Pagcor earnings subject to corporate income tax – BIR

MANILA, Philippines - The Bureau of Internal Revenue (BIR) has ruled that all earnings of state-run Philippine Amusement & Gaming Corp. (Pagcor) from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement facilities, gaming pools and other related operations are subject to corporate income tax.

The BIR issued Memorandum Circular 33-2013 to clarify the income tax and franchise tax due from Pagcor, its contractors and licensees.

Pagcor was stricken off the list of government-owned or controlled corporations that are exempted from the payment of the income tax by virtue of Republic Act 9337 or the Expanded Value Added Tax Law.

The previous management of the state-run gaming firm questioned before the Supreme Court the constitutionality of its removal from the list, arguing that its charter exempted it from paying the corporate income tax.  The High Tribunal, however, junked Pagcor’s petition on April 6, 2011.

Subject to income tax are Pagcor’s earnings from its casino operations, dollar pit operations, regular bingo operations and mobile bingo games operated with agents on commission basis. 

The agents’ commission income shall, however, be subject to regular income tax and and consequently to withholding tax under existing regulations.

Income from other related operations includes, but is not limited to, income from licensed private casinos covered by authorities to operate, income from traditional bingo, electronic and other bingo variations, income from private Internet casino, gaming, Internet sports betting and private mobile gaming operations, income from junket operations, income from SM demo units and income from other necessary and related services, shows and entertainment.

While the BIR has required Pagcor to pay franchise tax and income tax on all its income, gaming proponents are only required to pay income tax.

Pagcor, the third biggest taxpayer among government corporations, remitted P1.07 billion in corporate income tax alone last year, a landmark amount in its 27-year history. 

It actually paid a total of P5.5 billion to the BIR,  comprising P1.07 billion in corporate income tax,  P1.37 billion  (franchise tax from its gaming operations), P2.32 billion (franchise tax collections from licensees), and P778 million in withholding taxes.  The total amount remitted to the BIR is 10.4 percent higher than the P4.98 billion paid in 2011.

For this year, Pagcor is eyeing P44 billion in total revenues, up 10 percent from a year earlier, mainly driven by robust gaming operations and the opening of port tycoon Enrique Razon’s Solaire Resort and Casino at  Pagcor’s Entertainment City.