in the Philippines and the "level of digitalization" of BIR's tax enforcenrent and collection system. ll. Policies and Guic;lelines Consistent with tax laws applicable to taxable business entities and establishments, persons who conduct or who are engagecl in the business of offshore gaming operations, including their agents and components shall observe and comply with the following: 1. Register the business at the Revenue District Office (RDO) having jurisdictton over the priricipal place of business/head office (or residence in case of individuals), by accomplishing BIR Form 1901 (for individuals) or 1903 (for corporations or partnerships), and pay the registration fee to any Authorized Agent Bank (AAB) located within the RDO. A BIR Certificate of Registration shall be issued by the RDO, reflecting therein the tax types required of the conceined taxpayer fr:lr filing and payment, which shall be displayed conspicuously in the business establishment. 2. File applicable tax returns on or before due dates, pay correct internal revenue taxes, and submit information returns and other appropriate tax compliance reports in accordance with existing rules and regulations. ]i;l?;,-Ii:iliIjlC;sT4IqNMTGERTN.APDI,_,BIVl,rII,tSUT,{TCINE \\)rt.f , DEC 28 2ot7 il,,rtr" RECEIVEry I

3' raIKaeuegwtehu,polaarbtinziooednodsks.sRuocefhvaecsnchuoaeulnlotbfsfiecaenmrd/asodfteohrearthvbaeuislpainuberlpesosa/sanecycotoifmuanesticnfeogrtiariienncsinopgredcsctoiwomnithpailnianntdh.e"vet*irmiitfneicaptatriexosnrcurUilbeVesdJaunbfVdy lll. Classification of POGO Taxpayers ln consonance with FAGCOR's Rules and Regulations, POGO taxpayers are classified as follows: 1. Licensee, which refers to a POGO, duly licensed and authorized by pAGCoR to provide offshore gaming services, which may be: a. Philippine-based Operator, a duly constituted business enterprise organized in the Philippines. b. cOofufsnhtoryr,e-wbhaoseudrilloepnegraagtoer,thaedsuelyrvcicoensstoitfuatePdAbGuCsiOneRs-sacecnrteedrpiteridseSoerfguaicneiz/Seudpipnoartnypfroorveiiognir for its online gaming activity. 2' olOicffleshhneosrreeEdngataintmyd,inwaguhtaihccohtrivizmiteiaedsYbtroysftPshpAeGtPoCOaOGROP,otowGhpoircohlv-iimcdeeanyasbeepe:arotircualaniyoortshpeercbifiucscinoemspsoneenntittyofdtuhley a' POGo-gaming Agent, which refers to the representative in the philippines of Offshore- based Operator. b' Service Provider, which refers to the entity which provides components of offshore online further be: gaming operations, which may (1) Gaming Software/Platform Provider, for gaming systems and games, sports book, pool betting, etc. (2) Business Process Outsourcing provider, for call centers and lT,support services, excluding the taking of actual bets. (3) Data/Content Streaming Provider, for real time streaming of casino games produced streamed via the internet to thJ website of the from a live dealer studio selup, Licensees. c' Gaming Support Provider, which refers to a company that produces proprietary products and services that may or may not be found in an important part of the online gaming set-up, the gaming system of'the Licensee, but is rewards and marl,reting modules. e.g. payment lolutions, piuv.r registration, lV. Taxability of POGO 1' The income of PoGo, consistent with the PAGCOR Charter and setflecljurisprudence, may be classified as follows: a) aflnrmocmoumseoempfeernortamtpinGlagcaemosfj,ngagnaodmpgbealrimantgiinogcnasp,soiwnoolhssi;c,ahgnrdaemfeirnsgtocliunbcsomaendoroetahrenrinsgimreilaalrizeredcroeradteiorniveodr \M [:i;*t o: T\ffi DEC 2 8 2017'-.',r+ RECE

b) lncome from other Related Services, which refers to income or earning realized or derived not from gaming operations but from such other necessary and related services, shows and entertainment. 2' The operations or activities PoGo and/or other Entity, as classified above, shall have the following tax treatment: a) welTmhexihhgvoeaeihnemtetesehrp,v,nltyeftsefirhrreroeenasmvallgetoubrnaroreuneases,ysssurskr;bgve/iinjahnseedmcsctomthoinmetfeorgentanatrsfaxerft,rocoiaoeimfnnnicpacaoGhtnlsmiysoa/egermkailonitornancdrgaxi,nlo_obngthfpasefteinuovrrrerarertit'pisohoeeren,rcsdaaeesgnusrwtcnei(edei5piedl%triaoo)esn,rx.ifnipesrretlneiinsei-s,gdi ceoirhntfueaa.lreromlgls*ek,in"isnwediodhssrictmholhefeienvrtviiaeemexfsoruermsoeis,f b) lncome tfaorponpmorormportaihalteeinr.cTRohmeelea5tte%adxf,Sravenarclvuhiceise-easdtadinxecdionmtalieexufaronofdmaollntthaoexnre--gsaapsmhparinilclginnootJtpeatapraxpetlyios.,nsa)s shall be subject may be deemed c) aAshdLadilecl debnetsasexuebajndedectroivttoihne5groi/anopcfrpoarmnicceahbifsrreeomttaaxbxeoostnhoignisaimglsainnngioinnoglpgeraermavteiinongnuserseavnaednndufrenosom.rmoathl einrcroemlaetetdaxs,evravilcuees- d) toAgnSonoaunlnnmyp-oopgilrntnoamhgcrmetoaaimrlPncigreEntoicnvvofoitritpidomtieyeeme,srra,srattawplinotxhehnd,ceosvisr.faiiuscRAlbuaneaejlellla-yoscatottedihnddtaecoelrSuPdtEdheointernGavtgixitnioyeota,shrrtwmriecdoha6rgoolnfatrthisomsaeemxnirenoar-gntaspoartapnergiPl.ii-laeigoannabGbdtmel,eoiotSnattgtexh-i*ireecovederpicnrea5esrpo%6appnetrir,ooFoitnporviasreieidnarsneictvhethriinariasegltleanrbxode1teea.vGs"exsrnuaioonubmnnejienisniict.tggsst e) lncome payments-made by POGO licensees or any other business entity licensed or authorized by PAGCOR for all their purchases of gbods ano servGs shall subject to withhording taxes as may be appropriate and appricabre. . 0 ssCreehogramvulillcpaetbeiosnensrsaes.ntuiodbenjer,ecfdteettoos,PacopoGpmliomcailsibcsleeionsnwesiethsohrooraldnainnygyootthtahexererfsbourumsnindeoesfrsreeexmnistuiitnyinergriacetrienosvneedanusbeyaplarAweGssuClatonRodf g) Purchases (local or imported) and sale (local or international) of goods (tangible or intangible) or services shall be subject to existing tax laws and'reve"nue issuances, as may be applicable. V. Repealing Clause, or Any ruling or revenue issuance which is inconsistent herewith is hereby amended, repealed modified accordingly. the All internal revenue officials and others concerned are hereby enjoined to give this circular most extensive publicity pr:ssible. +q r;ffIrii CFIi\'TERliAt REVIYJX /p9*^^Ha\ - CAESAR R. DULAY V i&:UBI'g MGT. FDTPYtIS, IC--N 0120s " Commissioner of lnternal Revenue {t 3: DEC 28 2017 Lfi4,i- RECE TV,E6 F.r.+qErfldil*t*"&"31 5*fe+?I ,- *i