Baniqued Layug & Bello

July 2, 2020 BIR RULING NO. OT-365-20 PD 1869; Secs. 109 & 27 of NIRC; BIR Ruling No. 1090-18 Baniqued Layug & Bello 8/F Jollibee Center, San Miguel Avenue Ortigas Center, Pasig City Attention: AAA BBB CCC Gentlemen : This refers to your letters dated November 29, 2018 and September 4, 2019 requesting on behalf of your client, BIG TIME GAMING CORPORATION ( "BIG TIME," for brevity), for confirmation of your opinion that income derived from bingo games operations conducted by BIG TIME, as a licensee of the Philippine Amusement and Gaming Corporation (PAGCOR), shall be subject to 5% franchise tax, in lieu of all kinds of taxes, pursuant to Section 13 (2) (b) of Presidential Decree ("PD") No. 1869, as amended by Republic Act ("RA") No. 9487. It is represented that BIG TIME, with Tax Identification Number 000-000-000-000, is a corporation duly organized under the laws of the Philippines, the primary purpose of which is to engage in, conduct and maintain the business of amusement, entertainment, gaming and recreational activities, including the operation of electronic games and similar games for the general public, at specified venues allowed by law. BIG TIME is a holder of various Gaming Licenses 1 for its Bingo Games Operations which were issued by PAGCOR pursuant to PD No. 1869, as amended by RA No. 9487. AIDSTE In reply, please be informed that Section 13 (2) of PD No. 1869, as amended by RA No. 9487, provides, viz. : " SEC. 13. Exemptions . (2) Income and other taxes (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation, nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise . Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority . xxx xxx xxx (b) Others: The exemption herein granted for earnings derived from the operations conducted under the franchise, specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s),association(s),agency(ies),or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator . (Emphasis and underscoring supplied) In the case of Bloomberry Resorts and Hotels, Inc. vs. Bureau of Internal Revenue , 2 the Supreme Court affirmed the applicability of the tax exemption provisions of PD No. 1869, as amended by RA No. 9487, to PAGCOR's licensees. Thus, the Supreme Court ruled that: "As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s),association(s),agency(ies),or individual(s) with whom the PAGCOR or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise, so it must be that all contractees and licensees of PAGCOR ,upon payment of the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos. For the same reasons that made us conclude in the December 10, 2014 Decision of the Court sitting En Banc in G.R. No. 215427 that PAGCOR is subject to corporate income tax for "other related services," we find it logical that its contractees and licensees shall likewise pay corporate income tax for income derived from such "related services." xxx xxx xxx Plainly, too, upon payment of the 5% franchise tax, petitioner's income from its gaming operations of gambling casinos, gaming clubs and other similar recreation or amusement places, and gaming pools, defined within the purview of the aforesaid section, is not subject to corporate income tax." (Emphasis and underscoring supplied) With regard to the VAT exemption of BIG TIME, Section 109 (1) (K) of the National Internal Revenue Code of 1997, as amended, provides: " SEC. 109. Exempt Transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws , except those under Presidential Decree No. 529; (Emphasis supplied) Thus, PAGCOR and its licensees are exempt from the payment of VAT because PAGCOR's charter, PD No. 1869, is a special law that grants the latter exemption from taxes and such exemptions extend or inure to the benefit of its licensees. 3 AaCTcI Premises considered, this Office hereby rules that since BIG TIME is a holder of Gaming Licenses for its Bingo Games Operations issued by PAGCOR, the exemption from taxes, fees and charges enjoyed by PAGCOR is extended to BIG TIME pursuant to Section 13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the income derived by BIG TIME solely from its Bingo Games Operations, during the validity period of its Gaming Licenses on the specified gaming sites, is subject only to the 5% franchise tax, and shall be exempted from corporate income tax and VAT. However, for the purpose of applying the 5% franchise tax, any income that may be realized by BIG TIME from related services or such services not falling under gaming operations, shall be subject to corporate income tax and VAT. 4 This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue ANNEX A Big Time Gaming Corporation List of Gaming Sites Big Time Gaming Corporation No. Tax Identification No. Registered Address/Location Gaming License No. Valid Until 1 000-000-000-000 Sunshine Blvd. Plaza, Quezon Ave. Corner Sct Santiago St.,South Triangle, Quezon City 16-685 April 15, 2021 2 000-000-000-000 Unit 21 Intrepid Plaza, E. Rodriguez Jr. Avenue, Bagumbayan, Quezon City 18-1013 October 13, 2021 3 000-000-000-000 233 Tomas Morato Ave.,South Triangle, Quezon City 19-1247 October 13, 2022 4 000-000-000-000 Unit 102, G/F Web Jet Acropolis Bldg. 88 E. Rodriguez Jr. Ave.,Bagumbayan 3, Quezon City 16-749 July 23, 2021 5 000-000-000-000 RS228 06 to 08 Robinsons' Supermarket, EMA Town Center, Brgy. Camalig, Meycauayan, Bulacan 17-942 December 17, 2021 6 000-000-000-000 Units 8, 9, 10 & 32 Auburn Place, Alabang, Zapote Road, Talon III, Las Pias City 18-1012 December 18, 2021 7 000-000-000-000 Merville Arcade, West Service Road, corner Merville Brgy. 201 Pasay City 17-907 December 17, 2021 8 000-000-000-000 N. Falcon St.,Brgy. Poblacion, Sta. Cruz, Laguna 15-244 May 08, 2023 9 000-000-000-000 2/F Bocobo Commercial Center, 1253-Bocobo St. cor. Padre Faura St.,Barangay 670, Zone 072, Ermita, Manila 15-184 April 10, 2022 10 000-000-000-000 G/F Hotel Sogo, Distrito 10 Purok 7, Maharlika Highway, San Juan ACCFA, Cabanatuan City 15-215 March 25, 2023 11 000-000-000-000 21 Puregold Gen. Luna St.,Banaba, San Mateo, Rizal 15-177 February 06, 2022 12 000-000-000-000 2F Parkmall, Ouano Avenue, South Special Economic Zone, Mandaue City 15-187 April 21, 2020 13 000-000-000-000 138-142 SkyOne Bldg.,M. L. Quezon Avenue, San Isidro, Angono, Rizal 15-556 December 21, 2020 14 000-000-000-000 Roben Theatre C. M. Recto Avenue, Brgy. 313 Zone 31, Sta. Cruz, Manila 15-061 March 30, 2021 15 000-000-000-000 2F Syquio Business Center Bldg.,Maharlika Highway, Purok Lambingan, Daan Sarile, Cabanatuan City 15-322 June 29, 2021 16 000-000-000-000 G/F Jea Bldg. Lopez St.,Corner Jalandoni St.,Iloilo City 15-591 January 19, 2021 17 000-000-000-000 Insular Square, J.P. Rizal St.,Tabok, Mandaue City, Cebu 15-436 September 21, 2021 18 000-000-000-000 Emiliano Pineda Building, Mac Arthur Highway, San Francisco, Mabalacat City, Pampanga 15-367 August 06, 2021 19 000-000-000-000 2F Blue Horizon Bldg.,Quezon Avenue, Poblacion, Alaminos City, Pangasinan 2404 16-579 January 26, 2022 20 000-000-000-000 ATDRMAM Bldg.,Sitio Kanluran, Kumintang Ibaba, Batangas City 16-722 May 16, 2020 21 000-000-000-000 Zone C-1, 2, 3, 4 Meerea High St.,Ouano Ave.,North Reclamation Area, Mandaue City 16-581 January 26, 2022 22 000-000-000-000 243 Dizon Building, Sto. Entiero Street, Brgy. Sto. Cristo, Angeles City 15-491 November 04, 2021 23 000-000-000-000 L2-107-108 Robinsons Place Las Pias Alabang Zapote Rd. Talon Uno, Las Pias City 17-853 May 09, 2021 24 000-000-000-000 2F, No. 14 Tanjuatco Building, Plaza Aldea, Sampaloc, Tanay, Rizal 17-987 December 19, 2021 25 000-000-000-000 2F Sir Thomas Bldg.,No. 18 Matalino St. corner Matatag St.,Barangay Central, Diliman, Quezon City 19-1190 June 10, 2022 26 000-000-000-000 252 EJ Arcade, Friendship Highway, Brgy. Anunas, Angeles City 17-948 November 16, 2021 27 000-000-000-000 G/F CS-15 and 2/F Unit C1 Chinatown Mall, Annex B Calle Felipe II cor. La Chambre St.,Barangay 293, Zone 028, Binondo, Manila 17-963 November 27, 2021 28 000-000-000-000 Robinsons' Place, J. Catolico Sr. Ave.,Brgy. Lagao, General Santos City 17-969 December 11, 2021 Footnotes 1. Please see attached Annex "A" for the list of Gaming Licenses issued to Big Time. 2. G.R. No. 212530 dated August 10, 2016. 3. Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue ,G.R. No. 172087 dated March 15, 2011. 4. Section 14 (5) of PD No. 1869, as amended by RA No. 9487.