Foreign-based Pogos subject to 5% franchise tax

The Bureau of Internal Revenue (BIR) is going after the payment of the 5-percent franchise tax due from Philippine offshore gaming operators (Pogos) based overseas despite opposition from state-run regulator Philippine Amusement and Gaming Corp. (Pagcor).

In a statement Monday, the Department of Finance (DOF) quoted Internal Revenue Commissioner Caesar R. Dulay as saying that the franchise tax on all licensed Pogos was not a new imposition nor 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 response to Pagcor’s memorandum to the Office of the President contesting the payment of the franchise tax among foreign-based Pogos.

Pagcor’s website showed there were 58 licensed Pogos, but it did not say how many were operating from abroad.

Licensees employ Philippine-based service providers whose workers directly deal with their clients—online gamblers abroad, mainly from China, where gambling is illegal.

In its memo to President Duterte, Pagcor claimed the franchise tax was not previously imposed by the BIR, citing a 2018 legal opinion by the Office of the Solicitor General (OSG), which Dulay disproved.

Dulay pointed out that as early as 2017, the BIR’s Revenue Memorandum Circular (RMC) No. 102-2017 already slapped a franchise tax on all Pogos, whether here or abroad.

“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,” RMC 102-2017 read.

Dulay last year moved to correct the OSG’s opinion and reiterated the BIR’s basis for imposing franchise tax on offshore Pogos.

Also, Dulay noted that the OSG’s opinion was “not binding” because under the Tax Code, “the power to interpret [its] provisions and other tax laws shall be under the exclusive and original jurisdiction of the BIR Commissioner subject to review by the Secretary of Finance.”

The BIR chief also corrected the erroneous claim that Pogo operators were being assessed and paying their corporate income taxes and value-added tax (VAT), the DOF said. INQ