CTA: Casino firms should pay 30% income tax on junket operations

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The Court of Tax Appeals (CTA) has ruled that casino operators should pay the 30-percent corporate income tax on their junket operations.

In a recent 15-page decision, the CTA denied the petition of Prime Investment Korea, Inc., for a refund of the P24.37-million tax it paid on junket revenues for the year 2014.

The court noted that Section 14(5) of Presidential Decree Number 1869 subjected income from “related services” to corporate income tax, unlike gaming operations which could be subjected to a more favorable 5-percent franchise tax.

It also cited Revenue Memorandum Circular Number 33-2013, which classified “income from junket operations” as “income from ‘other related operations'” which should be subjected to income tax.

Since junket services are not considered part of gaming operations, Prime Investment Korea could not exercise its option to pay the 5-percent franchise tax instead of the 30-percent corporate income tax.

“Section 14(5) of P.D. No. 1869 is clear that any income that may be realized from these related services shall not be included as part of the income for the purpose of applying the franchise tax, but the same shall be considered as a separate income and shall be subject to income tax,” read the decision penned by Associate Justice Juanito Castañeda, Jr.

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