Philippines Imposes Withholding Tax on Jackpot Prizes

The Philippine Bureau of Internal Revenue (BIR) issued Memorandum Circular No. 57-2026 on Tuesday, May 26, to clarify the tax treatment of jackpot prizes and other gambling-related winnings. The circular confirms that prizes won from casinos and other authorized gaming activities are considered taxable “winnings” under the National Internal Revenue Code and are subject to final withholding tax.

The BIR defined progressive jackpot prizes as those that increase incrementally as more bets are placed across linked tables, electronic gaming machines, or bingo games until the prize is won. These rules apply to individuals regardless of citizenship or residency status, and the tax base is calculated on the gross prize amount, without deductions for service charges, commissions, or administrative fees. For Philippine residents, a 20 percent final withholding tax applies, while non-resident individuals not engaged in trade or business within the Philippines face a 25 percent tax.

According to Philippine News Agency, BIR Commissioner Charlito Mendoza emphasized that the circular was issued in response to numerous inquiries from both players and gaming operators seeking clarity on the tax obligations for fixed and progressive jackpot prizes. “The circular addresses possible confusion in coverage and strengthens compliance moving forward,” Mendoza said, noting that gaming operators are responsible for withholding and remitting the correct tax and may be held liable for penalties under the Tax Code for any failure to comply.

Scope of the Circular

The memorandum extends to winnings obtained from casinos and gambling venues regulated or licensed by PAGCOR, as well as other government-authorized entities such as the Cagayan Economic Zone Authority (CEZA) and the Aurora Pacific Economic Zone and Freeport Authority (APECO). It also encompasses jackpots from bingo and electronic gaming, ensuring that all high-value prizes are treated consistently under existing law. The clarification aims to ensure fairness and uniformity in taxation while safeguarding government revenue without modifying the legal framework.

The BIR noted that the Philippines’ gaming and gambling industry has expanded significantly in recent years, leading to an increase in high-value jackpots. This growth, under the supervision of PAGCOR and other authorized agencies, has prompted the need for clear guidance on the tax treatment of these winnings to prevent inconsistencies and enhance compliance.

Compliance Responsibilities for Operators

Gaming operators act as withholding agents under the memorandum. They are responsible for ensuring that taxes are properly withheld and remitted. Failure to do so may result in the application of surcharges, interest, and compromise penalties, and in some cases, the filing of criminal charges in accordance with the Tax Code. The BIR’s guidance reinforces the importance of transparency and proper reporting in the growing casino and gaming sector, providing both players and operators with a clear framework for taxation.