On 8 February 2021, the House of Representatives approved House Bill No. 5777 “An Act Taxing Persons Engaged in Philippine Offshore Gaming Operations, Amending for the Purpose Section 25 and Adding a New Section 150-C of the Internal Revenue Code of 1997, as Amended”.
The bill will then be transmitted to the Senate to undergo three (3) readings before it is sent to the Office of the President for the signature of President Rodrigo Duterte.
Offshore Gaming Licensee (also known as POGO) Defined
Under HB No. 5777, Offshore Gaming Licensee is defined as offshore gaming operator, whether organized and registered abroad or in the Philippines which is duly licensed and authorized through a gaming license by the Philippine Amusement and Gaming Corporation (PAGCOR) or any Special Economic Zone Authority or Tourism Zone Authority to conduct gaming operations including acceptance of bets from offshore customers.
Salient Features of HB No. 5777
1. Taxation of Alien Employees of licensed POGOs in the Philippines [Section 25 (G)]
If passed into law, HB No. 5777 will impose twenty-five percent (25%) withholding tax on the gross income of alien individuals employed by offshore gaming licensee or also known as POGO in the country, with a presumed minimum gross annual income of Six Hundred Thousand Pesos (P600,000.00). This is regardless of the residency of alien employees, or the term or class of their working or employment permit.
Further, government agencies collecting applicable mandatory contributions such as the Social Security System (SSS), Philippine Health Insurance Corporation (PHIC), and Home Development Mutual Fund (HDMF), may use the basic salary as the basis of computation of applicable contributions.
2. Taxation of Accredited Service Providers to Licensed POGOs [Section 27 (F)]
Accredited service providers to POGO is defined as a corporation created or organized in the Philippines or under its laws which is duly authorized by PAGCOR or any economic zone to provide licensed POGOs with ancillary services such as customer and technical relations and support information technology, gaming software, data provision, etc.
Accredited Service Providers to POGO will not be subjected to gaming tax but will be subjected to income tax and other applicable local and national taxes.
3. Taxation of Offshore Gaming Licensees (OGL) or POGOs
POGOs will be imposed with five percent (5%) gaming tax on gross revenue or receipts derived from gaming operations and similar related activities. This is in lieu of all kinds of taxes including franchise tax, therefore, this income is exempt from any kind of taxes, fees, charges or levies, whether national or local, provided that PAGCOR or special economic zones may impose regulatory fees which shall not cumulatively exceed two percent (2%) of the gross revenue or receipts derived from gaming operations and similar related activities.
In recent years, there have been varying opinions and arguments about the legality of POGOs in the country as well as the taxation of offshore gaming operations. If HB No. 5777 is enacted into law, this will settle the question on the manner of taxation of POGOs.
Some say that the passage of this bill into law will recognize the legitimacy of online gambling, much is yet to unfold about this matter. However, should this imposition stand, this industry may be a source of billions worth of potential revenues.