BIR Ruling [DA-042-00]

January 20, 2000 BIR RULING [DA-042-00] Jackpot Leisure Development Corporation 2nd Floor, Baclaran ITM Mall Food Court, Paraaque City Attention: Mr . Andres Y . Narvasa, Jr . Chairman Gentlemen : This refers to your letter dated July 7, 1999 requesting for legal opinion that since Jackpot Leisure Development Corporation is a holder of Bingo Franchise granted by the Philippine Amusement and Gaming Corporation (PAGCOR), the income derived by it from the operation of bingo games are exempt from the payment of taxes pursuant to Sections 13 and 14 of P.D. No. 1869. It is represented that Jackpot Leisure Development Corporation ("JACKPOT' for brevity) is a domestic corporation duly organized and existing under the laws of the Philippines, with SEC Registration No. A199710458; that on April 20, 1998, JACKPOT was granted by PAGCOR a grant of authority to hold and operate bingo games; and that the basis of grant of authority finds support in the provisions of Sections 8 and 9 of P.D. 1869, which substantially provides, thus, "Section 8. Registration . All persons primarily engaged in gambling, together with their allied business, with contract or franchise from the Corporation, shall register and affiliate business with the Corporation. The Corporation shall issue the corresponding certificate of affiliation upon their compliance by the registering entity with the promulgated rules and regulations thereon. "Section 9. Regulatory Power . The Corporation shall maintain a Registry of affiliated entities, and shall exercise all the powers, authority and the responsibilities vested in the Securities and Exchange Commission over such affiliated entities mentioned under the preceding section, including but not limited to amendments of Articles of Incorporation and By-Laws, change in corporate term, structure, capitalization and other matters concerning the operation of the affiliating entities, the provisions of the Corporation Code of the Philippines to the contrary notwithstanding except only with respect to original corporation." In reply, please be informed that pursuant to Section 13 of P.D. 1869 pertinent portion of which provides that " Sec. 13. Exemptions xxx xxx xxx "(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 percent (5%) 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, 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 the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees, 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 operation 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." any corporation, association, agency or individual with whom the Corporation (i.e., the PAGCOR) has a contractual relationship, shall, in lieu of the five percent (5%) Franchise Tax of the gross revenue or earnings derived from the operations conducted under the franchise, be extended the benefit and exemption from the payment of tax of any kind or form, income, or otherwise, as well as fees, charges or levies of whatever nature, whether National or local, being enjoyed by the Corporation. Since JACKPOT has been granted an authority to hold and operate bingo games by PAGCOR, thus establishing the existence of a contractual relationship with the latter, this Office is of the opinion as it hereby holds that the exemption from taxes, fees and charges being enjoyed by PAGCOR is deemed to have been extended to the former, JACKPOT. (BIR Ruling No. 138-98 dated September 25, 1998; BIR Ruling No. DA-591-99 dated October 10,1999) llcd This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group