CLARIFYING THE TAXABILITY OF ELECTRONIC SABONG (e-SABONG) OPERATIONS AS REGULATED BY THE PHILIPPINES AMUSEMENT AND GAMING CORPORATION (PAGCOR)

CLARIFYING THE TAXABILITY OF ELECTRONIC SABONG (e-SABONG) OPERATIONS AS REGULATED BY THE PHILIPPINES AMUSEMENT AND GAMING CORPORATION (PAGCOR) (Revenue Memorandum Circular No. 25-2022, March 11, 2022)

• Electronic Sabong or  e-Sabong is the online and/or remote or offsite wagering/betting  on live cockfighting matches, events and/or activities streamed or broadcasted live from cockpit arena/s licensed or authorized by the LGU.
• The Supreme Court held that like PAGCOR, its contractors and licensees remain exempted from payment of corporate income tax and other taxes except from 5% franchise tax on their income from gaming operations. However, the ruling is in CIR v. Acesite (Philippines) Hotel Corporation and CIR v. Thunderbird Pilipinas Hotel & Resorts Inc., which held that PAGCOR is also exempted from indirect tax like VAT. However, the tax exemption on VAT only extends to those individuals or entities who have contracted with PAGCOR (PAGCOR contractees not licensees)

Taxability of e-Sabong Operations

• E-Sabong Operator’s lncome
  • lncome from e-Sabong Operation refers to the Gaming income and/or Service income generated from activities authorized under the e-sabong license issued by PAGCOR, including but not limited to those derived from the plasada.
    • Gaming Income from e-Sabong Operation by the e-Sabong Operator shall be subject to 5% franchise tax in lieu of all internal revenue taxes except for VAT and Percentage Tax, depending on the threshold, and shall be directly remitted to BIR. Also, the franchise tax is separate and distinct from the licensing and regulatory fees payable to PAGCOR.
    • In the event that the e-Sabong Operator has contracted PAGCOR for the provisions of goods and services in connection with PAGCOR’s gaming operation, then such shall be subject to VAT at zero rate.
    • Service Income from e-Sabong by an e-Sabong Operator shall be subject to regular income tax, VAT or percentage tax, withholding tax and other taxes, as may be deemed appropriate. The 5% franchise tax in lieu of all internal revenue taxes shall not apply.
  • Other Income from e-Sabong Operation refers to all income or earnings realized by the e-Sabong Operator from all other activities (i.e., advertisements, promotions, etc.) whose authorization does not derive from the e-Sabong license issued by PAGCOR.
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate. The 5% franchise tax in lieu of all internal revenue taxes shall not apply.
  • Agent’s Commission – the Commission income received by an authorized Third-Party Master Agent/Agent, which is usually computed as a percentage of the bets from e-sabong players registered under his/her account.
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit the corresponding creditable withholding taxes due (5%/10% for Individual, 5%/10% for non-individual) for the account of Agent/Master Agent
  • Promoter/Coordinator’s Commission – the Commission income received by a Third-Party e-sabong Promoter/Coordinator for services rendered to the e-Sabong Operator.
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit the corresponding creditable withholding taxes due (5%/10% for Individual, 5%/10% for non-individual) for the account of the Promoter/Coordinator
  • Cockpit Owner/Operator’s income from e-sabong Operation – the revenue accruing to the Third-Party Cockpit Owner/Operator for the use of the cockpit arenas/venues in holding cockfights for e-sabong duly licensed by the Local Government Units (LGUs) and registered with PAGCOR.
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit the corresponding creditable withholding taxes due (5%/10% for Individual, 5%/10% for non-individual)
  • GameCock Owner’s income from e-Sabong Operation the revenue accruing to a Third-Party Gamefowl breeder who supplies the gamecocks utilized in the cockfights under the e-Sabong platform/system
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit the corresponding creditable withholding taxes due (5%/10% for Individual, 5%/10% for non-individual)
  • Duly Licensed Third-Party Betting Station Host income from e-sabong Operation the revenue accruing to the Third-Party OCBS Host duly licensed by PAGCOR for setting up a betting station who shall source live stream of cockfights from an e-sabong Operator
    • This shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit 2% creditable withholding taxes for the account of the Third Party OCBS Host.
  • lncomereceived by a Third-Party Gamecock Owner from the e-sabong Operator in relation to the e-Sabong operation shall be subject to regular income tax, VAT or percentage tax depending on the threshold, withholding tax and other taxes, as may be deemed appropriate.
    • The e-Sabong Operator shall withhold and remit 2% creditable withholding taxes for the account of the Third Party Game Cock Owner
  • Other income derived or received by any person/s or entity/ies in relation to the operation/s of e-sabong not included in the above-mentioned enumeration shall be subject to appropriate taxes, including but not limited to final withholding taxes and the like.