BIR Ruling [DA-353-99]

June 16, 1999 BIR RULING [DA-353-99] Best World Gaming & Entertainment Corp. 26/F Chatham House 116 Valero cor. Herrera Street Salcedo Village Makati City Attention: Mr . William P . Pascaran EVP/COO Gentlemen : This refers to your letter dated June 4, 1999 stating that Best World Gaming & Entertainment Corp. (BW Gaming) 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 BW Gaming applied for the authority to conduct and operate Nationwide Computerized On-Line Bingo games with Philippine Amusement and Gaming Corp. (PAGCOR), which is vested with regulatory powers with respect to operations, capitalization and organizational structure of business primarily engaged in gambling operations; that on December 3, 1998, PAGCOR granted BW Gaming the sole authority to conduct and operate a nationwide computerized On-Line Bingo Game, to be known as "Bingo Pilipino", with its Central Draw Area at the 3rd Floor, Prime Block Mall, Tutuban Center, C.M. Recto, Manila; that BW Gaming's operation is subject to the regulatory powers of PAGCOR consistent with the provisions of P.D. No. 1869; that in consideration of the Grant of Authority, BW Gaming shall pay PAGCOR twenty percent (20%) of its gross receipts, representing 5% BIR Franchise Tax and 15% PAGCOR's share; that the consideration shall be remitted at the PAGCOR's office on a monthly basis on or before the 15th day of the succeeding month; that failure to remit shall entitle PAGCOR to an interest of eighteen percent (18%) per annum to be compounded monthly; and that for this purpose, a cash bond in the amount of $1,000,000.00 shall be submitted by BW Gaming to PAGCOR prior to the commencement date. 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 BW Gaming. 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 the BW Gaming has contractual relationship with PAGCOR, the latter having granted and approved on December 3, 1998 the request of the former to conduct and operate a nationwide computerized on-line Bingo games to be known as Bingo Pilipino with its Central Draw Area at the 3rd Floor, Prime Block Mall, Tutuban Center, C.M. Recto, Manila, it is the opinion of this Office that the exemption from taxes, fees and charges being enjoyed by PAGCOR may also be extended to BW Gaming. 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. LLphil Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)