Winnings in Horse Racing are Not Subject to the 20% Final Withholding Tax

August 31, 1987 BIR RULING NO. 249-87 21 (c) 229 000-00 249-87 Gentlemen : This refers to your joint letter dated August 19, 1987 requesting in effect a modification of Revenue Memorandum Circular No. 32-87 insofar as it subjects the winnings in horse races to the 20% final (income) withholding tax under Section 21(c) of the Tax Code, as amended. You contended that the "prize pool" for winning horses is already subjected to the 10% tax prior to distribution thereof to the horse owners and the "dividend pool" is also subjected to said 10% tax prior to distribution thereof to the holders of the winning tickets, pursuant to Section 269 (now Section 229) of the Tax Code; that the "other winnings" contemplated under Section 15 of Revenue Regulations No. 1-82 apply to persons or entities who can be individually and easily identified such as golfers, tennis players and other professional sportsmen participating in tournaments offering money prizes for winners as well as participants in raffles and product promotions; that winnings from horse racing are the results of risking money at great odds; and that the horse racing industry can not bear additional tax impost without endangering its closure. You likewise pointed out that in a letter dated July 13, 1979 of former Commissioner Plana, this Office ruled that winnings received by a taxpayer from the entry of a horse in a race do not constitute "prize and award" within the contemplation of the expanded withholding tax system which ruling was reiterated in another ruling dated April 30, 1982 holding that prizes and winnings payable or paid to owners of winning race horses and to holders of winning tickets do not fall within the purview of "prizes and other winnings" as said term is used under Section 21 (c) of the Tax Code. In reply, please be informed that, for being meritorious, this Office has finally decided to revoke that portion of Revenue Memorandum Circular No. 32-87 which provides in the salient features thereof that winnings in horse races regardless of the class of bet are subject to the 20% final (income) withholding tax under Section 21(c) in relation to Section 51 of the Tax Code as amended. In other words, the aforesaid previous rulings of this Office that winnings in horse racing are not subject to the 20% final withholding tax are, therefore, upheld. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner