BIR Ruling [DA-227-00]

May 10, 2000 BIR RULING [DA-227-00] P.D. 1869; BIR Rlng. No. 109-98; 138-98 DA-227-2000 Cesar R. Marcelo & Associates Certified Public Accountants Unit 506 Annapolis Tower No. 43 Annapolis St., Greenhills San Juan, Metro Manila Attention: Mr . Cesar R. Marcelo Gentlemen : This refers to your letter dated April 5, 2000 requesting on behalf of your client, POWER MANAGEMENT & CONSULTANCY, INC. (POWER) for a confirmatory ruling to the effect that the tax exemption privileges enjoyed by the Philippine Amusement and Gaming Corporation (PAGCOR) under P.D. No. 1869 may be extended to its contractors. It is represented that POWER is an existing corporation duly organized and registered with the Securities and Exchange Commission (SEC); that on January 24, 2000, POWER entered into an agreement with PAGCOR in connection with the operations of Jai-Alai; that on the basis of said agreement, POWER had been engaged by PAGCOR to undertake and handle the promotional and marketing aspects of Jai-Alai, with the end in view of increasing revenue generated from said operations; and that as provided for in the said contract, POWER shall be entitled to receive certain per cent of gross ticket sales as service fees. In reply, please be informed of the following pertinent provisions of Section 13(2)(a) and (b) of P.D. 1869, which states: "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 POWER is under contractual relationship with PAGCOR to undertake and handle marketing aspects of Jai-Alai pursuant to an Agreement entered into on January 24, 2000, 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 POWER. This ruling is being issued on the basis of the 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. LibLex Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue