The Department of Finance and the Office of the Solicitor General (OSG) have agreed that all Philippine offshore gaming operators (Pogos) and their service providers operating in the country are taxable under existing laws.
However, the OSG said Pogos based abroad were not covered by Philippine tax laws, Solicitor General Jose Calida said in a letter to Finance Secretary Carlos Dominguez III on Tuesday.
“There is nothing in the [2018 OSG] legal opinion that states or even infers that all Pogos and their employees cannot be taxed,” Calida told Dominguez.
In the legal opinion, Calida said there were Philippine-based Pogos and foreign-based Pogos that engaged gaming agents and service providers accredited by the state-run regulator Philippine Amusement and Gaming Corp. (Pagcor).
“Notably, all betting and payout systems of Pogos are conducted outside the Philippines. On the other hand, Philippine service providers are local companies that perform support services for offshore betting activities. 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 (information technology) support services. These companies then sell these live-streamed games to foreign-based Pogos. In turn, the foreign-based Pogos collect bets from its preregistered clients through its online platform and earn from such activity,” Calida explained.
Calida noted there was usually confusion that Pogos were also the service providers.
“Contrary to this notion, we clearly defined in our legal opinion that based on the rules and regulations for Pogos promulgated by Pagcor, the Pogos we referred to as not subject to income tax are the foreign-based Pogos. We further stated that gaming operations conducted by the service providers and subscribed to by the foreign-based Pogos are merely cost centers as far as the latter are concerned. Ultimately, a foreign-based Pogo’s source of income is the placement of bets on its online betting facility—which are all derived from sources outside the Philippines,” Calida said.
Citing the Tax Code, Calida pointed out that “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.