BIR Ruling

February 1, 1972 Mr. Teodoro C. Araneta Delegate, 1971 Constitutional Convention Room 520, Manila Hotel Manila S i r : This refers to your letter dated October 29, 1971 requesting information whether the 10% agent's commission from a sweepstakes prize is exempt from income tax. In reply thereto, I have the honor to inform you in the affirmative. Section 4 of Republic Act No. 1169 reads as follows: "SEC. 4. Holding of sweepstakes . The Office shall hold charity horse race sweepstakes under such regulations as shall be promulgated by the Board in accordance with Republic Act Numbered Three hundred and nine: Provided , however , That when the holding of a sweepstakes race to determine prizes is impossible due to war, public calamity, or other unforeseen or fortuitous event, or when there is no sufficient number of horses to determine the major prizes, the Board of Directors may determine the procedure to be followed in the distribution of prizes in the most just, equitable and expeditious manner. The horse races and the sale of tickets in the said sweepstakes shall be exempt from all taxes, except that each ticket shall bear a twelve-centavo internal revenue stamp and that from the total prize fund as provided herein from the proceeds of the sale of tickets there shall be deducted an amount equivalent to one and one-half per centum of such total prize fund, which shall be paid to the Bureau of Internal Revenue not later than ten days after each sweepstakes in lieu of the income tax heretofore collected from sweepstakes prize winners : Provided, however, That any prizes that may be paid out from the resulting prize fund , after said one and one-half per centum has been deducted, shall be exempt from income tax. The tickets shall be printed by the Government and shall be considered government securities for the purpose of penalizing forgery or alteration." (Emphasis supplied) In accordance with the foregoing provision of the law the following are exempt from taxes: 1. The horse which held by the Philippine Charity Sweepstakes; 2. The sale of tickets; 3. The sweepstakes prize winners; and 4. Any prizes that may be paid out from the resulting prize fund, after the 1 % has been deducted from the total prize fund and paid to the Bureau of Internal Revenue. Since the 10% agent's commission is taken from the sweepstakes prize fund, the same is exempt from income tax. In lieu of the taxes which are not collected, the Philippine Charity Sweepstakes pays twelve centavos on each ticket for internal revenue stamps and 1% of the total prize fund. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue