Taxability of Cash Prize Won in the 1st Pambansa Millennium Chess Grand Prix

June 13, 2000 BIR RULING NO. 026-00 32 (B) (7) (d) RR 2-98 000-00 026-2000 Atty. Samuel D. Estimo No. 10 Magreville Avenue Magreville Subdivision Capitol Hills, Quezon City S i r: This refers to your letter dated April 27, 2000 requesting, in behalf of your client, International Chess Grandmaster Rogelio (Joey) M. Antonio Jr ., for a ruling exempting the latter's cash prize amounting to One Million Pesos (P1,000,000.00) from income tax. It is represented that GM Antonio won the recently concluded 1st Pambansa Millennium Chess Grand Prix sanctioned by the Philippine Chess Federation (PFC), a sports association recognized by the Philippine Sports Commission (PSC); that during the awarding ceremonies, PCF withheld twenty percent (20%) of GM Antonio's P1Million champion prize in accordance with Revenue Regulations No. 2-98; and that GM Antonio refused to accept the reduced prize not only because the PCF announced during the start of the sports competition that the champion's purse would be tax-free, but also because of the existence of R.A. 7549, which exempts all prizes and awards granted to athletes in local and international sports competitions and tournaments from the payment of income tax. In reply, please be informed that Section 32(B)(7)(d) of the Tax Code of 1997 provides that "All prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned by their respective national sports association" shall be included in gross income and shall be exempt from income tax. This section, however, should be read in relation to the provisions of R. A. 7549, dated May 22, 1992, which was integrated in the aforecited section of the Tax Code, Section 2 of the said Act provides that the national sports association shall refer only to those sports associations duly accredited by the Philippine Olympic Committee (POC). The documents submitted by you, however, disclosed that the sports association that organized and sanctioned the aforementioned chess event is not duly accredited by the Philippine Olympic Committee. Thus, the exemption granted under the aforequoted section of the Tax Code of 1997 does not apply to your client. Moreover, tax exemptions are not presumed (Floro Cement Corp. v. Gorospe, 200 SCRA 480) because it is a cardinal rule in taxation that tax exemption should be construed "in strictissimi juris" against the taxpayer and liberally in favor of the taxing authority. Tested by this precept, we cannot indulge in expansive construction and write into the law an exemption not therein set forth. Rather, we go by the reasonable assumption that where the State has granted in express terms certain exemptions, those are the exemptions to be considered and no more. (Esso vs. Acting Commissioner of Customs, 18 SCRA 489). Further, the exemption contained in the tax statutes must be strictly construed against the one claiming the exemption, because the law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. (Commissioner of Internal Revenue v. P.J. Kiener Company, Ltd., 65 SCRA 143) In view thereof, the prize money won by your client, GM Rogelio (Joey) M. Antonio, Jr ., is subject to 20% final withholding tax under Section 24(B)(1) of the Tax Code of 1997, as implemented by Revenue Regulations 2-98. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue