DOF, OSG clear confusion on Pogo taxes, agree that PH-based casinos covered by tax laws

The Department of Finance (DOF) and Office of the Solicitor General (OSG) came to an agreement over which online casino outfits, or Philippine Offshore Gaming Operations (Pogo), should and shouldn’t be taxed.

Solicitor General Jose C. Calida, in a letter to Finance Secretary Carlos G. Dominguez III on Tuesday, Nov. 19, said he was referring to Pogos based abroad when he said such facilities are not covered by Philippine tax laws.

“There is nothing in the legal opinion that states or even infers that all Pogos and their employees cannot be taxed,” Calida said in his letter, referring to the legal opinion issued by the OSG in 2018.

In that legal opinion, Calida said there were Philippine-based and foreign-based Pogos which engage gaming agents and service providers licensed by the Philippine Amusement and Gaming Corp. (Pagcor).

“Notably, all betting and payout systems of Pogos are conducted outside the Philippines,” said Calida.

“On the other hand, Philippine service providers are local companies that perform support services for offshore betting activities,” he said. “These service providers are the companies that employ foreigners here in the Philippines, handle the recording and live streaming of such games, and perform IT support services,” he added.

“These companies then sell these live-streamed games to foreign-based Pogos. In turn, the foreign-based Pogos collect bets from its pre-registered clients through its online platform and earn from such activity,” Calida said.

He said there was a common confusion that Pogos are also service providers.

“Contrary to this notion,” Calida said, “the Pogos we referred to as not subject to income tax are the foreign-based Pogos.”

Citing the Tax Code, Calida said “a foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.”

Dominguez agreed with Calida’s explanation.

“If the Pogo located outside the country caters fo foreign gamblers, then it is not subject to tax in the Philippines,” Dominguez said in a Viber message.

But service providers of Pogos in the Philippines are subject to income tax and value-added tax, he said.

Philippine-based Pogos and service providers were “subject to Philippine taxes on income derived from sources within and without the Philippines,” Calida said.

Dominguez reiterated revenues of all Pagcor-licensed Pogos in the Philippines were subject to 5-percent franchise tax under Bureau of Internal Revenue (BIR) rules.

“It is the BIR which is the agency vested with the power to interpret tax laws,” said Calida.

“The OSG affirms its full support to the efforts of the BIR and DOF to tax Pogos and their employees in the country,” he said.

Edited by TSB