By: Franchette M. Acosta, Senior Partner, Villaraza & Angangco
E: fm.acosta@thefirmva.com l http://www.thefirmva.com
The Bureau of Internal Revenue (BIR) issued on December 27, 2017 Revenue Circular No. 102-2017 clarifying the tax imposed on entities engaged in Philippine offshore gaming operations. Philippine offshore gaming operators offer to offshore players online games of chance through the internet. Consistent with the regulation issued by the Philippine Amusement and Gaming Corporation (PAGCOR), the Circular classifies POGO Taxpayers as follows: first, the “Licensee”, and second, the “Other Entity”, which includes the POGO Gaming Agent, Service Provider and the Gaming Support Provider. There are different kinds of Service Providers: the Gaming Software/Platform Provider for gaming systems and games, sports book and pool betting; the Business Process Outsourcing Provider for call centers and IT-support services and Data/Content Streaming Provider, for real time streaming of casino games produced from a live dealer studio set-up.
The Circular clarifies that gross gaming receipts or the agreed or pre-determined minimum monthly revenues/income from gaming operations, whichever is higher, shall be subject to a franchise tax of 5%. This tax is in lieu of all kinds of taxes, levies, fees or assessments of any kind. Income from other related services shall be subject to normal income tax, value –added tax and other applicable taxes as deemed appropriate.
An “Other Entity” as defined above, or the POGO Gaming Agent, Service Provider and Gaming Support Provider, who is also a POGO Licensee shall be taxed 5% franchise tax on its gaming activities. However, it shall be subject to the normal tax rate and other appropriate taxes on its non-gaming operations. An Other Entity, who is not a POGO Licensee, deriving or earning only income from other related services or from non-gaming operations shall be subject to normal income tax, value-added tax and other applicable taxes on its entire revenues.
Income from gaming operations are those which are derived from operating of gambling casinos, gaming clubs and other similar recreation or amusement places and gaming pools. Income from other related services refer to income derived not from gaming operations but from other necessary and related services, shows and entertainment.
Income payments made by POGO Licenses or any other business entity licensed or authorized by PAGCOR for all their purchases of goods and services shall be subject to withholding taxes as may be appropriate. Compensation, fees, commissions or any other form of remuneration as a result of services rendered to POGO Licensees or any other business entity licensed by PAGCOR shall be subject to applicable withholding taxes under existing revenue laws and regulations.
This is article is prepared for information purposes only and should not be construed as legal advice.