BIR Ruling No. 405-2020

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BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869: Secs.109 & 27 of NIRC

BIR Ruling No.1090-18 0T-0405-2020

BANIQUED LAYUG & BELLO Ortigas Center, Pasig City 8/F Jollibee Center, San Miguel Avenue JUL 2 4_2020

Attention:Attys. Suzette A. Celicious- Sy

Kathleen Mae M. Villamin

Ana Margaret T. Dahilig

Gentlemen:

on behalf of your client, GAMEXPERIENCE ENTERTAINMENT CORP This refers to your letters dated November 29, 2018 and September 4, 2019 requesting

("GAMEXPERIENCE, for brevity), for confirmation of your opinion that income derived from electronic gaming operations conducted by GAMEXPERIENCE, 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") No.

1869, as amended by Republic Act ("RA) No. 9487.

It is represented that GAMEXPERIENCE, 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 incidental thereto, 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; and to carry on any lawful activities 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. GAMEXPERIENCE is a

holder of various Gaming Licenses' for its Electronic 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 form of tax or charge attach

in any way to the earnings of the Corporation, except a Franchise Tax of five

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

(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,l 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 icorporation(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

subiect 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)

With regard to the VAT exemption of GAMEXPERIENCE, Section 109 (1)(K) of the

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

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

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

added tax:

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)

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 GAMEXPERIENCE is a holder

of Gaming Licenses for its Electronic Games Operations issued by PAGCOR, the exemption

from taxes, fees and charges enjoyed by PAGCOR is extended to GAMEXPERIENCE pursuant to Section 13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the

income derived by GAMEXPERIENCE solely from its Electronic 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 GAMEXPERIENCE 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,

Maeomwea

CAESAR R. DULAY Commissioner of Internal Revenue

035951

K-1 gps(gameexperience)

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

List of Gaming Sites

No. Tax Identification No. Greenhill Town CenerU78,No.2Granada StretValenciaQueon Ciy GAMEXPERIENCE ENTERTAINMENT CORP Registered Address I Location Gaming License No. Valid Unti

G/F Mactan Southgate Mall, Pueblo VerdeMactan Economic Zone-11-Sez Brgy Basak, Lapulapu City 2ndFir. BlockedD,Mactan Marina Mall, MEPZ 1 Brgy.IBO, Lapu-Lapu City Cebu G/F & 2/F Gaisano Grand Mal, Mactan, Basak, Lapu-Lapu City, Cebu September 28, 2021 September 09, 2022 October 13, 2021 May 16, 2020

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