Tax at the Rate of 20% is Imposed upon the Amount of Prizes

October 14, 1988 BIR RULING NO. 501-88 21 (a) & 21 (e) (1) 000-00 501-88 Gentlemen : This refers to your letter dated August 10, 1988 requesting in effect a ruling as to whether or not your members who will voluntarily contribute a minimum of P20.00 out of their dividends relative to the scheme initiated by them to pool said contributions in order to buy gifts for your Christmas program draw is required to pay taxes for the same. It is represented that a scheme was initiated by your members composed mostly of retired military personnel, wherein each member will contribute a minimum of P20.00 out of their dividends; that you will take charge of pooling said P20.00 from all members who will voluntarily contribute; and that the amount collected will be used to buy gifts which will be given away to the lucky recipient to be drawn during your Christmas Program to be held at the GHQ Grandstand in Camp Aguinaldo, Quezon City; and that the general public is excluded from the same. In reply, please be informed that in the negative. However, under Section 21(c)(1) of the Tax Code, as amended, a tax at the rate of 20% is imposed upon the amount of prizes (except prizes amounting to P3,000.00 or less which shall be subject to tax under paragraph (a) of the same Section and other winnings (except Philippine Charity Sweepstakes winnings) received by a citizen or resident alien from sources within the Philippines. Accordingly, the recipient of the aforesaid gifts/prizes is subject to the 20% final tax imposed under said Section 21(c)(1) of the Tax Code, if the same amounts to more than P3,000.00 and to the tax imposed under Section 21(a) of the same Code, if the same is P3,000.00 or less. aisadc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner