Saint Wealth Ltd. vs. BIR

GR Nos. 252965 & 254102 dated December 7, 2021


POGO licensees derive no income from the sources within the Philippines because the “activity” that produces income occurs and is located outside the territory of the Philippines


From 2016, the Philippines began regulating online gaming hubs, specifically the Philippine Offshore Gaming Operators (POGOs). Thus, on September 1, 2016, the PAGCOR issued the Rules and Regulations for Philippine Offshore Gaming Operations. 

In 2017, the BIR issued RMC No. 102-2017,  which recognized that online activity is sufficient to constitute doing business in the Philippines, and clarified the taxability of POGOs. Under RMC No. 102-2017, Licensees must pay 

  1. 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. 
  2. For income arising from non-gaming operations, Licensees must pay normal income tax, value-added tax (VAT), and other applicable taxes

In addition, RMC No. 64-2020 was issued which impose requirements for POGO registration and BIR clearance

In 2020, during the pandemic, the Bayanihan 2 Law outlines the sources of funding for the COVID-19 measures which includes – a five percent (5%) franchise tax based on the gross bets or turnovers earned by POGOs. 

Saint Wealth Ltd. (Saint Wealth), an offshore-based POGO licensee, filed a Petition for Certiorari and Prohibition assailing the constitutionality of RMC No. 64-2020 as it violates  

  1. the fundamental principle of situs of taxation. Under Philippine tax laws, non-­resident foreign corporations are only liable to pay taxes on income received from sources within the Philippines. However, Saint Wealth’s income is derived from sources outside the Philippines since all of its operations are located abroad. Therefore, it should not be subjected to any Philippine tax. 
  2. the rule on uniformity of taxation because it treats differently offshore-based POGO licensees from other foreign corporations which are not engaged in trade or business in the Philippines.

Other off-shore POGO licensees filed a petition to declare Bayanihan 2 unconstitutional because it whimsically disregards the principle of territoriality in taxation. Similar to Section 11(f) of the Bayanihan 2 Law, Section 11(g) also violates the principle of territoriality in taxation because it taxes “non-gaming” income of offshore-based POGO licensees derived from sources abroad.

The BIR stated that the tax impositions on POGO licensees do not violate the principles of situs and uniformity of taxation. The principle of situs of taxation only applies to income taxation. Clearly, such principle does not apply in the imposition of franchise tax – the tax imposed upon POGO licensees. Assuming arguendo that the principle of situs of taxation applies, the revenues of POGOs are still subject to tax because  income-producing activity of POGOs is its entire gaming operations, therefore, taxable in the Philippine jurisdiction


Whether offshore-based POGO licensees are liable to pay income tax, VAT, and other applicable taxes for income derived from their non-gaming operations.


NO. The BIR can only Impose Income Tax Upon Income Derived from the Philippines; VAT can only be Imposed for Services and Goods Consumed in the Philippines. The offshore-based POGO licensees derive no income from the sources within the Philippines because the “activity” which produces income occurs and is located outside the territory of the Philippines. Indeed, the flow of wealth or the income-generating activity – the placing of bets less the amount of payout – transpires outside the Philippines.

Section 42(A) of the NIRC provides the guidelines in determining what income is derived from sources within the Philippines, while Section 42(C) thereof identifies what income is sourced without. The test is to determine if the income originated from the Philippines.

The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. In BOAC, the Court held that, while the actual transportation would occur outside the Philippines, the sale of tickets in the Philippines already constituted a taxable activity. Applying the rulings of BOAC, offshore-based POGO licensees derive no income from the sources within the Philippines because the “activity” that produces income occurs and is located outside the territory of the Philippines.

Under the POGO Rules and Regulations, POGOs are entities which provide and participate in offshore gaming services. Offshore gaming has three components:

1. Prize consisting of money or something else of value which can be won under the rules of the game;

2. A player who:

  • being located outside of the Philippines and not a Filipino citizen, enters the game remotely or takes any step in the game by means of a communication device capable of accessing an electronic communication network such as the internet.
  • gives or undertakes to give, a monetary payment or other valuable consideration to enter in the course of, or for, the game; and

3. The winning of a prize is decided by chance.

All these three components do not involve and are not performed within the Philippine territory. None of these components likewise deals with Filipino citizens. To reiterate, the placing of bets occurs outside the Philippines; the players must not be Filipino citizens, or within the Philippines; and the payment of the prize also occurs outside of the Philippines. The only transaction entered into by these offshore-based POGO licensees are the service contracts with these service providers located in the Philippines.

Justice Dimaampao also observed the necessity to discuss the other jurisprudential tests to ascertain whether a resident foreign corporation is “doing” or “engaging in” or “transacting” business in the Philippines, to determine the taxability of POGOs, particularly offshore-based POGO licensees, within the jurisdiction of the Philippines.
Substance Test – the true test in determining whether a foreign corporation is transacting business “seems to be whether [it] is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another.”
Contract Test – transactions entered into by a foreign corporation which constitute an isolated transaction and are not a series of commercial dealings which signify an intent on the part of such corporation to do business in the Philippines, does not fall under the category of “doing business.”
Intention Test – what is determinative of “doing business” is not really the number or the quantity of the transactions, but the intention of the entity to continue the body of its business in the country.
Actual Performance Test – an essential condition to be considered as “doing business” in the Philippines is the actual performance of specific commercial acts within the territory of the Philippines, because, as aptly pointed out by Justice Dimaampao in his Reflections, the Philippines has no jurisdiction over commercial acts performed in foreign territories.
Applying these jurisprudential tests,it is clear that the POGOs, particularly offshore-based POGO licensees, are not doing, engaging in, nor transacting business in the Philippines.