Baniqued Layug & Bello

July 16, 2020 BIR RULING NO. OT-385-20 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, FIRST LEISURE & GAME CO.,INC. (doing business under the name and style of Balay Bingo) (" FIRST LEISURE ," for brevity), for confirmation of your opinion that income derived from bingo games operations conducted by FIRST LEISURE, 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 FIRST LEISURE, 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 organize, conduct and carry on the business of promoting amusement and allied activities, i.e. ,bingo, concerts, theater, sports, etc.;and to engage in tourism project promotion and development, i.e. ,recreational centers, golf clubs, etc. FIRST LEISURE 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. HEITAD 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 FIRST LEISURE, 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 Premises considered, this Office hereby rules that since FIRST LEISURE 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 FIRST LEISURE pursuant to Section 13 (2) (b) of PD No. 1869, as amended by RA No. 9487. Therefore, the income derived by FIRST LEISURE 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 FIRST LEISURE from related services or such services not falling under gaming operations, shall be subject to corporate income tax and VAT. 4 ATICcS 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 FIRST LEISURE AND GAME CO.,INC . No. Tax Identification No. Registered Address/Location Gaming License No. Valid Until 1 000-000-000-000 3rd Floor, Robinson's Place, Mandalagan, Bacolod City 15-456 September 22, 2020 2 000-000-000-000 G/F Art District Bldg.,Lacson St.,Lopue's Mandalagan, Bacolod City 15-450 September 09, 2020 3 000-000-000-000 Gustilo Town Center & Northland Resort, Provincial Road cor. National Highway, Manapla, Negros Occidental 15-375 August 27, 2017 4 000-000-000-000 UG 17-21 Centro Mall Lopez Ave.,Batong Malake, Los Baos, Laguna 17-951 December 17, 2021 5 000-000-000-000 G/F Gaisano Mall, Araneta St.,Brgy. Singcang, Bacolod City, Negros Occidental 15-178 February 06, 2022 6 000-000-000-000 G/F Gaisano Mall, Cagba Brgy. Tugbu, Masbate City 15-185 April 10, 2020 7 000-000-000-000 Rosalie Building, Tabunok, Talisay City, Cebu 15-527 November 04, 2020 8 000-000-000-000 8 & 9 Grand Gaisano Mall Quezon Ave. Zone I, Digos City, Davao del Sur 15-545 December 08, 2020 9 000-000-000-000 2/F Felcris Centrale, Quimpo Boulevard, Brgy. 40-D, Davao City 16-592 January 19, 2021 10 000-000-000-000 G/F Doors 107/108, JLF Parkway Building A. Pichon Corner Quirino STS. Davao 15-614 February 02, 2021 11 000-000-000-000 Amkor Building National Road Tunasan City of Muntinlupa 15-438 September 21, 2021 12 000-000-000-000 Level 3, Units 317-321 Robinsons Place Tagum, Visayan Village, Tagum City, Davao del Norte 15-435 September 21, 2021 13 000-000-000-000 277C, 278CDE, 2142-2144 SM Lanang Premier, Jose P. Laurel Ave.,Brgy. San Antonio, Agdao, Davao City 16-682 April 11, 2022 14 000-000-000-000 1st Floor City Mall, Lacson St. cor. G.M. Cordova Ave.,Mandalagan, Bacolod City 17-965 November 27, 2021 15 000-000-000-000 G/F Chimes Mall, Brgy. 27 C, Gov. Sales St. cor. Sta. Ana Ave.,Brgy. 27-C, Poblacion District, Davao City 17-927 October 27, 2021 16 000-000-000-000 2nd Level, Plazuela de Iloilo Mall, Benigno Aquino Ave.,Mandurriao, Iloilo City 18-1003 January 22, 2022 Footnotes 1. Please see attached Annex "A" for the list of Gaming Licenses issued to First Leisure. 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.