BIR Ruling [DA-018-04]

January 12, 2004 BIR RULING [DA-018-04] P.D. No. 1869 DA-357-99; DA-009-2001; BIR Ruling No. 138-98; DA-136-2002 TOPCA, Inc. 3rd Floor, Marymart Mall Valeria-Delgado Streets Iloilo City Gentlemen : This refers to your undated letter to the Regional Director, BIR Region No. 11 which was indorsed to this Office on February 27, 2003 requesting for a ruling on whether the tax exemption being enjoyed by the Philippine Amusement and Gaming Corporation (PAGCOR) under Section 13(2)(a) and (b) of Presidential Decree (P.D.) No. 1869 may be extended to your corporation as its franchisee. It is represented that TOPCA, Inc. with corporate address at the 3rd Floor, Marymart Mall Valeria-Delgado Streets, Iloilo City, has been granted an authority by the PAGCOR to hold and operate commercial bingo games; and that it is the operator of the Bingo Fiesta Center. In reply, please be informed of the following pertinent provisions of Section 13(2)(a) and (b) of P.D. No. 1869, which state: "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 shall attach 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 the 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. (b) Others: The exemptions herein granted for earnings derived from 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 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." By virtue of the contractual relationship existing between TOPCA, Inc. and PAGCOR where the former is authorized to conduct and operate bingo games, this Office is of the opinion as it hereby holds that the exemption from taxes, fees and charges enjoyed by PAGCOR is effectively extended to TOPCA, Inc.. However, PAGCOR's Charter has been amended by R.A. 7716, as a consequence of which, PAGCOR's liability to the 5% franchise tax has been replaced by the 10% VAT, and that this 10% VAT shall be in lieu of all taxes, national and local. This too, extends to TOPCA. This ruling is being issued on the basis of 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. ACaDTH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group