BIR lists taxes on offshore gaming

Philippine offshore gaming operations (Pogo) licensed by the state-owned Philippine Amusement and Gaming Corp. will be slapped a number of taxes in a bid to lessen foregone revenues from such activities, the Bureau of Internal Revenue said.

Under Revenue Memorandum Circular No. 102-2017 issued by Internal Revenue Commissioner Caesar R. Dulay on Dec. 27, “the entire gross gaming receipts/earnings or the agreed or predetermined minimum monthly revenues/income from gaming operations under existing rules, whichever is higher, shall be subject to a franchise tax of 5 percent, in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description.”

“This income is therefore exempt from any kind of tax, income or otherwise, as well as fees, charges or levies of whatever nature, whether national or local,” the BIR added.

Income from gaming operations come from casinos, gaming clubs and other similar amusement or recreation places as well as gaming pools.

A Pogo’s income from other related services or its nongaming operations, meanwhile, will be subject to normal income tax, value-added tax (VAT) and other applicable taxes, as may be deemed appropriate, the BIR said, noting that the 5-percent franchise tax in lieu of all taxes will not apply.

Other related services include entertainment and shows in gaming facilities.

It clarified that “a licensee deriving income from both gaming operations and from other related services shall be subject to 5-percent franchise tax on its gaming revenues and normal income tax, VAT and other applicable taxes on its non-gaming revenues.”

As for other Pogo licensees such as gaming agents representing the offshore-based operator in the Philippines, service providers (of gaming software, business process outsourcing, and data/content streaming) as well as gaming support providers, they will also be taxed a 5-percent franchise tax on their gaming activities and likewise subject to the normal tax rate and other appropriate taxes on their non-gaming operations, the BIR said, even as non-Pogo licensees that derive or earn income only from other related services or from nongaming operations will be slapped normal income tax and VAT, among other applicable taxes on its entire revenues.

According to the BIR, income payments made by Pogo licensees or any other business entity licensed or authorized by Pagcor for all their purchases of goods and services will be subject to withholding taxes as may be appropriate and applicable.

Compensation, fees, commissions or any other form of remuneration as a result of services rendered to Pogo licensees or any other business entity licensed by Pagcor will be subject to applicable withholding taxes under existing revenue laws and regulations, it added.

Purchases (local or imported) and sale (local or international) of goods (tangible or intangible) or services will be subject to existing tax laws and revenue issuances, as may be applicable, according to the BIR.

“The BIR, not a newcomer to the workings and tax issues presented by online business transactions through the internet, feels that the challenge in gaming operations is how to implement a fair and equitable taxation of online gaming businesses, how to monitor the revenues and revenue-generating activities of Pogo and how to adapt existing taxes to Pogo so as to lessen the so-called ‘lost potential tax revenues.’ This is the perspective from which the current issue of taxing taxpayers engaged in Pogo should be viewed,” it said.

Pagcor issued last September the guidelines for Pogo, a gaming activity which the BIR noted “basically refers to the offering by a licensee of Pagcor of online games of chance via the internet, using a network and software or program, exclusively to offshore authorized players, excluding Filipinos abroad, who have registered and established an online gaming account with the licensee.”