Taxability of the Cash Prizes of a Foreign Players/Participants

February 18, 1988 BIR RULING NO. 052-88 21 (a) 000-00 052-88 Gentlemen : Reference is made to BIR Ruling No. 19-000-032-87 dated February 9, 1987 addressed to that Association, dispositive portion of which is quoted hereunder as follows: "In view thereof, this Office is of the opinion as it hereby holds that in the case of players/participants of said tournaments who are citizens or resident aliens, cash prizes amounting to more than P3,000 shall be subject to a final tax of 20% pursuant to Section 21(c)(1) of the Tax Code as amended by Executive Order No. 37 which took effect August 1, 1986 while cash prizes amounting to P3,000 or less shall be subject to tax under Section 21(a) of the same Code. "However, in the case of players/participants who are non-resident aliens not engaged in trade or business in the Philippines (their stay in the Philippines is for 180 days or less), their cash prizes shall be subject to a tax of 30% on the total amount thereof, pursuant to Section 22(b) of the Tax Code, as amended by Executive Order No. 37." In connection thereto, please be informed that after a restudy of the facts and applicable laws, we find the opinion of local players/participants that the cash prizes won by them in tournaments is not a passive income inasmuch as participating in golf tournaments is their profession and/or occupation well taken. Such being the case, the aforequoted ruling is hereby modified in that the cash prizes of said local participants/players should be subjected to the rates prescribed under Section 21(a) of the Tax Code, as amended and not to 20% final withholding tax imposed by Section 21(c)(1) of the same Code. However, with respect to the taxability of the cash prizes of said foreign players/participants, we have perused the different tax treaties concluded by the Philippines, notably, RP-Japan, RP-US, RP-Indonesia, RP-Singapore, RP-Australia and RP-Belgium. It is to be noted that said tax treaties provide that income derived by athletes from their personal activities are taxed in the contracting state in which the activities are exercised, i.e., the Philippines. Accordingly, since the cash prizes are taxable in the Philippines and the players/participants are considered non-resident aliens not engaged in trade or business in the Philippines, then the aforementioned ruling subjecting them to a tax of 30% on the total amount of the cash prizes, pursuant to Section 22(b) of the Tax Code, as amended by Executive Order No. 37 is correct and should be maintained. aisadc That Association may make proper representations with Congress of the Philippines for possible legislation modifying and/or revising the aforesaid 30% tax rate. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner