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BIR requires POGOs to pay 5% franchise tax before reopening

The Bureau of Internal Revenue on Monday said Philippine offshore gaming operators should pay the 5-percent franchise tax before they can resume operations, as clearly stated in a memorandum circular issued by the agency in 2017.

BIR Commissioner Caesar Dulay said the imposition of the 5-percent franchise tax on POGO licensees was “not a new imposition nor is it being imposed retroactively.”

“From the beginning, our bureau has maintained the position that the said tax applies to all POGO licensees and operators and there was no change of rules midstream,” Dulay said in his comment to the memorandum sent by the Philippine Gaming and Amusement Corp. to the Office of the President regarding the franchise tax imposed on POGOs.

A copy of the BIR’s comment was furnished to Finance Secretary Carlos Dominguez III.

PAGCOR said in its memo to the OP that the 5-percent franchise tax was not previously imposed by the BIR, citing as basis an opinion issued by the Office of the Solicitor General on Dec. 19, 2018.

Dulay, however, cited Revenue Memorandum Circular No. 102-2017 dated Dec. 27 2017 on the “Taxation of Taxpayers Engaged in Philippine Offshore Gaming Operations” as the BIR’s basis for imposing the franchise tax.

RMC 102-2017 states that “the entire gross gaming receipts/earnings or the agreed or pre-determined minimum monthly revenues/income from gaming operations under existing rules, whichever is higher, shall be subject to a franchise tax of five percent in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description”. 

Dulay said that on April 26, he sent a letter to the OSG reiterating the BIR’s stand and basis for the applicability of the 5 percent franchise tax to offshore-based licenses and operators.

Copies of the letter were also sent to Dominguez and PAGCOR chairperson Andrea Domingo.

The BIR chief SAID the legal opinion issued by the OSG on the issue “is not binding” because under “Section 4 of the NIRC [National Internal Revenue Code] as amended, the power to interpret provisions of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the BIR commissioner subject to review by the Secretary of Finance.”

Dulay also corrected the erroneous claim that POGO operators were being assessed and paying their corporate income taxes and value added tax.

He said POGO licensees or operators were not being assessed nor paying income tax and other taxes because the BIR’s RMC 102-2017 clearly states that in lieu of such taxes, they are only subject to the franchise tax.

“Only POGO service providers are subject to the regular taxes, such as income and VAT. However, both POGO operators and service providers whose employees earn compensation income need to withhold and remit the taxes due FROM them,” Dulay said.

Topics: Bureau of Internal Revenue , BIR , Philippine offshore gaming operators , POGOs , franchise tax , Philippine Gaming and Amusement Corp. , PAGCOR
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