BIR to e-sabong operators: Pay your taxes
MANILA, Philippines — The taxman has reminded e-sabong operators and related businesses of their tax obligations after a recent Senate inquiry found them earning billions of pesos per month from online “talpak” made more popular by stay-at-home gamblers amid the prolonged COVID-19 pandemic.
In a March 11 revenue memorandum circular, Bureau of Internal Revenue (BIR) Commissioner Caesar Dulay listed down the taxability of Philippine Amusement and Gaming Corp. (Pagcor)-regulated electronic sabong (cockfighting) games.
“With the onset of the pandemic and the prolonged mobility restrictions that came with it (the closure of cockpits being one of them), e-sabong saw a phenomenal increase in adoption and use,” Dulay noted.
Dulay said that while the state-run Pagcor as well as its licensees and contractees had been exempted — upheld by a Supreme Court (SC) ruling — from paying corporate income taxes, gaming operators were required to shell out 5-percent franchise tax.
Dulay added that Pagcor-licensed and/or accredited gaming operators must pay 12-percent value-added tax (VAT), citing another SC ruling which had clarified that unlike tax-exempt Pagcor and its contractees, licensees should pay up.
“The tax exemption of Pagcor extends only to those individuals or entities that have contracted with Pagcor in connection with Pagcor’s gaming operations. This is to proscribe any indirect tax, like VAT, that may be shifted to Pagcor because the tax exemptions granted under the Pagcor charter were primarily meant to favor Pagcor, and not any other entity,” Dulay pointed out.
As such, Dulay said all Pagcor-licensed e-sabong entities must be registered with the BIR, as well as file and pay their tax dues. “The BIR shall have the authority to inspect totalizators and other betting devices used in the collection, consolidation and recording of wagers made in online or remote/offsite betting activities on locally licensed games,” he said.
The BIR chief enumerated the e-sabong industry’s tax obligations — for one, operators’ gaming income was subject to 5-percent franchise in lieu of other internal revenue taxes except VAT or percentage tax. “In the event that the e-sabong operator has contracted with Pagcor for the provision of goods and services in connection with Pagcor’s gaming operations, then, such provision of goods and services to Pagcor is subject to VAT at zero-rate,” Dulay said.
Dulay added that e-sabong operators’ franchise taxes must be remitted directly to the BIR, and these payments will be on top of, or “separate and distinct from the 5-percent franchise tax due from Pagcor arising from the licensing and regulatory fees that Pagcor receives from the e-sabong operator.”
Operators’ service income sourced from e-sabong operations as well as other incomes from related activities not covered by Pagcor’s license, meanwhile, “shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate,” Dulay said, as franchise tax does not apply.
Income tax, VAT or percentage tax, and withholding taxes will also be slapped on commission income received by third-party e-sabong master agents, agents, promoters, and coordinators, Dulay said. “The e-sabong operator shall withhold and remit the corresponding creditable withholding taxes (5 percent/10 percent for individual payees and 10 percent/15 percent for non-individual payees) due” for the accounts of master agents, agents, promoters, as well as coordinators.
Also, cockpit owners and operators must pay income, VAT, percentage and other withholding taxes, of which e-sabong operators should withhold and remit the corresponding 5-percent creditable withholding taxes due for the cockpit operators and owners’ accounts.
The same taxes applied to income received by third-party off-cockpit betting station (OCBS) hosts from the OCBS. The BIR defined OCBS as physical sites where e-sabong players register, view live-streamed cockfights and wager their bets, while the OCBS host sets up an OCBS in existing licensed casinos, integrated resorts, e-bingo or e-games facilities, or new gaming sites specifically for e-sabong, Dulay explained. “The e-sabong operator shall withhold and remit the corresponding 2-percent creditable withholding taxes due for the account of the third-party OCBS host,” he added.
The income of third-party game cock owners will be slapped with the same income, VAT or percentage, as well as withholding and other taxes, with the e-sabong operator tasked to withhold and remit to the BIR the 2-percent creditable withholding taxes due from the cock owner.
Unregistered e-sabong operators, which may escape Pagcor supervision and the tax regime for such gaming operations, cannot avoid other taxes and penalties under the Tax Code, Dulay said.
“In addition to the penalties and sanctions imposed by the appropriate regulatory government agencies, the income derived by unauthorized e-sabong operators and the entities providing ancillary services to its unauthorized e-sabong operations shall not be covered under the fiscal regime as provided for in the Pagcor charter but rather subject to appropriate taxes and penalties as provided under the National Internal Revenue Code of 1997, as amended,” the BIR chief said.
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