BIR Ruling [DA-545-06]

September 13, 2006 BIR RULING [DA-545-06] First Global Cock Gaming Corporation Arcontica Resort, Km. 29, Aguinaldo Highway Dasmarias, Cavite Attention: Mr. Vicente "Bello" Costa Executive Director Gentlemen : This refers to your letter dated June 30, 2006 requesting that the controversy arising from the proposed Municipal Tax Ordinance granting franchise to Inter-Petal Recreational Corporation (IPRC) to collect the 5% local franchise tax on the "tele-sabong wagering system" and the 10% final withholding tax on winnings from on-line cockfighting bets be referred to the Provincial Oversight Committee (POC) of the Provincial Government of Cavite. aIEDAC In reply thereto, please be informed that the Bureau of Internal Revenue has no jurisdiction to interfere with the controversy arising from the municipal tax ordinance proposed by IPRC thru its marketing arm the First Global Cock Gaming Corporation (FGCGC) to the Sangguniang Bayan of Dasmarias, Cavite. The withholding tax regulations, as far as the withholding tax on winnings is concerned, has long been implemented thru Revenue Regulations No. 2-98, which states in part as follows: "SEC. 2.57.1. Income Payments Subject to Final Withholding Tax. The following forms of income shall be subject to final withholding tax at the rates herein specified; (A) Income payments to a citizen or to a resident alien individual; (1) Interest from any peso bank deposit, and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; royalties (except on books as well as other literary works and musical compositions), prizes (except prizes amounting to ten thousand pesos (P10,000.00) or less which shall be subject to tax under Sec. 24(A)10 of the Code) and other winnings (except Philippine Charity Sweepstakes winnings and lotto winnings) derived from sources within the Philippines Twenty percent (20%) ." However, this Bureau, as early as in the year 2002, has been in coordination with your sector (the "cockfighting affectionados") in developing a scheme in response to the request that a withholding tax shall be imposed particular to the on-line cockfight betting or the wager in "tele-sabong". Thus, this Office has provided IPRC, thru Atty. Fernando Campos, a copy of the proposed Revenue Memorandum Circular (RMC) in 2004, exploiting the possibilities in implementing the withholding tax scheme on winnings derived from cockfights, for his comments. Subsequently, the Commissioner in his letter address to IPRC on March 1, 2005, informed Atty. Campos that the Bureau has no objection as to the plan of IPRC to operate a "tele-sabong wagering system", and on its request that it be allowed to collect the withholding tax on the winnings thereof and that of the winnings from derbies it will conduct. However, the Commissioner reserves the rights of the Bureau to make comments on the "tele-sabong scheme" or the "on-line cockfight betting" pending the determination of its legal feasibility. It is the understanding of this Office that at present the "tele-sabong wagering system" is not yet in its full operational stage. Moreover, no particular group proponent thereto has submitted to the Bureau a proposal of the procedure in collecting and remitting the withholding tax derived from the tele-sabong scheme. Instead, what is presented before this Office is a dispute arising from the proposed Municipal Tax Ordinance and on the granting of franchise to IPRC to collect the 5% local franchise tax and the 10% final withholding tax on winnings from the on-line cockfight betting. AcEIHC It appearing that there is a challenge over the control of the operations of the "tele-sabong wagering system," this Office hereby reiterates its position that it has no jurisdiction to resolve the above dispute. Neither has it the authority to indorse the said controversy to the POC. Please be guided accordingly. (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service