Bloomberry Resorts and Hotels, Inc. v. BIR o Subsequently, the Court in PAGCOR v. The Bureau of Internal Revenue, et al.

,
Exempt Corps and Others Taxes at Preferential Rates|Aug 10 2016|Perez articulated that Section 1 of RA No. 9337, amending Section 27(C) of the
NIRC of 1997, which removed PAGCOR's exemption from corporate
Nature of Case: income tax, was indeed valid and constitutional.
Digest maker: Villafuerte  Consequently, in implementing the aforesaid amendments, respondent issued RMC
SUMMARY: Pursuant to the issuance of RA No. 9337, which amended Sec. 27(C) of the No. 33-2013 declaring that PAGCOR, in addition to the five percent (5%) franchise
NIRC of 1997 (which had the effect of excluding PAGCOR from the enumeration of GOCCs tax of its gross revenue under Section 13(2)(a) of PD No. 1869, is now subject to
exempt from paying corporate income tax), RESP issued RMC No. 33-2013 declaring that corporate income tax under the NIRC of 1997, as amended.
PAGCOR, in addition to the five percent (5%) franchise tax of its gross revenue under o In addition, a provision therein states that PAGCOR's contractees and
Section 13(2)(a) of PD No. 1869, is now subject to corporate income tax under the NIRC. In licensees, being entities duly authorized and licensed by it to perform
addition, a provision therein states that PAGCOR's contractees and licensees are likewise gambling casinos, gaming clubs and other similar recreation or amusement
subject to income tax under the NIRC of 1997, as amended. The Court struck down this places, and gaming pools, are likewise subject to income tax under the
Revenue Memorandum Circular. NIRC of 1997, as amended.
 PET immediately elevated the matter through a petition for certiorari and prohibition
The Court cited the pilot case of PAGCOR v. The Bureau of Internal Revenue, reiterating the before this Court asserting the following arguments:
doctrines it stated therein (see below). It noted that it intentionally did not rule in said case o PD No. 1869, as amended by R.A. No. 9487, is an existing valid law, and
whether or not PAGCOR’s tax privilege of paying only the 5% franchise tax in lieu of all expressly and clearly exempts the contractees and licensees of PAGCOR
other taxes inures to the benefit of third parties with contractual relationship with it in from the payment of all kinds of taxes except the 5% franchise tax on its
connection with the operation of casinos, such as petitioner herein. In this case, the Court gross gaming revenue;
applied the principle of verba legis. As the PAGCOR Charter states in unequivocal terms that o This clear exemption from taxes of PAGCOR's contracting parties under
exemptions granted for earnings derived from the operations conducted under the Section 13(2)(b) of PD No. 1869, as amended by R.A. No. 9487, was not
franchise specifically from the payment of any tax, income or otherwise, as well as any form repealed by the deletion of PAGCOR in the list of tax-exempt entities
of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), under the NIRC;
association(s), agency(ies), or individual(s) with whom the PAGCOR or operator has any o RESP CIR acted without or in excess of its jurisdiction, or with grave abuse
contractual relationship in connection with the operations of the casino(s) authorized to be of discretion amounting to lack or excess of jurisdiction when she issued the
conducted under this Franchise, so it must be that all contractees and licensees of PAGCOR, assailed provision in RMC No. 33-2013 which, in effect, repealed or
upon payment of the 5% franchise tax, shall likewise be exempted from all other taxes, amended PD No. 1869; and
including corporate income tax realized from the operation of casinos. Thus, the Court o Respondent CIR, in issuing the assailed provision in RMC No. 33-2013, will
ordered the BIR to cease and desist from the implementation of the RMC. adversely affect an industry which seeks to create income for the
government, promote tourism and generate jobs for the Filipino people.
DOCTRINE:
(i) Section 1 of RA No. 9337, amending Section 27(C) of the NIRC of 1997, as amended,
which excluded PAGCOR from the enumeration of GOCCs exempted from corporate ISSUE/S & RATIO (The two issues are related, but the Court focused on the second issue
income tax, is valid and constitutional; more.)
(ii) PAGCOR's tax privilege of paying five percent (5%) franchise tax in lieu of all other 1. WON the assailed provision of RMC No. 33-2013 subjecting the contractees and
taxes with respect to its income from gaming operations is not repealed or amended by licensees of PAGCOR to income tax under the NIRC of 1997, as amended, was issued
Section l(c) of R.A. No. 9337; by respondent CIR with grave abuse of discretion amounting to lack or excess of
(iii) PAGCOR's income from gaming operations is subject to the 5% franchise tax only; and jurisdiction– YES
(iv) PAGCOR's income from other related services is subject to corporate income tax only. 2. WON said provision is valid or constitutional considering that Section 13(2)(b) of PD
No. 1869, as amended (PAGCOR Charter), grants tax exemptions to such contractees
and licensees - YES
FACTS: a. The determination of the submissions of petitioner will have to follow the
 PAGCOR granted to Bloomberry Resorts and Hotels, Inc (hereinafter shorthand: pilot case of PAGCOR v. The Bureau of Internal Revenue, et al., where this
PET) a provisional license to establish and operate an integrated resort and casino Court clarified its earlier ruling in G.R. No. 17208719 involving the same
complex at the Entertainment City project site of PAGCOR. Petitioner and its parent parties, and expressed that:
company, Sureste Properties, Inc., own and operate Solaire Resort & Casino. i. (i) Section 1 of RA No. 9337, amending Section 27(C) of the NIRC
o Thus, being one of its licensees, petitioner only pays PAGCOR license fees, of 1997, as amended, which excluded PAGCOR from the
in lieu of all taxes, as contained in its provisional license and consistent with enumeration of GOCCs exempted from corporate income tax, is
the PAGCOR Charter or Presidential Decree (PD) No. 1869, which provides valid and constitutional;
the exemption from taxes of persons or entities contracting with PAGCOR ii. (ii) PAGCOR's tax privilege of paying five percent (5%) franchise
in casino operations. tax in lieu of all other taxes with respect to its income from
 Republic Act (R.A.) No. 9337 amended Section 27(C) of the NIRC of 1997, which gaming operations is not repealed or amended by Section l(c) of
excluded PAGCOR from the enumeration of government-owned or controlled R.A. No. 9337;
corporations (GOCCs) exempt from paying corporate income tax.
 iii. (iii) PAGCOR's income from gaming operations is subject to the applied without attempted interpretation. This is the plain meaning rule
5% franchise tax only; and or verba legis, as expressed in the maxim index animi sermo or speech is
iv. (iv) PAGCOR's income from other related services is subject to the index of intention.
corporate income tax only. f. Plainly, too, upon payment of the 5% franchise tax, petitioner's income
b. The Court through Justice Diosdado M. Peralta, categorically followed from its gaming operations of gambling casinos, gaming clubs and other
what was simply provided under the PAGCOR Charter (PD No. 1869, as similar recreation or amusement places, and gaming pools, defined
amended by RA No. 9487), by proclaiming that despite amendments to the within the purview of the aforesaid section, is not subject to corporate
NIRC of 1997, the said Charter remains in effect. Thus, income derived by income tax.
PAGCOR from its gaming operations such as the operation and licensing of
gambling casinos, gaming clubs and other similar recreation or amusement RULING: WHEREFORE, the petition is GRANTED. Accordingly, respondent Bureau of
places, gaming pools and related operations is subject only to 5% franchise Internal Revenue, represented by Commissioner Kim S. Jacinto-Henares is hereby ORDERED
tax, in lieu of all other taxes, including corporate income tax. The Court to CEASE AND DESIST from implementing Revenue Memorandum Circular No. 33-2013
concluded that the CIR committed grave abuse of discretion amounting insofar as it imposes corporate income tax on petitioner Bloomberry Resorts and Hotels, Inc.'s
to lack or excess of jurisdiction when it issued RMC No. 33-2013 income derived from its gaming operations.
subjecting both income from gaming operations and other related
services to corporate income tax and 5% franchise tax considering that it
unduly expands the Court's Decision dated 15 March 2011 without due
process, which creates additional burden upon PAGCOR.
i. Noticeably, the Court intentionally did not rule on WON
PAGCOR’s tax privilege of paying only the 5% franchise tax in
lieu of all other taxes inures to the benefit of third parties with
contractual relationship with it in connection with the operation
of casinos, such as petitioner herein.
c. Section 13 of PD No. 1869 evidently states that payment of the 5% franchise
tax by PAGCOR and its contractees and licensees exempts them from
payment of any other taxes, including corporate income tax.
i. [RULING] As previously recognized, the above-quoted provision
providing for the said exemption was neither amended nor
repealed by any subsequent laws (i.e. Section 1 of R.A. No. 9337
which amended Section 27(C) of the NIRC of 1997); thus, it is still
in effect. Guided by the doctrinal teachings in resolving the case
at bench, it is without a doubt that, like PAGCOR, its contractees
and licensees remain exempted from the payment of corporate
income tax and other taxes since the law is clear that said
exemption inures to their benefit.
d. As the PAGCOR Charter states in unequivocal terms that exemptions
granted for earnings derived from the operations conducted under the
franchise specifically from the payment of any tax, income or otherwise,
as well as any form of charges, fees or levies, shall inure to the benefit of
and extend to corporation(s), association(s), agency(ies), or individual(s)
with whom the PAGCOR or operator has any contractual relationship in
connection with the operations of the casino(s) authorized to be
conducted under this Franchise, so it must be that all contractees and
licensees of PAGCOR, upon payment of the 5% franchise tax, shall
likewise be exempted from all other taxes, including corporate income
tax realized from the operation of casinos.
i. For the same reasons that made us conclude in the 10 December
2014 Decision of the Court sitting En Banc in G.R. No. 215427 that
PAGCOR is subject to corporate income tax for "other related
services", we find it logical that its contractees and licensees shall
likewise pay corporate income tax for income derived from such
"related services."
e. Simply then, in this case, we adhere to the principle that since the statute is
clear and free from ambiguity, it must be given its literal meaning and