In Perception Gaming, Inc. v. Commissioner of Internal Revenue (CTA EB Nos. 1315 and 1356, 7 July 2017), the Court of Tax Appeals En Banc held that Perception Gaming, Inc.’s (PGI) lease of gaming machines and rendition of related technical services to the Philippine Amusement and Gaming Corporation (PAGCOR) and to PAGCOR-Authorized Bingo Operators are effectively subject to zero percent (0%) value-added tax (VAT).
The Court cited Section 13(2) of the PAGCOR Charter which provides that three (3) entities shall enjoy exemption from taxes: (1) PAGCOR; (2) corporations with which PAGCOR or PAGCOR-Authorized Operator (Operator) has any contractual relationship in connection with the operations of the casinos under the PAGCOR Charter; and (3) those receiving compensation or other remuneration from PAGCOR or Operator as a result of essential facilities furnished and/or technical services rendered to PAGCOR.
The Court explained that the tax-exempt status of PAGCOR extends to other entities with which the PAGCOR or Operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under the PAGCOR Charter. Under Section 108(B)(3) of the National Internal Revenue Code, services performed in the Philippines by VAT-registered entities shall be subject to zero percent (0%) rate if these services are rendered to persons or entities whose exemption under special laws effectively subjects the supply of such services to zero percent (0%) rate. Thus, the services rendered by PGI to PAGCOR and to its authorized Bingo Operators are effectively subject to zero percent (0%) VAT.