International edition
October 19, 2021

The Supreme Court has ruled

Pagcor not exempt from income tax

(Philippines).- The high court, in a vote of 13 to 0, upheld the constitutionality of a provision in Republic Act No. 9337 or the Expanded Value-Added Tax Law (E-VAT), which excluded Pagcor from the list of government-owned and -controlled corporations (GOCCs) that are exempted from the payment of the income tax.


owever, the court declared that the state-owned gaming firm is not covered by the 10% value-added tax, rendering Bureau of Internal Revenue Regulation (RR) No. 16-2005 null and void "for being contrary to the National Internal Revenue Code (NIRC)."

In a 25-page ruling penned by Associate Justice Diosdado Peralta, the court en banc noted that Pagcor failed to prove that it is still exempt from the payment of corporate income tax, considering that Section 1 (c) of R.A. 9337 amended Section 27 (c) of R.A. 8424 or the NIRC of 1997 by omitting Pagcor from the list of GOCCs exempted from the income tax.

The SC, likewise, dismissed the contention of Pagcor that Section 1 (c) is null and void for being violative of the non-impairment clause under Section 10, Article II of the Constitution, which provides that no law impairing the obligation of contracts shall be passed.

In the case of Pagcor, the court explained that it was granted a franchise to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports, gaming pools, within the country.

It noted that under Section 1, Article XII of the Constitution, Pagcor’s franchise is subject to amendment or repeal by Congress such as the amendment under Section 1 of R.A. 9337.

“Hence, the provision in Section 1 of R.A. 9337, amending Section 27 ( c ) of R.A. No. 8424 by withdrawing the exemption of Pagcor from corporate income tax, which may affect any benefits to Pagcor’s transactions with private parties, is not violative of the non-impairment clause of the Constitution,” the ruling stated.

On the other hand, the court said RR No. 16-2005 is invalid for being contrary to R.A. 9337.

“Nowhere in R.A. No. 9337 is it provided that petitioner can be subjected to Vat. R.A. No. 9337 is clear only as to the removal of petitioner’s exemption from the payment of corporate income tax, which was already addressed above by this court,” the court ruled.

It explained that Pagcor is exempt from the payment of VAT because its charter, Presidential Decree 1869, is a special law that grants petitioner exemption from taxes. 

Concurring with the ruling were Chief Justice Renato Corona, Antonio Carpio, Conchita Carpio Morales, Presbitero Velasco, Jr., Teresita Leonardo-De Castro, Lucas Bersamin, Mariano del Castillo, Roberto Abad, Martin Villarama, Jr., Jose Portugal Perez, Jose Catral Mendoza and Ma. Lourdes Sereno.


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