THE Department of Finance (DoF) and the Office of the Solicitor General (OSG) cleared the air on the taxability of Philippine Offshore Gaming Operators (POGOs) after days of back-and-forth on the issue, reaching apparent consensus on the tax obligations of resident POGOs and their employees.
Foreign-based Philippine offshore gaming companies generating income offshore as it caters to foreign gamblers are indeed not subject to local taxes, according to the Department of Finance (DoF) and Office of the Solicitor General (OSG).
In a letter by Solicitor-General Jose C. Calida to Finance Secretary Carlos G. Dominguez III showed by the DoF to reporters Wednesday, the two sides clarified Mr. Calida’s earlier statements on POGO taxability, acknowledging that gaming operators “strictly and exclusively” deriving income outside the country are not subject to Philippine tax.
Mr. Calida also acknowledged that the revenue of Philippine based POGOs and Philippine service providers are subject to Philippine tax.
Mr. Dominguez added that Philippine service providers are subject to income tax and value-added tax (VAT), based on whether it has workers based in the Philippines.
“The service provider of the POGO located in the Philippines through workers/employees here, is subject to income tax and VAT on its fees charged to the nonresident POGO,” he told reporters in a phone message.
The OSG said Philippine service providers are those that hire foreign employees to work here to provide information technology support services. Live-streamed games are then sold to foreign-based POGOs, which collect bets from clients. The Philippines can then tax the service providers’ fees from foreign POGOs, which constitute its revenue.
Mr. Dominguez added that if the actual gaming operator is located in the Philippines and is licensed by the Philippine Amusement and Gaming Corp. (PAGCOR), its revenue is subject to a 5% franchise tax.
Mr. Calida also clarified that he recognizes the BIR’s authority to interpret tax laws.
He said that the OSG’s legal opinion on the taxability of POGOs was issued on Dec. 19, 2018 at PAGCOR’s request.
“Moreover, the OSG supports the legislative efforts of Congress to streamline the efficient collection of taxes from these entities,” he said further. — Beatrice M. Laforga
