The Philippines’ Bureau of Internal Revenue (BIR) has declared that jackpot prizes won from casinos and other gambling activities are subject to a final withholding tax before payout, equivalent to 20% of the total or 25% for non-residents who are not engaged in trade or business within the Philippines.
The clarification was issued via a circular this week and subsequently reported by state-run Philippine News Agency.
According to the BIR, such jackpots are considered winnings under the Tax Code and are therefore subject to final withholding tax. A progressive jackpot prize is defined as a type of jackpot prize that increases incrementally as more bets are placed, whether across linked tables, electronic gaming machines or bingo games, until such prize is won, according to the memo.
Similarly, the final withholding tax will apply to jackpot prizes or similar winnings derived by individuals from participation in casino gaming and other gambling activities.
The 20% base tax is to be charged on the gross amount of the jackpot prize won without any deduction for service charges, administrative fees, commissions or other similar charges.
Explaining the purpose of its circular, the BIR said, “In recent years, the Philippines gaming and gambling industry has experienced significant growth under the regulatory framework of the Philippine Amusement and Gaming Corporation (PAGCOR) and other authorized government instrumentalities, including Cagayan Economic Zone Authority (CEZA) and the Aurora Pacific Economic Zone and Freeport Authority (APECO). This expansion has led to more high-value jackpot prizes for players.
“In view of these developments, there is a compelling need to clarify the tax treatment of jackpot prizes to ensure consistent application of existing laws, promote equity and uniformity in taxation and safeguard government revenue – without expanding or modifying the scope of the law.”
PNA also quoted BIR Commissioner Charlito Mendoza as clarifying that the circular “addresses possible confusion in coverage and strengthens compliance moving forward.”
“Gaming operators are considered withholding agents of such winnings and are reminded that failure to withhold and remit the correct tax will make them liable for the tax due, as well as the applicable penalties under the Tax Code.”
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