BIR tweaks requirements for POGOs securing tax clearance

THE BUREAU of Internal Revenue (BIR) revised the list of documents and relaxed some of the rules Philippine offshore gaming operation (POGO) companies and their service providers have to comply with for tax clearance.

BIR Commissioner Caesar R. Dulay on June 24 issued Revenue Memorandum Circular (RMC) No. 64-2020 containing the revised list of requirements for POGO licensees, which requires POGO companies to register with the BIR, settle the five percent franchise tax, remit and pay withholding taxes and submit a notarized undertaking to pay tax arrears.

The new rules however no longer require the companies to submit copies of their 2019 and first quarter 2020 quarterly returns for franchise tax.

It also tweaked the requirement on the notarized undertaking that companies need to submit. Previously, the undertaking had to say “to pay all tax arrears for prior years,” but the new rules now only require it to say “to pay tax arrears.”

It likewise removed the detail in the previous guidelines released on May 7 that withholding taxes will have to be settled for the “January to April 2020 period.” The new rules now simply state that withholding taxes must be paid.

Meanwhile, for POGO service providers, the BIR also updated the conditions but maintained they still need to register with the bureau; submit a copy of their 2019 income tax return (ITR); remit and pay withholding taxes due in January-April; and submit a notarized undertaking to pay tax arrears.

The BIR however also removed the required payment of 25% final withholding tax due from their foreign employees and said the undertaking must simply state “pay tax arrears” from the “pay all tax arrears for prior years” specified previously.

“Failure to comply with any of the above-mentioned conditions, as well as submission of falsified or fraudulent documents, shall result in the denial of the issuance of a BIR Clearance for the resumption of operations,” the BIR said.

POGO firms and their service providers will still have to submit documents to secure tax clearances, namely: copy of the application for registration of corporations or a BIR certificate of registration; copies of monthly remittance form for income taxes withheld, quarterly remittance return of income taxes withheld or the payment form for January-April 2020; as well as the notarized undertaking.

POGO companies are also required to pass copies of their franchise tax returns and proof of payments while the service providers need to submit copies of 2019 ITR with proof of payments.

“Please note that the application of a Service Provider for the issuance of a BIR clearance shall not be approved in case its POGO Licensee failed to comply with the BIR requirements for BIR Clearance,” the document read.

The new rules were signed and approved by BIR Deputy Commissioner Arnel SD. Guballa who also heads the bureau’s POGO Task Force.

Sought for comment, BIR officials did not respond to queries sent as of publication.

Last week, officials of the gaming regulator Philippine Amusement and Gaming Corp. (PAGCOR) confirmed that at least two POGO companies expressed interest in leaving the country due to several factors, including the issue on franchise tax.

The BIR has been struggling to collect the 5% franchise tax, which is on top of the 2% franchise fee of PAGCOR, from overseas-based POGO companies that question its applicability.

So far, the BIR has not released data on the number of POGO companies and service providers that have secured tax clearance to resume operations.

There are 60 POGO licensees registered in the country, most of which are based overseas, and more than 200 service providers who provide outsourced works for the operators.

The government collected P6.42 billion in taxes from the POGO industry last year, up 170% from the P2.38 billion generated in 2018. — B.M. Laforga