Constitutional Law, Taxation

SAINT WEALTH LTD. v. BIR G.R. No. 252965 December 07, 2021, POGO Rules and Regulations, Franchise Tax  


From 2016, the Philippines began regulating online gaming hubs, specifically the Philippine Offshore Gaming Operators (POGOs). 

The PAGCOR issued POGO Rules and Regulations defining offshore gaming as “the offering by a licensee of PAGCOR authorized online games of chance via the internet using a network and software or program, exclusively to offshore authorized players excluding Filipinos abroad, who have registered and established an online gaming account with the licensee.” 

The POGO Rules and Regulations further provides that POGOs must register with PAGCOR. Upon registration, the POGO is given an Offshore Gaming License (OGL). 

Under RMC No. 102-2017, Licensees must pay a five percent (5%) franchise tax, in lieu of all other taxes, for their income arising from their gaming operations. Such franchise tax is based on their entire gross gaming revenues. 

Meanwhile, for income arising from non-gaming operations, Licensees must pay normal income tax, value-added tax (VAT), and other applicable taxes.

The BIR then issued RMC No. 78-2018 or the “Registration Requirements of Philippine Offshore Gaming Operators and Its Accredited Service Providers,” which reiterated that online activity is sufficient to do business in the Philippines and considered POGOs as “Resident Foreign Corporation Engaged in Business in the Philippines,” which requires all offshore-based and Philippine-based POGO licensees to register with the BIR.

Saint Wealth, an offshore-based POGO licensee, filed a Petition for Certiorari and Prohibition [With Application for a Temporary Restraining Order and/or Writ of Preliminary Injunction] (the Saint Wealth Petition), assailing the constitutionality of RMC No. 64-2020, and praying for the issuance of a TRO and/or writ of preliminary injunction to enjoin the enforcement of the same.

According to Saint Wealth, the Revenue Memorandum Circulars violates its constitutional right to due process; the equal protection clause because Under RMC No. 64-2020, Saint Wealth, an offshore-based POGO licensee, is treated as if it is similarly situated with Philippine-based casino providers, however, there exists a reasonable classification between offshore-based POGO licensees and Philippine-based entities that justifies a difference in treatment; that considering that a reasonable classification exists between Saint Wealth, an offshore-based POGO licensee, and Philippine-based operators, the BIR should treat them differently and should not impose similar tax liabilities on these different classes of entities.

On September 22, 2021, R.A. No. 11590, entitled “An Act Taxing Philippine Offshore Gaming Operations, Amending for the Purpose Sections 22, 25, 27, 28, 106, 108, and Adding New Sections 125-A and 288-G of the National Internal Revenue Code of 1997, As Amended, And For Other Purposes,” was signed into law.

R.A. No. 11590 categorically classifies POGO licensees, whether Philippine-based or offshore-based as corporations “engaged in doing business in the Philippines” and imposes a five percent (5%) gaming tax on the income of POGOs derived from their gaming operations. Such gaming tax is based on the entire gross gaming revenue or receipts or the agreed predetermined minimum monthly revenue, whichever is higher.


Whether offshore-based POGO licensees are liable to pay a five percent (5%) franchise tax for income derived from their gaming operations.


The instant Petition is GRANTED. 

As aptly observed by Justice Perlas-Bernabe, when the PAGCOR Charter was enacted, offshore gaming was not yet in existence. Thus, the PAGCOR Charter could not have contemplated virtual gaming websites as “casinos and other related amusement places” mentioned under Section 13(2)(b) thereof. Consequently, the PAGCOR Charter cannot be said to have been the basis for imposing tax on POGO Licensees.

Simply then, when RMC No. 102-2017 was issued, there was no law imposing any franchise tax on POGOs. Thus, RMC No. 102-2017 is invalid, insofar as it imposed franchise taxes on POGOS, because it was passed without any statutory basis.

Likewise, as pointed out by Justice Caguioa, RMC No. 102-2017 is likewise invalid and unconstitutional because it effectively amended the PAGCOR Charter when it imposed taxes on entities not taxed under the law. It must be emphasized that the State’s inherent power to tax is exclusively vested in Congress. 

Without such imprimatur from Congress, the BIR cannot arrogate upon itself the authority to impose taxes, especially because “[t]he rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation.”

Moreover, the BIR cannot enlarge or go beyond the provisions of the law it administers. 

As held in Purisima v. Lazatin:

RR 2-2012 is unconstitutional.

According to the respondents, the power to enact, amend, or repeal laws belong exclusively to Congress. In passing RR 2-2012, petitioners illegally amended the law – a power solely vested on the Legislature.

We agree with the respondents.

The power of the petitioners to interpret tax laws is not absolute. The rule is that regulations may not enlarge, alter, restrict, or otherwise go beyond the provisions of the law they administer; administrators and implementors cannot engraft additional requirements not contemplated by the legislature.

It is worthy to note that RR 2-2012 does not even refer to a specific Tax Code provision it wishes to implement. While it purportedly establishes mere administration measures for the collection of VAT and excise tax on the importation of petroleum and petroleum products, not once did it mention the pertinent chapters of the Tax Code on VAT and excise tax. 

Indeed, the ruling in Purisima applies squarely in this case. 

The BIR encroached upon the authority reserved exclusively for Congress when it issued RMC No. 102-2017 and imposed a five percent (5%) franchise tax upon POGOs when the PAGCOR Charter itself does not tax POGOs. 

RMC No. 102-2017 likewise failed to indicate which provisions of the PAGCOR Charter it was implementing when it imposed the franchise tax. Accordingly, RMC No. 102-2017, and consequently, RMC No. 78-2018, insofar as they imposed franchise taxes on POGOS, are invalid and unconstitutional for being issued without any statutory basis and for encroaching upon legislative power to enact tax laws.

Section 11(f) and (g) of Republic Act No. 11494, Revenue Regulation No. 30-2020; Revenue Memorandum Circular No. 64-2020; Revenue Memorandum Circular No. 102-2017; and Revenue Memorandum Circular No. 78-2018, in so far as they impose franchise tax, income tax, and other applicable taxes upon offshore-based POGO licensees are declared NULL and VOID for being contrary to the Constitution and other relevant laws.

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