BIR Ruling [DA-520-98]

November 20, 1998 BIR RULING [DA-520-98] Club Filipino Mckinley Corner Eisenhower Streets Greenhills Subdivision, San Juan Metro Manila Attention: Atty . Fortunato P . Aguas President Emeritus and Chairman Centennial Committee Gentlemen : This refers to your letter dated September 22, 1998, in effect, reiterating your earlier request that the prizes given by the Club Filipino to the lucky winners of the Bingo-Raffle held on August 23, 1998 be exempt from the final withholding tax. cdll You stated that prior to your receipt of our letter dated July 28, 1998, you were informed by PAGCOR that the bingo-raffle falls under the jurisdiction of the latter and which in fact, supervised the holding of the raffle and audited the prizes and receipts; that PAGCOR likewise informed you to submit the income statements of the bingo games after one month from the holding of the bingo-raffle; that PAGCOR will take charge of remitting the 5% franchise tax to the BIR; and that you are supposed to send to PAGCOR your club's outreach programs as well as the expenses to be incurred in the said program. In reply, please be informed that although the operation of your bingo games was undertaken by PAGCOR, the winners thereof are nonetheless liable to the 20% final tax imposed under Sections 24(B) (1) and 25(A) (2) of the Tax Code of 1997. However, the payees-winners are not required to file income tax return for their winnings but the liability for payment of the tax rests primarily on the payor as withholding agent. Thus, in the instant case, PAGCOR is constituted as withholding agent which is required to withhold the 20% final tax and remit the same to the BIR before making money payment to the winners. The fact that PAGCOR enjoys exemption from the payment of income tax pursuant to Section 27(C) of the Tax Code of 1997 does not absolve it from liability to pay the deficiency tax in case of failure to withhold the final tax due from the winners of your bingo-games. This constitutes our final decision on the matter. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue