BIR Ruling [DA-106-00]

February 18, 2000 BIR RULING [DA-106-00] Madarang & Company G-26 South Star Plaza President Osmea Highway Makati City Attention: Mr . Agapito M . Madarang Gentlemen : This refers to your letter dated December 2, 1999 requesting for a ruling as to whether the tax exemption being enjoyed by the Philippine Amusement and Gaming Corporation (PAGCOR) under Section 13(2)(a) and (b) of P.D. 1869 may be extended to BingoLink, Inc. It is represented that BingoLink, Inc. is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with SEC Registration No. A199911351 and with business address at 1705 Centerpoint Building, 17th Floor, Dona Julia Vargas Avenue, Ortigas Center, Pasig City; that it is organized primarily for the purpose of acquiring interests in gaming enterprises and franchised technologies related to gaming and entertainment, among other activities as a holding company; that on July 19, 1999, BingoLink, Inc. entered into a contractual agreement to provide the On-Line systems, computer hardware, software interface, and telecommunication links essential to the operation of Bingo Pilipino, a nationwide On-Line Bingo Gaming Service conducted by Best World Gaming & Amusement Corporation under PAGCOR's authority pursuant to the latter's Charter and direct supervision and control; that under the same contract, BingoLink, Inc. also undertook to provide various facilities and services essential to the sale, distribution and processing of the Bingo player cards by which the public participates in and/or acquires dial-in access to the aforementioned Bingo Pilipino On- Line Bingo Gaming Service; that the said On-Line Bingo Gaming Service is originated by Best World Gaming & Amusement Corporation from a central draw site at the Prime Block Mall, 3rd Floor, Tutuban Center, C.M. Recto, Manila and thence relayed nationwide on public telecommunication networks, connecting through the on-line System and telecommunications servers of BingoLink, Inc., and that BingoLink, Inc. is the owner and ultimate provider of these essential facilities and technical services that make it possible for Best World Gaming & Amusement Corporation and/or PAGCOR to interface the Bingo Pilipino Gaming Service with the telecommunication systems serving the public in general. In reply, please be informed that in BIR Ruling No. 138-98 dated September 25, 1998, this Office ruled 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 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 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." "Since ABLE is under contractual relationship with PAGCOR by virtue of an Authority to 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 Bingo Bonanza. xxx xxx xxx Considering that BingoLink, Inc. has a contractual relationship with PAGCOR by providing the On-Line systems, computer hardware, software interface and telecommunication links essential to the operation of Bingo Pilipino conducted by Best World Gaming & Amusement Corporation under the authority of PAGCOR, it is therefore safe to conclude that the exemption from taxes, fees and charges being enjoyed by PAGCOR may also be extended to BingoLink, Inc. 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, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. EQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)