The Bureau of Internal Revenue (BIR) has issued the applicable rules and regulation on taxing Philippine offshore gaming operators (POGOs), with the collected taxes to be used by government in its COVID response efforts.
The release of BIR Revenue Regulations (RR) No. 20-2021, signed by Finance Secretary Carlos Dominguez III and Internal Revenue Commissioner Caesar Dulay, serves as the implementing guidelines for the implementation of Republic Act (RA) No. 11590 that was signed by President Rodrigo Duterte last September.
The BIR guidelines mandated payment of gaming tax equivalent to 5% of POGO licensees’ gross gaming revenues (GGR), or 5% of the agreed, pre-determined minimum monthly revenues from gaming revenues, whichever is higher.
Licensees’ non-gaming operations will also be slapped with 25% annual income tax, just like other firms which enjoyed the reduced rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. Prior to CREATE, firms were levied 30% corporate income tax — the highest in ASEAN.
The tax reduction under CREATE was intended to generate savings for companies badly hit by the pandemic, which government hoped would be reinvested when the economy recovered.
POGO licensees’ non-gaming revenues are now subject to 12% value-added tax (VAT) or percentage tax.
POGO service providers, both within and outside of the country, must pay annual income taxes, plus withholding tax on purchases of goods and services.
Licensees employ service providers, whose workers directly deal with their clients—online gamblers abroad, mainly in China (where gambling is illegal).
But service providers would no longer pay VAT for the sale of goods and properties and services given to POGO licensees as long as they paid gaming taxes.
Foreigners working in POGO must also pay a 25% final withholding tax on their gross income. This means Chinese POGO workers needed to secure tax identification numbers before employment in the Philippines.
In October, Dominguez said RA 11590 will allow the BIR to collect a total of P76.2 billion from POGOs in 2022 and 2023.
Dominguez estimates P35.1 billion can be generated from the tax on GGR, on top of P41.2 billion from foreign POGO workers’ personal income taxes.