BIR Ruling No. 424-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

Rn BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869;Secs.109& 27 of NIRC

BANIQUED LAYUG & BELLO BIR Ruling No.1090-18 07-0424-2020 JUL 2 7 202U

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,RIZAL GAMING CORPORATION ("RIZAL GAMING,for This refers to your letters dated November 29, 2018 and September 4, 2019 requesting

brevity), for confirmation of your opinion that income derived from bingo games operations conducted by RIZAL GAMING, 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 to Section 13(2)(b) of Presidential Decree ("PD'0) No. 1869, as amended by Republic

Act ("RA) No. 9487.

It is represented that RIZAL GAMING, with Tax Identification Number

, 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 and

supervise restaurants, cafes, bars and general amusement and recreation enterprises of every

kind and nature; to furnish amusement and recreation to the public, such as but not limited to.

bingo games, ballroom dancing, tea and garden parties, movie premiers, stage plays, basketball

games, concerts, variety shows and other similar related business activities and to carry on any

lawful business and to do any and everything necessary, suitable, convenient or proper for the

accomplishment of any of the purposes enumerated or incidental to the powers of the

corporation. RIZAL GAMING is a holder of various Gaming Licensesfor its Bingo Games

Operations which was 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 formof tax or charge attach

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

1

CT-0424-2020 JUL 27 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.

XXXXXXXXX

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

tax, income or otherwise, as well as any form of charges, fees or levies, shall operations conducted under the franchise, specifically from the payment of any 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 tolthe benefit of and extend to

corporation(s), association(s), agency(ies), orindividual(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\paycorporate 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-0424-2020 3y

JUL 2 7 20'D

National Internal Revenue Code of 1997, as amended, provides: With regard to the VAT exemption of RIZAL GAMING,Section 109 (1)(K) of the

Subsection (2) hereof, the following transactions shall be exempt from the value- added tax: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of

XXX XXX XXX

(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)

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 RIZAL GAMING 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 RIZAL GAMING pursuant to

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

by RIZAL GAMING 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 RIZAL GAMING 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,

aeearwa

CAESAR R. DULAY

Commissioner of Internal Revenue

035967

T

K-1 gps(rizal gaming)

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.

OT-0424-2020

"ORPORATION JUL 12 7 2020 Annex "A"

es

Tax Identification No. Level 3.Robinson's PlaceOrtigas Ave.Ext. Sto.Domingo,CaintaRizal RIZALGAMING CORPORATIONGT Registered Address I Location Gaming License No. May 26, 2021 Valid Until

ITSP Bldg, Ortigas Ave., Bgry San Isidro, Taytay, Rizal October 28, 2017

G/F Robinsons Place Cainta Ortigas Ave Ext, Brgy. Sto.Domingo, Cainta, Rizal May 26, 2021

2nd Flr. Graceland Plaza, J.P.Rizal St., Brgy.Malanday, Marikina City April 01, 2021

2/F RMR Square Tandang Sora Avenue Pasong Tamo 2 Quezon City November 17, 2022

Hollywood Suites and Resort, McArthur Highway, Brgy Ibayo, Marilao Bulacan April 10, 2023

149 A Luvers Market M.H. Del Pilar Street Barangay San Rafael, Rodriguez Rizal July 27, 2021

2/F, Ardi Commercial Complex, A.Bonifacio Ave., San Andres, Cainta, Rizal November 16, 2021