Request to Hold in Abeyance the Implementation of Revenue Memorandum Circular No. 74-90 Subjecting to the 20% Withholding Tax winnings from Small Town Lotteries

January 9, 1991 BIR RULING NO. 004-91 21 (c) (1) 000-00 004-91 Gentlemen : This refers to your letters dated September 8, 1990 and August 31, 1990 respectively, in effect, requesting to hold in abeyance the implementation of Revenue Memorandum Circular No. 74-90 dated August 1, 1990 subjecting to the 20% withholding tax winnings from small town lotteries. In reply, please be informed that your request cannot be granted for lack of legal basis. The Commissioner of Internal Revenue or any other internal revenue officer for that matter is not legally empowered to suspend the implementation of our tax laws. Under Section 4 of Republic Act No. 1169, only the holding of horse race sweepstakes by the Philippine Charity Sweepstakes Office and the sale of tickets in said sweepstakes shall be exempted from all taxes. However, the holding of small town lotteries is not embraced within said tax exemption. Accordingly, prizes awarded in small town lotteries are subject to a final tax of 20% if the amount of the prize is more than P3,000.00, pursuant to Section 21(c)(1) of the Tax Code. If the prize is less than P3,000.00, the same is subject to income tax pursuant to Section 21(a) of the same Code. The individual, corporation, company or any juridical entity authorized by PCSO to conduct small town lottery, who are the parties paying the prize shall undertake the withholding of the 20% final tax, before paying the prize to the winner, pursuant to Section 50(a) of the same Code; otherwise they shall be liable to the corresponding penalties prescribed by the National Internal Revenue Code. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner