MP Hotel Management Corporation

December 19, 2007 BIR RULING [DA-651-07] R.A. 9337; R.R. 16-2005; R.R. 4-2007 MP Hotel Management Corporation 300 Fields Ave., Balibago, Angeles City Attention: Mr. Mark Smith President Gentlemen : This refers to your letter dated July 30, 2007, requesting for a ruling that the exemption from all taxes of Philippine Amusement and Gaming Corporation (PAGCOR) under its Charter is effectively extended to your company, and this exemption includes exemption from 12% VAT as contracting party to a Contract of Lease with PAGCOR. In reply, please be informed that Section 1 (A) and (C) of Republic Act (RA) No. 9337 provide, viz .: "SEC. 1. Section 27 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: 'SEC. 27. Rates of Income Tax on Domestic Corporations . (A) In General. Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%). xxx xxx xxx. The corporate income tax rate shall be applied on the amount computed by multiplying the number of months covered by the new rate within the fiscal year by the taxable income of the corporation for the period, divided by twelve.' xxx xxx xxx '(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 and Insurance System (GSIS) , the Social Security System (SSS) , the Philippine Health Insurance Corporation (PHIC) , and the Philippine Charity Sweepstakes Office (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." From the afore-quoted provisions of RA 9337, it is clear that the income of PAGCOR is now subject to income tax as a domestic corporation because only GSIS, SSS, PHIC and PCSO are exempt from the payment of income tax. Moreover, Section 10 (h) of Revenue Regulations (RR) No. 4-2007 also provides, to wit: "Section 10. Definitions and Specific Rules on Selected Services . Sec. 4.108-3 of RR No. 16-2005 is hereby amended to read as follows: "SEC. 4.108-3. Definitions and Specific Rules on Selected Services . xxx xxx xxx (h) Services of franchise grantees xxx xxx xxx Gross receipts of all other franchisees, other than those covered by Sec. 119 of the Tax Code, regardless of how their franchises may have been granted, shall be subject to the twelve percent (12%) VAT imposed under Sec. 108 of the Tax Code starting Feb. 1, 2006. This includes among others, the Philippine Amusement Gaming Corporation (PAGCOR), and its licensees or franchisees ." (Emphasis supplied) ScCEIA In view of the foregoing, this Office is of the opinion that PAGCOR and its licensees and franchisees, like MP Hotel Management Corporation, are subject to 12% VAT. Unless and until the provisions of RA 9337 and RR 4-2007 are revoked or declared void, the same have the force and effect of law. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service