BIR Ruling [DA-177-00]

March 27, 2000 BIR RULING [DA-177-00] SGV & CO. 6760 Ayala Avenue 1226 Makati City Attention: Mr . Joel Tan-Torres Gentlemen : This refers to your letter dated February 2, 2000 stating that your client, Belle Jai Alai Corporation (Belle), is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines and is engaged in the business of gaming and entertainment; that on June 17, 1999, Belle entered into an agreement, in connection with the operation of Jai-Alai, with Philippine Amusement and Gaming Corporation (PAGCOR); that on the basis of the said agreement, PAGCOR shall manage, operate and control all aspects of Jai-Alai operations pursuant to its franchise; that Belle, on the other hand, shall provide funds for the pre-operating expenses and working capital of the Jai-Alai operation; that Belle shall likewise make available to PAGCOR the use of integrated nationwide network of on-line computerized system capable of accepting and processing both fronton and off-fronton bets, as well as the outfitting and rolling out of off-fronton betting station; and that in consideration of the undertakings of Belle, the net income derived from the operations of Jai-Alai shall be divided equally among PAGCOR, Belle and another entity. In connection therewith, you now request for a ruling as to whether or not the tax exemption being enjoyed by PAGCOR under Section 13(2)(a) and (b) of PD 1869 may be extended to Belle. In reply thereto, please be informed that in BIR Ruling No. 138-98 dated September 25, 1998, this Office ruled that xxx xxx xxx "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." "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 Such being the case, since Belle is under contractual relationship with PAGCOR, the latter having entered into an agreement with the former in connection with the operation of Jai-Alai, it is the opinion of this Office that the exemption from taxes, fees and charges being enjoyed by PAGCOR may also be extended to Belle. 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)