POGOs to Restart Business Soon, Tax Clearance Process Underway

The Philippine Bureau of Internal Revenue (BIR) announced the start of the tax clearance process for the applications of online gaming firms that offer their services outside the country, collectively known as POGOs (Philippine Offshore Gaming Operators). The news comes two weeks after BIR unveiled newer, more stringent guidelines the operators must comply with before they can restart their operations during the now laxer coronavirus quarantine.

The country’s Internal Revenue Deputy Commissioner Arnel Guballa confirmed many of the offshore gaming companies have already lodged written applications for tax clearance. Roughly 220 Philippine online gaming operators are currently registered with different Revenue District Offices in the country’s capital Manila, particularly those located in Makati, Las Pinas, and Paranaque.

The Philippine state-owned gambling regulator PAGCOR (Philippine Amusement and Gaming Corporation) gave the POGOs the green light to resume their operations for the purpose of generating additional revenue.

The extra funds are to be used to combat the negative effects of the COVID-19 pandemic. However, the operators must first obtain tax clearances from the Bureau of Internal Revenue before they can legally resume their business.

According to Deputy Commissioner Guballa any gambling providers that operate without having secured a clearance first are doing so illegally. The Philippine authorities collected as much as PHP43 billion in 2019 from taxes and registration fees alone.

A Philippine law firm that represents the online gaming providers insisted more information was required from the Bureau of Internal Revenue before the operators can file their tax clearance applications. Deputy Commissioner Guballa begs to differ, however. In his words, the guidelines provided by the Bureau’s Commissioner, Caesar Dulay, were laid down clearly and comprehensively enough so there is no reason for any delays.

BIR Issued Stricter Requirements for POGOs

Under said guidelines, the clearance process requires the operators to present copies of their Registered District Offices’ registration along with documents for franchise payment fees. Documents for payment of the final withholding taxes for the previous years and Q1 of 2020 are also needed. The latter is taken from the salaries of employees and paid by the online gambling operators directly to the Philippine government.

Also required for submission is a notarized warrant which guarantees the operators will contribute all back taxes they have been levied with in 2019 and during previous years. Deputy Commissioner Guballa also emphasized that any online gambling operator to submit false information or forged documents will be automatically denied.

While the operators are displeased with the multi-million PHP assessment, it came to light few of them have already received notices for deficiency tax assessment. In fact, these cases occurred even prior to the coronavirus pandemic.

Meanwhile the gambling operators are protesting, with the focus falling predominantly on the 25% final withholding taxes imposed on the wages of over 100,000 foreigners who are employed in the online gaming industry. The monthly salary of each of these workers was fixed at the amount of PHP70,000, according to newspaper reports.

The legal representatives of the gambling operators insist that the compensation for each employee was lower at PHP40,000 since the workers have also received free meals, housing, and transportation.

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