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Rody Signs Law Taxing POGOs

Rody Signs Law Taxing POGOs
Chinese workers take a break from a POGO facility in Las Piñas City on Aug. 16, 2019. Photo by Edd Gumban, The Philippine STAR

President Duterte signed into law on Wednesday, Sept. 22, Republic Act No. 11590, which imposes additional taxes on Philippine offshore gaming operators (POGOs) as the government seeks to raise revenues for its programs during the pandemic.

“This is part of our strict regulation of all kinds of gambling and the prohibition of illegal gambling,” presidential spokesman Harry Roque said at a press briefing on Thursday, Sept. 23.

The presence of POGOs in the Philippines has sparked controversy because they have been tied to unlawful activities like money laundering, prostitution, human trafficking, bribery and tax evasion.

Officials have given assurances that the Duterte administration won’t tolerate any illegal activity linked to the gaming firms.

Under the law, which adds new sections to the tax code, an “offshore gaming licensee” refers to the offshore gaming operator, whether organized abroad or in the Philippines, duly licensed and authorized through a gaming license by the Philippine Amusement and Gaming Corp. (Pagcor) or any special economic or tourism zone or freeport authority to conduct gaming operations.

It also defined an offshore gaming licensee gaming agent as a representative in the Philippines of an offshore-based operator who shall act as a resident agent who will receive summons, notices, and other legal processes for the offshore gaming licensee and to comply with the government’s disclosure requirements.

The law imposes a gaming tax on services rendered by offshore gaming licensees and is expected to generate more than P28 billion in additional tax revenues this year.

It provides that the entire gross gaming revenue or receipts or the agreed predetermined minimum monthly revenue or receipts from gaming, whichever is higher, shall be levied a gaming tax equivalent to 5% in lieu of all other direct and indirect internal revenue taxes and local taxes on gaming income.

It also allows Pagcor or any special economic, tourism zone, or freeport authority to impose regulatory fees on offshore gaming licensees, which shall not cumulatively exceed 2% of the gross gaming revenue or receipts derived from gaming operations and similar activities.

As for the POGO workers, RA 11590 provides that aliens, who are employed and assigned in the Philippines by an offshore gaming licensee or its service provider, shall pay a final withholding tax of 25% on their gross income provided that the minimum final withholding tax due for any taxable month shall not be lower than P12,500.

The law also requires all foreign employees of offshore gaming licensees and their service providers to have a tax identification number (TIN).

All offshore gaming licensees and service providers that employ or engage a foreign national without a TIN shall be slapped with a fine of P20,000 for every non-compliant individual. They may also lose their government-issued licenses and may be barred from employing foreigners “in proper instances.”

The non-gaming revenues of Philippine-based offshore gaming licensees shall be subject to an income tax equivalent to 25% of the taxable income derived during each taxable year from all sources within and without the Philippines.

Accredited service providers to offshore gaming licensees will not be subject to gaming tax but should pay the income tax rates imposed on domestic corporations and other applicable taxes.

The non-gaming revenues derived within the Philippines of foreign-based offshore gaming licensees shall be subject to an income tax equivalent to 25% of the taxable income derived during each taxable year. A majority or 60% of the total revenue collected from the gaming tax will be allocated for the implementation of the Universal Health Care Act (60%), health facilities enhancement program (20%), and programs related to the attainment of the Sustainable Development Goals (20%).