Millenium Bingo Fun Gaming Corporation

August 10, 2007 BIR RULING [DA-446-07] DA-045-2004; Sec. 1, R.A. 9337; R.A. 7716 Millenium Bingo Fun Gaming Corporation 2nd Flr., One Corporate Plaza 845 Arnaiz Ave. Legaspi Village Makati City Attention: Wellington S. Kho President Gentlemen : This refers to your letter dated December 7, 2005 requesting for clarification whether the Philippine Amusement and Gaming Corporation (PAGCOR) is subject to VAT and any other taxes. It is represented that Millenium Bingo Fun Gaming Corporation, Pacific Digital Amusement Systems, Incorporated (" Millenium Bingo ", for brevity) is a PAGCOR contractor; that it was informed by Revenue District Office (RDO) No. 28 in Novaliches that PAGCOR and its contractors are subject to VAT starting November, 2005; and that PAGCOR refutes this assertion, saying that it is not subject to VAT but only to franchise tax under Presidential Decree (PD) No. 1869. In reply, please be informed that PAGCOR's legislative franchise under PD 1869 had been amended by Republic Act (RA) No. 7716, otherwise known as the Expanded Vat Law (the EVAT law). Pursuant to R.A. No. 7716, PAGCOR became subject to the 10% VAT, effective January 1, 1996, in lieu of the 5% franchise tax prescribed under its Charter. That PAGCOR's liability for the 10% VAT, in lieu of the 5% franchise tax prescribed under its Charter, had already been resolved in VAT Ruling No. 004-96 dated May 14, 1996, and reiterated in VAT Ruling No. 030-99 dated March 18, 1999. Furthermore, Section 1 of RA 9337 provides that: "Section 1. Section 27 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: (C) Government-Owned or Controlled Corporations, Agencies or Instrumentalities. The provisions of existing special or general laws to the contrary notwithstanding, all corporations, agencies, or instrumentalities owned or controlled by the Government, except the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), and the Philippine Charity Sweepstakes (PCSO), shall pay such rate of tax upon their taxable income as are imposed by this Section upon corporations or associations engaged in a similar business, industry, or activity." EcICDT It can be seen here that RA 9337 omitted PAGCOR from the list of government corporations that are exempt from income taxation under Section 27 of the Tax Code of 1997. As a result, effective November 1, 2005, PAGCOR is now regarded as liable for income taxes imposed on domestic corporations along with its 10% (now 12% starting February 1, 2006) VAT liability as discussed above. Accordingly, this Office is of the opinion that since there is no longer any basis on PAGCOR's part to claim exemption from either VAT or income taxes, it follows that PAGCOR and Millenium Bingo may be taxed on income gained from their contractual arrangements. In addition, all transactions entered into by Millenium Bingo in this regard as a seller of goods and services or lessor of properties are subject to VAT. 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. aSTcCE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service