Bloomberry Resorts and Hotels, Inc. v. BIR

Doctrines: 

• PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related operations is subject only to five percent (5%) franchise tax. 
• PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes. 

Facts: PAGCOR granted to petitioner a provisional license to establish and operate an integrated resort and casino complex at the Entertainment City project site of PAGCOR. Petitioner and its parent company, Sureste Properties, Inc., own and operate Solaire Resort & Casino. Thus, being one of its licensees, petitioner only pays PAGCOR license fees, in lieu of all taxes, as contained in its provisional license and consistent with the PAGCOR Charter or PD No. 1869 which provides the exemption from taxes of persons or entities contracting with PAGCOR in casino operations. However, RA No. 9337 took effect which excluded PAGCOR from the enumeration of GOCCs exempt from paying CIT. 

Aggrieved, as it is now being considered liable to pay corporate income tax in addition to the 5% franchise tax, petitioner immediately elevated the matter through a petition for certiorari and prohibition before the SC. 

Issues: (i) whether or not the assailed provision of RMC No. 33-2013 subjecting the contractees and licensees of PAGCOR to income tax under the NIRC of 1997, as amended, was issued by respondent CIR with grave abuse of discretion amounting to lack or excess of jurisdiction; and (ii) whether or not said provision is valid or constitutional considering that Section 13(2)(b) of PD No. 1869, as amended, grants tax exemptions to such contractees and licensees. 

Held: Income derived by PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related operations is subject only to 5% franchise tax, in lieu of all other taxes, including corporate income tax. The Court concluded that the CIR committed grave abuse of discretion amounting to lack or excess of jurisdiction when it issued RMC No. 33-2013 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. 

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.