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Recto proposes clear tax rates for POGOs

By Vanne Elaine Terrazola

Senate President Pro Tempore Ralph Recto is seeking the imposition of a 30-percent income tax and five-percent franchise tax on Philippine offshore online gaming operations (POGOs).

Senator Ralph Recto (JOHN JEROME GANZON / MANILA BULLETIN FILE PHOTO)

Senate President Pro Tempore Ralph Recto (MANILA BULLETIN FILE PHOTO)

Recto recently filed Senate Bill No. 1295, which proposes to establish a tax regime for POGOs which are licensed and authorized by the Philippine Amusement and Gaming Corporation (Pagcor).

In filing the measure, the lawmaker said that while the offshore gambling industry continues to grow, “the nature of its business activity creates confusion in the enforcement of the country’s existing laws.”

The government started last year its crackdown on POGOs and their service providers that have evaded from their tax obligations, including the income taxes of foreigners employed in the industry. Finance authorities aimed to collect P2 billion in monthly taxes from the sector.

Solicitor General Jose Calida earlier issued a legal opinion saying that POGOs are exempted from tax because it generates earnings from bettors, or customers outside the country, mostly from China, citing the “source of income principle of the Tax Code.”

When tax officials refuted this, Calida later clarified his statement and said he was only referring to foreign-based POGOs whose incomes did not come from within the country.

“Hence, establishing the tax regime of POGOs and incorporating the same in the National Internal Revenue Code (NIRC) of 1997, as amended, is necessary to remove any doubt and avoid the confusion whether or not POGOs are taxable in our jurisdiction,” Recto said.

SB No. 1295 covers POGO companies in the Philippines, local gaming agents and POGO service providers.

Under PAGCOR rules and regulations on POGO operations, licenses are issued to Filipino-based or foreign-based operators.

Service providers that form part of the components of the POGO gaming operations such as gaming software provider, business outsourcing provider and content streaming provider are likewise required to secure a license.

Under the bill, licensed Philippine-based POGOs, local gaming agents and service providers shall be subjected to a 30-percent income tax, the taxable amount will be derived in the preceding taxable year from all sources within and outside of the Philippines.

Foreign-based POGOs shall also be subjected to a 30-percent income tax based on their gross income derived from game offerings or facilities located within the Philippines.

On top of the income tax, Recto’s bill also proposed the imposition of a five-percent franchise tax on all gross receipts derived from gaming operations of both Philippine and foreign-based POGO operators.

The measure is pending before the Senate Ways and Means Committee chaired by Sen. Pia Cayetano.

In the House of Representatives, a similar bill has passed the committee level.

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