BIR Ruling [DA-631-04]

December 14, 2004 BIR RULING [DA-631-04] Platinum Gaming & Entertainment Corporation Premier Hotel, Tetuan corner Tomas Mapua Street Sta. Cruz, Manila Attention: Mr. Rodolfo V. Soriano, Jr. Managing Director Gentlemen : This refers to your letter dated November 3, 2004 stating that your Regent Shine Limited (Regent) is a non-resident foreign corporation organized and existing under the laws of Hong Kong; that Regent is desirous of doing business in the Philippines; that on the other hand, Platinum Gaming and Entertainment Corporation (Platinum) is an existing domestic corporation duly organized under the laws of the Philippines and is registered with the Securities and Exchange Commission (SEC); that on November 21, 2001, Regent executed a Special Power of Attorney notarized on August 7, 2003, appointing Platinum as its resident in the Philippines in connection with the operation of slot machines and network/link system; that on April 6, 2004, Regent, as represented by its resident agent, Platinum, entered into a contract of lease with PAGCOR, a government-owned or controlled corporation which has the exclusive franchise to operate a casino in the Philippines pursuant to its Charter, P.D. No. 1869, in connection with the operations of Slot Machine VIP Club; that in accordance with the said contract, Regent will be paid rentals which will be equivalent to a percentage of the slot machines' gross revenues after deducting the players' winnings/prizes and all applicable taxes; and that on the other hand, Platinum, being the resident agent of Regent, that will be responsible for all the technical and management services enumerated in the undertakings of Regent, will be given commission from the percentage rentals Regent will receive. In connection therewith, you now request for an opinion as to whether or not the exemptions of PAGCOR under its charter are effectively extended to Regent and Platinum. In reply thereto, please be informed that Section 13(2)(a) of P.D. No. 1869 provides that "Section 13. Exemption . "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 away to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation on 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 exemption herein granted for earnings derived from the operations conducted under the franchise specially 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), associations(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." In BIR Ruling No. DA468-03 dated December 9, 2003 , this Office has already the occasion to rule on the matter, when it said that "Since AFL and SIX-IN-ONE are under contractual relationship with PAGCOR for the operation of top of the line slot machines and network/link system and the resident agent of AFL responsible for all the technical and management services, respectively, 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 AFL and SIX-IN-ONE." Considering that the above-cited ruling is in all fours similar to the instant case, this Office holds that exemptions granted to PAGCOR in accordance with its Charter, P.D. No. 1869, are effectively extended to Regent and Platinum, as the contractor and resident agent in the Philippines, respectively. TaEIcS 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. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group