BIR Ruling No. 426-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

PD 1869; Secs.109 & 27 of NIRC

OT00426-2020 BIR Ruling No.1090-18 JUL2 8T2020

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

Attention: Attys. Suzette A. Celicious- Sy

Kathleen Mae M. Villamin

Ana Margaret T. Dahilig

Gentlemen:

name and style of Davao Bingo Corporation) ("SOUTH BINGO, for brevity), for on behalf of your client, SOUTH BINGO CORPORATION (doing business under the This refers to your letters dated November 29, 2018 and September 4, 2019 requesting

confirmation of your opinion that income derived from bingo games operations conducted by

SOUTH BINGO, 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 SOUTH BINGO, with Tax Identification Number , is a corporation duly organized under the laws of the Philippines, the primary purpose of which is 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. SOUTH BINGO is a holder of various Gaming Licenses for 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

1 Please see attached Annex "A" for the list of Gaming Licenses isued to Squth Bingo

O7

JUL 2 8 2020

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

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

added tax:

XXX XXX *X

(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 grant$ 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 SOUTH BINGO 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 SOUTH BINGO pursuant to

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

by SOUTH BINGO 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 SOUTH BINGO 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,

18e3an1y

CAESAR R. DULAY

Commissioner of Internal Revenue

035981

A

gps(south bingo) K-1

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.

O

Franchise from the Corporation, nor shall any form of tax or charge attach JUL '2 8 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 inlieu 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.

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 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 Franchiseand 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. "

Plainly, too, upon payment of the 5% franchise tax, petitioner's income XXX XXX XXX

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-00426-2020

BIG TIME GAMING CORPORATION List of Gaming Sitos JUL 2 8 202inexA

No Tax Identification No. F SM City Davao Quimpo Bivd.,Ecoland.Davao City SOUTH BINGO CORPORATION Registered Address /Location Gaming License No. June 10,2020 Valid Until

Victory Town Center,Atienza cor.Gen Luna St.Lemery,Batangas December 17.2021