Exemption of Payments to the Racing Club from Expanded Withholding Tax

August 28, 1989 BIR RULING NO. 181-89 50 (b) 588-88 181-89 Gentlemen : This refers to your letter dated July 14, 1989 stating that a Memorandum of Agreement was executed by and between the Manila Jockey Club, Inc. and the Philippine Racing Club, Inc. on December 16, 1988, whereby they agreed that whenever either of them, pursuant to the calendar of races is scheduled to hold the races, whether week-end, holiday or mid-week races, and said racing club concerned cannot hold such scheduled races for any reason, such as but not limited to any incidents of force majeure , the other racing club shall hold such races in its own premises and racing oval unless the latter is unable to do so on account of the same or similar reason; that the racing club which is prevented from holding its scheduled races shall notify and request the other racing club to hold the races; that the racing club holding the races shall conduct the same as if it were its owned scheduled race day, employing facilities and materials for its own account; and that to cushion the impact of the adverse effects of its being unable to hold its scheduled races, by way of actual expenses and losses incurred and/or damages sustained by the racing club who cannot hold the scheduled races in the preparation for the aborted scheduled races, the racing club holding the races shall share with and remit to the former an amount equivalent to one and one-half percent (1.5%) of the gross wagers received on such race day. In connection therewith, you now request a ruling as to whether the 1.5% share of the gross wagers of the racing club who was not able to hold its races is subject to the expanded withholding tax. cdtech In reply, please be informed that under Revenue Regulations No. 6-85 otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, as amended, payments only to persons enumerated therein are subject to the expanded withholding tax. Considering that payments to the racing club who was not able to hold its races are not among those specified in said Regulations, such payments are not, therefore, subject to the expanded withholding tax. However, since the aforesaid payments are not subject to withholding tax the payor shall render an information return on such payments pursuant to Section 61 (formerly Section 71) of the Tax Code, as amended by Batas Pambansa Blg. 135 and as implemented by Section 21 of Revenue Regulations No. 1-82 dated March 18, 1982. cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner