EN BANC

[G.R. No. 252965. December 7, 2021.]

SAINT WEALTH LTD., as represented by DAVID BUENAVENTURA & ANG

LAW OFFICES, petitioner, vs. BUREAU OF INTERNAL REVENUE, herein
represented by HON. CAESAR R. DULAY, in his capacity as COMMISSIONER
OF THE BUREAU OF INTERNAL REVENUE, and JOHN DOES and JANE
DOES, as persons acting for, in behalf, or under the authority of
respondents, respondents.

[G.R. No. 254102. December 7, 2021.]

MARCO POLO ENTERPRISES LIMITED, MG UNIVERSAL LINK LIMITED, OG

GLOBAL ACCESS LIMITED, PRIDE FORTUNE LIMITED, VIP GLOBAL
SOLUTIONS LIMITED, AG INTERPACIFIC RESOURCES LIMITED, WANFANG
TECHNOLOGY MANAGEMENT LTD., IMPERIAL CHOICE LIMITED,
BESTBETINNET LIMITED, RIESLING CAPITAL LIMITED, GOLDEN DRAGON
EMPIRE LTD., ORIENTAL GAME LIMITED, MOST SUCCESS INTERNATIONAL
GROUP LIMITED, and HIGH ZONE CAPITAL INVESTMENT GROUP LIMITED,
petitioners, vs. THE SECRETARY OF FINANCE, in the person of CARLOS G.
DOMINGUEZ III and THE COMMISSIONER OF INTERNAL REVENUE, in the
person of CAESAR R. DULAY, respondents.

DECISION

GAERLAN, J : p

These are consolidated petitions for certiorari and prohibition with urgent prayer for the
issuance of a temporary restraining order (TRO) and/or preliminary injunction (Consolidated
Petitions), [1] seeking to annul and set aside: (1) Section 11 (f) and (g) of Republic Act (R.A.)
No. 11494 (Bayanihan 2 Law); (2) Revenue Regulations (RR) No. 30-2020 (RR No. 30-
2020) of the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR); (3)
Revenue Memorandum Circular (RMC) No. 64-2020 (RMC No. 64-2020) of the BIR; (4) RMC
No. 102-2017 of the BIR; and (5) RMC No. 78-2018 of the BIR (the Assailed Tax Issuances).
The Antecedents
In 1983, Presidential Decree No. 1869 (PAGCOR Charter) was enacted, consolidating
all laws relative to the franchise and powers of the Philippine Amusement and Gaming
Corporation (PAGCOR). [2] Under Section 10 of the PAGCOR Charter, PAGCOR is granted
rights, privileges, and authority to operate and license gambling casinos, gaming clubs, and
other similar recreation or amusement places within the territorial jurisdiction of the
Philippines. [3]

From 2016, the Philippines began regulating online gaming hubs, specifically the
Philippine Offshore Gaming Operators (POGOs). Thus, on September 1, 2016, the PAGCOR
issued the Rules and Regulations for Philippine Offshore Gaming Operations (POGO Rules
and Regulations). [4]
The POGO Rules and Regulations defines offshore gaming as "the offering by a
licensee of PAGCOR authorized online games of chance via the internet using a network and
software or program, exclusively to offshore authorized players excluding Filipinos abroad,
who have registered and established an online gaming account with the licensee." [5]
Moreover, the POGO Rules and Regulations explains that offshore gaming has three
components:
b.1. prize consisting of money or something else of value which can be won
under the rules of the game.
b.2. a player who:
b.2.a being located outside of the Philippines and not a Filipino citizen,
enters the game remotely or takes any step in the game by means of
a communication device capable of accessing an electronic
communication network such as the internet.
b.2.b gives or undertakes to give, a monetary payment or other valuable
consideration to enter in the course of, or for, the game; and

b.3. the winning of a prize is decided by chance. [6]

The POGO Rules and Regulations further provides that POGOs must register with
PAGCOR. Upon registration, the POGO is given an Offshore Gaming License (OGL). Entities
who may be given an OGL are either: (1) Philippine-based operators; or (2) offshore-
based operators. Philippine-based operators are corporations organized in the Philippines
which will either conduct offshore gaming operations themselves or engage the services of
PAGCOR-accredited service providers. Meanwhile, offshore-based operators are
corporations organized in any foreign country which will engage the services of PAGCOR-
accredited local gaming agents and/or service providers for its offshore gaming operations. [7]
POGO licensees are likewise required to pay several monthly regulatory fees. Thus,
from these regulatory fees alone, PAGCOR is able to generate billions of pesos in revenues.
On December 27, 2017, the BIR issued RMC No. 102-2017, entitled "Taxation of
Taxpayers Engaged in Philippine Offshore Gaming Operations," which recognized that online
activity is sufficient to constitute doing business in the Philippines, and clarified the taxability
of POGOs. Under RMC No. 102-2017, POGOs may either be classified as Licensees
(Philippine-based or offshore-based) or Other Entities (such as local gaming agents and
other service providers).
Further, RMC No. 102-2017 outlines the tax treatments for Licensees and Other
Entities, to wit:
a) The entire gross gaming receipts/earnings or the agreed or pre-determined
minimum monthly revenues/income from Gaming Operations under existing rules,
whichever is higher, shall be subject to a franchise tax of five percent (5%), in lieu
of all kinds of taxes, levies, fees or assessments of any kind, nature or description.
This income is therefore exempt from any kind of tax, income or otherwise, as well
as fees, charges or levies of whatever nature, whether national or local.
b) Income from Other Related Services income from non-gaming operations shall be
subject to normal income tax, value-added tax and other applicable taxes, as may
be deemed appropriate. The 5% franchise tax in lieu of all taxes shall not apply.
c) A Licensee deriving income from both gaming operations and from other related
services shall be subject to 5% franchise tax on its gaming revenues and normal
income tax, value-added tax and other applicable taxes on its non-gaming
revenues.
d) An Other Entity, specifically including the gaming agent, Service Provider and
Gaming Support Provider, who is also a POGO Licensee shall be taxed 5%
Franchise tax on its gaming activities and subject to the normal tax rate and other
appropriate taxes on its non-gaming operations. An Other Entity, who is not a
POGO Licensee, deriving or earning only Income from Other Related Services or
from non-gaming operations shall be subject to normal income tax, value-added
tax and other applicable taxes on its entire revenues.

e) Income payments made by POGO Licensees or any other business entity licensed
or authorized by PAGCOR for all their purchases of goods and services shall [be]
subject to withholding taxes as may be appropriate and applicable.
 f) Compensation, fees, commissions or any other form of renumeration as a result of
services rendered to POGO licensees or any other business entity licensed by
PAGCOR shall be subject to applicable withholding taxes under existing revenue
laws and regulations.

g) Purchases (local or imported) and sale (local or international) of goods (tangible or

intangible) or services shall be subject to existing tax laws and revenue issuances,
as may be applicable.

Thus, under RMC No. 102-2017, Licensees must pay a five percent (5%) franchise
tax, in lieu of all other taxes, for their income arising from their gaming operations. Such
franchise tax is based on their entire gross gaming revenues. Meanwhile, for income
arising from non-gaming operations, Licensees must pay normal income tax, value-added
tax (VAT), and other applicable taxes. [8]
On the other hand, Other Entities, who must also be registered with PAGCOR, are
subject to five percent (5%) franchise tax for income arising from gaming operations, and
normal income tax, VAT, and other applicable taxes for income arising from non-gaming
operations. Other Entities deriving income solely from non-gaming operations shall be liable
to pay normal income tax, VAT, and other applicable taxes. [9]

Thereafter, to implement RMC No. 102-2017, the BIR issued RMC No. 78-2018 dated
September 7, 2018, entitled "Registration Requirements of Philippine Offshore Gaming
Operators and Its Accredited Service Providers," which reiterated that online activity is
sufficient to do business in the Philippines and considered POGOs as "Resident Foreign
Corporation Engaged in Business in the Philippines." As such, RMC No. 78-2018, requires all
offshore-based and Philippine-based POGO licensees to register with the BIR. [10]

The COVID-19 Pandemic

At the start of 2020, the COVID-19 pandemic hit the Philippines, which brought about
the closure of several business establishments and industries. Sometime in mid-2020, the
Philippines began relaxing community quarantine restrictions, and the government started
allowing some industries to operate, including POGOs. Thus, on May 7, 2020, the BIR issued
RMC No. 46-2020, entitled "Guidelines & Requirements for POGO Licensees and Service
Providers in the Application of a BIR Clearance for the Resumption of Operations." Under
RMC No. 46-2020, POGOs must comply with the following conditions and submit the
following documents before they can resume their operations:
A. Conditions

1. Registered with the concerned Revenue District Office (RDO)

having jurisdiction over the place of business;
 2. Submit copies of 2019 & First Quarter of 2020 Franchise Tax
Quarterly returns and proof of payments;

3. Remitted and paid the withholding taxes due from the months of
January to April, 2020;
4. Submission of a notarized undertaking to pay all tax arrears for
prior years;

5. Failure to comply with any of the above will result in the denial of
the issuance of a BIR Clearance for resumption of operations.

B. Documentary Requirements

1. Copy of Application for Registration of Corporations, et al., duly

received by the concerned RDO (BIR Form No. 1903) or BIR Certificate of
Registration (COR), if already registered;

2. Copies of Franchise Tax Returns (BIR Form No. 2553) for the
taxable quarters of 2019 and 1st quarter of 2020 together with proof of
payments;

3. Copies of Monthly Remittance Form for Income Taxes Withheld

(BIR Form Nos. 1601-C and 0619-E and F), Quarterly Remittance Return
of Income Taxes Withheld (BIR Form 1601-EQ and FQ) or Payment Form
(BIR Form No. 0605) for January to April, 2020; and

4. Notarized Undertaking to pay all tax arrears for prior years.

On June 24, 2020, the BIR issued RMC No. 64-2020, revising RMC 46-2020, as
follows:
A. Conditions

1. Registered with the concerned Revenue District Office (RDO)

having jurisdiction over the place of business;
2. Payment of Franchise Tax and submit proof of payments;

3. Remitted and paid the withholding taxes, if applicable;

4. Submission of a notarized undertaking to pay tax arrears; and

5. Failure to comply with any of the above will result in the denial of
the issuance of a BIR Clearance for resumption of operations.

B. Documentary Requirements

1. Copy of Application for Registration of Corporations, et al., duly

received by the concerned RDO (BIR Form No. 1903) or BIR Certificate of
Registration (COR), if already registered;
 2. Copies of Franchise Tax Returns (BIR Form No. 2553) together
with proof of payments;

3. Copies of Monthly Remittance Form for Income Taxes Withheld

(BIR Form Nos. 1601-C and 0619-E and F), Quarterly Remittance Return
of Income Taxes Withheld (BIR Form 1601-EQ and FQ) or Payment Form
(BIR Form No. 0605) for January to April, 2020; and
4. Notarized Undertaking to pay tax arrears.

On September 11, 2020, the Bayanihan 2 Law, entitled "An Act Providing for COVID-19
Response and Recovery Interventions and Providing Mechanisms to Accelerate the
Recovery and Bolster the Resiliency of the Philippine Economy, Providing Funds Therefor,
and for Other Purposes," was enacted as an emergency response law to address the
COVID-19 pandemic. Section 11 of the Bayanihan 2 Law outlines the sources of funding for
the COVID-19 measures to be undertaken by the government. [11] Among others, Section 11
mentions a five percent (5%) franchise tax based on the gross bets or turnovers earned
by POGOs:
SECTION 11. Sources of Funding. — The enumerated subsidy and stimulus
measures, as well as all other measures to address the COVID-19 pandemic shall be
funded from the following:

xxx xxx xxx

(f) Amounts derived from the five percent (5%) franchise tax on the
gross bets or turnovers or the agreed pre-determined minimum
monthly revenues from gaming operations, whichever is higher,
earned by offshore gaming licensees, including gaming operators, gaming
agents, services-providers and gaming support providers;
(g) Income tax, VAT, and other applicable taxes on income from non-
gaming operations earned by offshore gaming licensees, operators,
agents, service providers and support providers.
The tax shall be computed on the peso equivalent of the foreign currency used, based
on the prevailing official exchange rate at the time of payment, otherwise the same shall
be considered as a fraudulent act constituting under declaration of taxable receipts or
income, and shall be subject to interests, fines and penalties under Sections 248 (B),
249 (B), 253, and 255 of the National Internal Revenue Code of the Philippines.
After two (2) years or upon a determination that the threat of COVID-19 has
been successfully contained or abated, whichever comes first, the revenues derived
from franchise taxes on gross bets or turnovers under paragraph (f) and income
from non-gaming operations under paragraph (g) shall continue to be collected
and shall accrue to the General Fund of the Government. The BIR shall implement
 closure orders against offshore gaming licensees, operators, agents, service providers
and support providers who fail to pay the taxes due, and such entities shall cease to
operate. [12] (Emphasis supplied)

To implement Section 11 (f) and (g) of the Bayanihan 2 Law, the BIR and the DOF
issued RR No. 30-2020 dated September 30, 2020, which provides:
Section 3. Sources of Funding for the Subsidy, Stimulus Measures, and
Other Measures to address the COVID-19 Pandemic. —

a. Franchise Tax at the rate of five percent (5%) imposed on the

gross bets or turnovers, or the agreed pre-determined minimum
monthly revenues from gaming operations, whichever is higher, earned by
offshore gaming licensees, including gaming operators, gaming agent,
service providers and gaming support providers.
b. Income Tax, Value-Added Tax, and other applicable taxes
imposed on income from Non-Gaming Operations earned by offshore
gaming licensees, including gaming operators, gaming agent, service
providers and gaming support providers.
The above taxes shall be computed on the peso equivalent of the foreign
currency used and based on the prevailing official exchange rate at the time of
payment.

The Saint Wealth Petition

On August 24, 2020, Saint Wealth Ltd. (Saint Wealth), an offshore-based POGO
licensee, filed a Petition for Certiorari and Prohibition [With Application for a Temporary
Restraining Order and/or Writ of Preliminary Injunction] (the Saint Wealth Petition), assailing
the constitutionality of RMC No. 64-2020, and praying for the issuance of a TRO and/or writ
of preliminary injunction to enjoin the enforcement of the same.
According to Saint Wealth, RMC No. 64-2020 should be invalidated based on the
following arguments:
First, RMC No. 64-2020 violates Saint Wealth's constitutional right to due process
because when the BIR issued RMC No. 64-2020, in relation to RMC No. 102-2017, the BIR
arrogated upon itself the power to determine the classification and taxability of POGOs,
notwithstanding the absence of any tax law passed by Congress. [13] Therefore, the issuance
of RMC No. 64-2020 and RMC No. 102-2017, with respect to the imposition of franchise tax
on off-shore based POGO licensees, is an invalid exercise of quasi-legislative powers on the
part of the BIR, and consequently, is a violation of POGO licensees' constitutional right to due
process. [14]
 Second, RMC No. 64-2020 violates the equal protection clause. Under RMC No. 64-
2020, Saint Wealth, an offshore-based POGO licensee, is treated as if it is similarly situated
with Philippine-based casino providers. [15] However, there exists a reasonable classification
between offshore-based POGO licensees and Philippine-based entities that justifies a
difference in treatment:
1. There is a substantial distinction between Philippine-based entities and
offshore-based POGO licensees because the former performs services
within the Philippines, while the latter performs services outside of the
Philippines. Hence, the former is subject to tax for income from services
rendered within the Philippines, while the latter is not subject to tax for its
income derived from services performed abroad.
2. The classification is germane to the purpose of RMC 64-2020, because its
purpose is to regulate POGO licensees and operators which are within the
taxing authority of the BIR. Thus, only those entities which are within the
taxing authority of the BIR may be subjected to the BIR's regulations.
3. The distinction is not limited to existing conditions only because the
distinction is based on established principles in taxation with regard to
classifying taxable entities.
4. The distinction applies equally to all members of the same class. The
distinction between Philippine-based entities and offshore-based POGO
licensees is equally applicable to the members of each class. [16]
Considering that a reasonable classification exists between Saint Wealth, an offshore-
based POGO licensee, and Philippine-based operators, the BIR should treat them differently
and should not impose similar tax liabilities on these different classes of entities. [17]

Third, RMC No. 64-2020 violates the fundamental principle of situs of taxation. Saint
Wealth is a non-resident foreign corporation. Under Philippine tax laws, specifically the
National Internal Revenue Code (NIRC), non-resident foreign corporations are only liable to
pay taxes on income received from sources within the Philippines. However, Saint Wealth's
income is derived from sources outside the Philippines since all of its operations are located
abroad. Therefore, it should not be subjected to any Philippine tax. [18]
Fourth, RMC No. 64-2020 violates the rule on uniformity of taxation. Since offshore-
based POGO licensees are differently situated from Philippine-based casino providers,
offshore-based POGO licensees, including Saint Wealth, should be taxed differently.
Moreover, RMC No. 64-2020 likewise violates the rule on uniformity of taxation because it
treats differently offshore-based POGO licensees from other foreign corporations which are
not engaged in trade or business in the Philippines. RMC No. 64-2020 imposes several tax
liabilities, including taxes on income derived from sources abroad, upon offshore-based
POGO licensees, while other foreign corporations are not being imposed with such taxes. [19]
Meanwhile, as regards Saint Wealth's prayer for the issuance of injunctive relief, Saint
Wealth alleged that all the requisites for the issuance of such relief are present because: (1)
the issuance of RMC No. 64-2020 violates its right to due process and equal protection, and
RMC No. 64-2020 likewise violates the principles of situs and uniformity of taxation; (2) there
is an urgent need for injunctive relief to prevent the BIR from unduly collecting taxes from
Saint Wealth; and (3) there is no other ordinary, speedy, or adequate remedy to prevent the
infliction of irreparable injury, except for the issuance of a TRO and/or a writ of preliminary
injunction. [20]
The Marco Polo Petition
On November 19, 2020, offshore-based POGO licensees, namely: (1) Marco Polo
Enterprises Limited; (2) MG Universal Link Limited; (3) OG Global Access Limited; (4) Pride
Fortune Limited; (5) VIP Global Solutions Limited; (6) AG Interpacific Resources Limited; (7)
Wanfang Technology Management Ltd.; (8) Imperial Choice Limited; (9) Bestbetinnet Limited;
(10) Riesling Capital Limited; (11) Golden Dragon Empire Ltd.; (12) Oriental Game Limited;
(13) Most Success International Group Limited; and (14) High Zone Capital Investment
Group Limited (collectively referred to as Marco Polo petitioners) filed a Petition for Certiorari
and Prohibition (With Application for Temporary Restraining Order/Writ of Preliminary
Injunction) (the Marco Polo Petition), assailing the constitutionality of Section 11 (f) and (g) of
the Bayanihan 2 Law, RR No. 30-2020, RMC No. 102-2017, and RMC No. 78-2018.
The Marco Polo Petition argued the following:
First, Section 11 (f) and (g) of the Bayanihan 2 Law are unconstitutional for being
riders. They are violative of Article VI, Section 26 (1) of the 1987 Constitution because they
go beyond and are not germane to the subject matter of the Bayanihan 2 Law: [21]

The subject matter of the Bayanihan 2 Law is the implementation of COVID-19

relief measures. It is not a tax measure. However, Section 11 (f) and (g) of the said law
impose new taxes upon POGOs, which cannot be found in any other legislation.
Moreover, the Bayanihan 2 Law is a temporary relief measure. However, under the
said law, the collections under Section 11 (f) and (g) shall subsist beyond the effectivity
of the Bayanihan 2 Law, and even after the COVID-19 pandemic is successfully
contained. Clearly, therefore, Section 11 (f) and (g) of the Bayanihan 2 Law go beyond
the subject matter of the law. [22]
 Furthermore, Section 11 (f) and (g) of the Bayanihan 2 Law are not germane to
the purpose of the law. Again, the Bayanihan 2 Law is a temporary pandemic relief
measure. Thus, there is no logical connection between the perpetual tax imposition
under Section 11 (f) and (g) to the purpose of the law which is to provide a temporary
pandemic relief measure. [23]

Second, Section 11 (f) of the Bayanihan 2 Law violates substantive due process, and is
arbitrary and confiscatory: [24]
The concept of a tax based on gross bets or turnover of POGO licensees was
introduced for the first time in the Bayanihan 2 Law, pursuant to a last minute change
during the Bicameral Conference Committee meeting. As a result of such change,
POGO licensees are now being subjected to tax, not only on their earnings, receipts, or
income, but even on the winnings that they pay out to patrons. [25]
Clearly, it is arbitrary and confiscatory to tax POGO licensees on the basis of
gross bets or turnover because these do not equate to earnings, income, or wealth
flowing to the POGO licensees. Such rule likewise violates the Constitutional mandate
that the rule of taxation shall be uniform, and equitable, and that Congress shall evolve
a progressive system of taxation. [26]

Third, Section 11 (f) of the Bayanihan 2 Law is repugnant to substantive due process
because it whimsically disregards the principle of territoriality in taxation: [27]

Section 11 (f) of the Bayanihan 2 Law is unconstitutional because it taxes an

activity that does not take place in the Philippines. Under the POGO Rules and
Regulations, the activity which generates gaming revenue or income for offshore-based
POGO licensees is the game of chance or offshore gaming. This is because income is
generated only when patrons access the gaming website, place bets, and then lose
their bets. Therefore, the situs of income derived from offshore gaming is the place
where such game is played. Notably, the PAGCOR expressly prohibits POGO licensees
from the following activities: (1) allowing their gaming websites to be accessed within
Philippine territory; (2) allowing the placing of bets within Philippine territory; (3)
allowing the paying of winnings within the Philippine territory; and (4) allowing Filipino
citizens, wherever located, and foreign nationals while in the Philippines, from
accessing their games through their websites. From the foregoing, it is clear that the
income from offshore gaming operations are from sources outside the Philippine
jurisdiction because the activity that produces the income occurs abroad — the online
gaming websites are operated and accessed abroad, the bets are placed abroad, and
the winnings are paid abroad. [28]

Fourth, Section 11 (f) of the Bayanihan 2 Law violates the equal protection clause: [29]
 The Bayanihan 2 Law violates the equal protection clause for the following
reasons: (1) it is the only statute that taxes a business entity even for its losses (taxing
turnover); and (2) it is the only statute that taxes foreign corporations for income earned
abroad. Thus, only offshore-based POGO licensees are subjected to the type of tax
treatment imposed under Section 11(f) of the Bayanihan 2 Law. [30]

Moreover, the requirements for a valid classification under the equal protection
clause are not met. There is no substantial distinction between offshore-based POGO
licensees and other gaming businesses to justify taxing POGO licensees based on
gross bets or turnover when other similar gaming business (such as casinos
operating in the Philippines and licensed by PAGCOR) are only subjected to a five
percent (5%) franchise tax based on gross gaming revenues. Gross gaming revenue
is the total sum received less the total of all sums paid out as winnings to casino
players. There is likewise no substantial distinction between offshore-based POGO
licensees and other foreign corporations to justify the tax treatment of taxing POGO
licensees even for income derived abroad. Finally, the discrimination against POGO
licensees is not germane to the purpose of the law because such discrimination has no
logical connection to the purpose of the Bayanihan 2 Law, which, again, is only a
temporary pandemic relief measure. [31]

Fifth, Section 11 (g) of the Bayanihan 2 Law is also unconstitutional because it

whimsically disregards the principle of territoriality in taxation. Similar to Section 11 (f) of the
Bayanihan 2 Law, Section 11 (g) also violates the principle of territoriality in taxation because
it taxes "non-gaming" income of offshore-based POGO licensees derived from sources
abroad. Section 11 (g) likewise disregards the destination principle because it imposes VAT
on goods and services which are consumed outside the territory of the Philippines. [32]
Sixth, Section 11 (g) of the Bayanihan 2 Law likewise violates the equal protection
clause. There is no substantial distinction or justification to treat offshore-based POGO
licensees differently and to tax them on income from sources abroad when other foreign
corporations are only taxed on income derived from sources within the Philippines. There is
likewise no substantial distinction or justification to charge offshore-based POGO licensees
with VAT for their sale of goods and services destined for abroad. Further, the discrimination
against offshore-based POGO licensees is not germane to the purpose of the Bayanihan 2
Law because such discrimination has no relation to the law's purpose as a COVID-19
temporary relief measure. [33]
Seventh, since Section 11 (f) and (g) of the Bayanihan 2 Law are unconstitutional,
RMC No. 30-2020 is also unconstitutional because it has no statutory basis and/or mandate
of any existing law. [34]
 Eighth, RMC No. 102-2017 is likewise void for having no statutory basis: [35]
RMC No. 102-2017 was issued purportedly to clarify the taxability of POGOs. It
then imposed a franchise tax of five percent (5%) on the gross gaming revenues of
POGOs, including offshore-based POGO licensees. However, prior to the Bayanihan 2
Law, there was no statute which imposed taxes on the gaming revenue of offshore-
based POGOs. [36]

Apparently, in issuing RMC No. 102-2017, the BIR based the imposition of the
five percent (5%) franchise tax on gross gaming revenues on the PAGCOR Charter.
However, the PAGCOR Charter grants PAGCOR and its contractees (licensees)
operating within the territorial jurisdiction of the Philippines an exemption from all
national and local fees and taxes in exchange for the payment of the five percent (5%)
franchise tax. The PAGCOR Charter does not authorize the collection of any new tax
whatsoever. It cannot be a source of a new tax on offshore gaming done online, and
outside the jurisdiction of the Philippines. Considering that there is no law which allows
for the taxation of foreign-sourced income of foreign corporations, including offshore-
based POGO licensees, RMC No. 102-2017 has no legal basis, and therefore, must
be struck down and declared void. [37]

Ninth, RMC No. 102-2017 is confiscatory and violates the equal protection clause.
Similar to the provisions of the Bayanihan 2 Law, RMC No. 102-2017 discriminates against
offshore-based POGO licensees, making them the only foreign corporations subject to taxes
for income abroad, therefore, violating the principle of territoriality. There is also no
substantial distinction or justification to treat offshore-based POGO licensees differently and
tax them on income from sources abroad when other foreign corporations are not subjected
to the same. [38]
Tenth, RMC No. 78-2018, which imposed registration requirements pursuant to the
taxes imposed under RMC No. 102-2017, is void for having been issued without statutory
basis and/or for being unconstitutional. Since RMC No. 102-2017 is unconstitutional and void,
it follows that RMC No. 78-2018, which imposes registration requirements to enforce RMC
No. 102-2017, is likewise unconstitutional and void. [39]
The Marco Polo Petition likewise prayed for the issuance of a TRO and/or writ of
preliminary injunction. [40] In support of its application for the issuance of a TRO and/or writ of
preliminary injunction, the Marco Polo Petition made the following arguments:
1. The Marco Polo petitioners have a clear and unmistakable right against
deprivation of property without due process of law. [41]
 2. Section 11 (f) and (g) of the Bayanihan 2 Law and the Assailed Tax
Issuances directly and specifically target offshore-based POGO licensees
such as the Marco Polo petitioners. The imposition of the taxes in question
would amount to a deprivation of their property without due process of law,
and is a material and substantial invasion of their constitutional rights. [42]
3. There is an extreme urgency for the issuance of injunctive relief because if
the same is not issued, the Marco Polo petitioners would bleed financially
because of illegal and oppressive taxes. [43]

4. The Marco Polo petitioners will suffer irreparable injury if injunctive relief is
not granted. If they are forced to cease operations, either because of
closure orders or because they cannot afford to pay the illegal and
oppressive taxes, their business reputations will be tarnished, and they will
lose their clientele who may decide to patronize other operators
permanently. [44]

Issuance of the TRO

On January 5, 2021, a TRO [45] was issued in favor of the Marco Polo petitioners. The
TRO enjoined the implementation of: (1) Section 11 (f) and (g) of the Bayanihan 2 Law; (2)
RR No. 30-2020; (3) RMC No. 102-2017; and (4) RMC No. 78-2018.
Respondents' Consolidated Comment
On January 15, 2021, the DOF Secretary and the BIR Commissioner (respondents),
through the Office of the Solicitor General (OSG), filed their Consolidated Comment [46] to the
Consolidated Petitions.
In the Consolidated Comment, the respondents raised several procedural and
substantive issues.
With regard to the procedural issues, the respondents argued that the Consolidated
Petitions did not present an actual justiciable controversy. Moreover, the respondents
contended that resort to a petition for certiorari and prohibition was improper, and a facial
challenge is not permitted to assail the provisions of the Bayanihan 2 Law and the BIR
issuances. Finally, the respondents alleged that the Consolidated Petitions violated the
doctrine of hierarchy of courts, and exhaustion of administrative remedies. [47]

Meanwhile, for the substantive issues, the respondents argued the following:
First, Section 11 (f) and (g) of the Bayanihan 2 Law does not violate the "one subject,
one title rule" under Article VI of the Constitution:
 Section 26 (1), Article VI of the Constitution requires that "[e]very bill passed by
the Congress shall embrace only one subject which shall be expressed in the title
thereof." Such requirement is satisfied if all the parts of the statute are related, and are
germane to the subject matter expressed in the title, or as long as they are not
inconsistent with the general subject and title of the law. [48]

The full title of the Bayanihan 2 Law provides: "An Act Providing for COVID-19
Response and Recovery Interventions and Providing Mechanisms to Accelerate the
Recovery and Bolster the Resiliency of the Philippine Economy, Providing Funds
Therefor, and for Other Purposes." The phrase "Providing Funds Therefor" shows
that Section 11 of the said law, which enumerates the existing sources of funding for
COVID-19 relief measures, is germane to the purpose of the law. Furthermore, Section
11 (f) and (g) of the Bayanihan 2 Law do not impose new taxes because as early as
2017 and pursuant to RMC 102-2017, revenues derived by POGO operators have been
subject to a five percent (5%) franchise tax. [49]

Clearly, Section 11 (f) and (g) of the Bayanihan 2 Law are not riders but are
valid sources of funds, the identification of which is germane to the subject and purpose
of the law. As such, the Bayanihan 2 Law did not impose any new tax, but merely
allowed the realignment of collections from already existing taxes. [50]

Second, Section 11 (f) and (g) of the Bayanihan 2 Law, as well as the Assailed Tax
Issuances, do not violate the petitioners' right to due process: [51]
Section 11 (f) and (g) of the Bayanihan 2 Law are valid and constitutional. The
collection of franchise tax under the said law does not violate the principle of
territoriality in taxation because what is being collected is a tax not based on income,
but rather, on the exercise of a privilege. Since such franchise tax partakes of the
nature of an excise tax, the situs of taxation is the place where the privilege is
exercised, regardless of the place where the services are performed, or where the
products are delivered. [52]

RR No. 30-2020, which implements Section 11 (f) and (g) of the Bayanihan 2
Law, is valid, and enjoys the presumption that the legislature intended to enact a valid,
sensible, and just law. Furthermore, it bears emphasis that the NIRC empowers the
DOF Secretary to promulgate revenue regulations to ensure effective enforcement of
tax laws. Considering that RR No. 30-2020 was issued by the proper authority (the
DOF Secretary and the BIR), and in accordance with a valid statute enacted by
Congress, the same enjoys the presumption of validity. [53]

RMC No. 102-2017 has statutory basis. It was issued by the BIR in accordance
with the PAGCOR Charter, which imposes a five percent (5%) franchise tax on the
gross gaming revenues of businesses engaged in gambling operations under the
 mantle of PAGCOR. Clearly, the tax mentioned in RMC No. 102-2017 is not a new
tax. [54]

RMC No. 78-2018 and RMC No. 64-2020, which impose requirements for
POGO registration and BIR clearance, are valid. Again, these issuances did not impose
new taxes on POGO licensees. They merely provide for guidelines for registration and
application for a BIR Clearance in connection with their resumption of operations.
Notably, the act of providing guidelines is within the powers of the BIR as the
administrative body tasked to enforce tax laws, and administrative issuances. Hence,
RMC No. 78-2018 and RMC No. 64-2020 have in their favor the presumption of
legality. [55]

Third, Section 11 (f) and (g) of the Bayanihan 2 Law, as well as the Assailed Tax
Issuances, do not violate the equal protection clause. [56] There exists a reasonable
classification between offshore-based POGO licensees and other foreign corporations that
justifies the difference in treatment under the Bayanihan 2 Law:
1. Not all foreign corporations are engaged in offshore gaming, and not all
foreign corporations are required to obtain a license from PAGCOR before
they could operate. Moreover, with the recognition that online activity is
sufficient to constitute doing business in the Philippines, foreign
corporations engaged in offshore gaming are regarded as resident foreign
corporations engaged in business in the Philippines. Clearly, substantial
distinctions exist between foreign corporations engaged in offshore gaming,
and foreign corporations. [57]
2. The classification is germane to the purpose of the law since Section 11 (f)
and (g) of the Bayanihan 2 Law are mechanisms to accelerate the recovery
of the Philippine economy. [58]
3. The classification applies equally to all members of the same class — all
foreign corporations granted with an OGL. [59]
4. The classification is not limited to existing conditions since the Bayanihan 2
Law itself provides for the collection of taxes under Section 11 (f) and (g)
even after the COVID-19 pandemic is successfully contained. [60]
For the same reasons, RMC No. 102-2017, RMC No. 78-2018 and RMC No. 64-2020
do not violate the equal protection clause because there are valid classifications and
distinctions to justify the difference in treatment between POGO licensees and other
corporations.
 Fourth, the tax impositions on POGO licensees do not violate the principles of situs
and uniformity of taxation: [61]
The principle of situs of taxation only applies to income taxation. Clearly, such
principle does not apply in the imposition of franchise tax — the tax imposed upon
POGO licensees. Hence, in imposing franchise tax on POGO licensees, the location or
the situs of their income is immaterial, because what is being taxed is the exercise of
their rights and privileges granted to them by the government. [62]

Nevertheless, assuming arguendo that the principle of situs of taxation applies,

the revenues of POGOs are still subject to tax as they are considered income within the
Philippines. The income-producing activity of POGOs is its entire gaming operations,
which consist of operating the software, taking bets, provision of gaming, provision of
services, and streaming of the games. Such gaming operations, or parts of it, are done
in the Philippines. Thus, the revenues derived from these activities are taxable in the
Philippine jurisdiction. [63]
Moreover, offshore-based POGO licensees are considered resident foreign
corporations, and as such, they are taxable in the Philippines. Based on the Opinion of
the Office of the General Counsel of the Securities and Exchange Commission (SEC),
the setting up of game servers in the Philippines by a foreign corporation is considered
as "doing business" in the Philippines. According to the SEC, since these game servers
will be in continued operations while being physically present in the Philippines, the
foreign corporation which set up these servers are considered to be engaged in
activities which imply a continuity of commercial dealings in the Philippines. [64]
Meanwhile, as regards the income tax and VAT imposed upon revenues from
non-gaming operations, these non-gaming operations are services performed in the
Philippines. Thus, these are subject to normal income tax, VAT, and other applicable
taxes under the NIRC. [65]

With respect to the principle of uniformity of taxation, the taxes imposed upon
POGO licensees are uniform because they are imposed on all POGOs wherever they
operate. Uniformity of taxation simply requires that all subjects or objects of taxation,
similarly situated, are to be treated alike. [66]

In the Consolidated Comment, the respondents likewise moved for the reconsideration
of the issuance of the TRO. The respondents argued that the requisites for the issuance of a
TRO were not met because:
1. The petitioners failed to show that they have a clear legal right as there is
no violation of the "one subject, one title," due process, and equal protection
clauses of the Constitution. [67]
 2. The petitioners failed to prove the element of grave and irreparable injury.
The injury or damage sought to be prevented is not irreparable and is
actually capable of pecuniary estimation. Moreover, the petitioners have
other remedies such as tax refund or tax credit under the NIRC. [68]
3. The petitioners failed to show extreme necessity for the issuance of
injunctive relief. [69]
Legislative Developments during the Pendency of
the Case
On September 22, 2021, President Rodrigo Duterte signed R.A. No. 11590, entitled
"An Act Taxing Philippine Offshore Gaming Operations, Amending for the Purpose Sections
22, 25, 27, 28, 106, 108, and Adding New Sections 125-A and 288-G of the National Internal
Revenue Code of 1997, as Amended, and for Other Purposes."
R.A. No. 11590 categorically classifies POGO licensees, whether Philippine-based or
offshore-based as corporations "engaged in doing business in the Philippines." [70] R.A. No.
11590 likewise imposes a five percent (5%) gaming tax on the income of POGOs derived
from their gaming operations. [71] Such gaming tax is based on the entire gross gaming
revenue or receipts or the agreed predetermined minimum monthly revenue, whichever is
higher:
Section 125-A. Gaming Tax on Services Rendered by Offshore Gaming
Licensees. — Any provision of existing laws, rules or regulations to the contrary
notwithstanding, the entire gross gaming revenue or receipts or the agreed
predetermined minimum monthly revenue or receipts from gaming, whichever is higher,
shall be levied, assessed, and collected a gaming tax equivalent to five percent
(5%), in lieu of all other direct and indirect internal revenue taxes and local taxes,
with respect to gaming income x x x. (Emphasis supplied)

As regards income derived from non-gaming operations, R.A. No. 11590 imposes a
25% income tax on Philippine-based POGOs for their income derived from sources within
[72]
and without the Philippines. On the other hand, for offshore-based POGO licensees, they
are subject to 25% income tax for their income only from sources within the Philippines: [73]
Sec. 28. Rates of Income Tax on Foreign Corporations. —
xxx xxx xxx

(7) Offshore Gaming Licensees. — The provisions of existing special or

general laws to the contrary notwithstanding, the non-gaming revenues derived
within the Philippines of foreign-based offshore gaming licensees as defined and
duly licensed by the Philippine Amusement and Gaming Corporation or any special
 economic zone authority or tourism zone authority or freeport authority shall be subject
to an income tax equivalent to twenty-five percent (25%) of the taxable income derived
during each taxable year. (Emphasis supplied)

Finally, with respect to the imposition of VAT, R.A. No. 11590 provides that sales of
goods and properties to POGOs, as well as services rendered to POGOs by service
providers, shall be subject to zero percent (0%) rate. [74]
The Issues
This Court is tasked to tackle the following pivotal issues: (1) whether offshore-based
POGO licensees are liable to pay a five percent (5%) franchise tax for income derived from
their gaming operations; and (2) whether offshore-based POGO licensees are liable to pay
income tax, VAT, and other applicable taxes for income derived from their non-gaming
operations.
Our Ruling
The Consolidated Petitions are meritorious.
Prefatorily, it is worthy to note that the Consolidated Petitions appear to have been
rendered moot by the enactment of R.A. No. 11590, which categorically imposes the
following taxes on offshore-based POGO licensees, such as the petitioners:
1. Five percent (5%) gaming tax on all income derived from gaming
operations; and
2. Twenty-Five percent (25%) income tax on income derived from non-gaming
operations from sources within the Philippines.
R.A. No. 11590 similarly states that all laws, rules and regulations, including the
Bayanihan 2 Law, which are contrary to or inconsistent with any provision of the same are
repealed and modified accordingly. [75]

In Jacinto-Henares v. St. Paul College of Makati, [76] this Court explained the principle
of mootness in this wise:
A moot and academic case is one that ceases to present a justiciable
controversy by virtue of supervening events, so that an adjudication of the case or a
declaration on the issue would be of no practical value or use. Courts generally decline
jurisdiction over such case or dismiss it on the ground of mootness. [77] (Citations
omitted)

With the enactment of R.A. No. 11590, a supervening event has transpired which
directly addressed the pivotal issues raised in the Consolidated Petitions because a valid law
has been passed clarifying the taxability of POGOs, including offshore-based POGO
licensees, and imposing the applicable taxes thereon.
Nevertheless, this Court finds it imperative to resolve the instant case vis-à-vis the
petitioners' tax liabilities prior to the passage of R.A. No. 11590, and to discuss the
substantive issues raised by the petitioners. As succinctly held in David v. Macapagal-Arroyo,
[78]
this Court may still decide a case, which is otherwise moot and academic, when
constitutional issues raised require the formulation of controlling principles to guide the
bench, the bar, and the public:
The "moot and academic" principle is not a magical formula that can
automatically dissuade the courts in resolving a case. Courts will decide cases,
otherwise moot and academic, if: first, there is a grave violation of the Constitution;
second, the exceptional character of the situation and the paramount public interest
is involved; third, when constitutional issue raised requires formulation of
controlling principles to guide the bench, the bar, and the public; and fourth, the
case is capable of repetition yet evading review. [79] (Emphasis supplied; citations
omitted)

Here, the petitioners raise, among others, genuine issues on the constitutionality of
Section 11 (f) and (g) of the Bayanihan 2 Law. Thus, this Court is impelled to consider and
resolve the Consolidated Petitions to provide guidance as to the tax liabilities of offshore-
based POGO licensees, including the petitioners, prior to the passage of R.A. No. 11590.
The PAGCOR Charter Imposes a Franchise Tax upon
its Licensees on Revenues Derived from Gaming
Operations, and Income Tax, VAT, and Other
Applicable Taxes on Revenues Derived from Non-
Gaming Operations.
Under Section 13 (2) (a) of the PAGCOR Charter, PAGCOR is exempt from the
payment of any and all taxes on its income derived from gaming operations, except for a five
percent (5%) franchise tax on its gross revenues or earning:
SECTION 13. Exemptions. —

xxx xxx xxx

(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind or
form, income or otherwise, as well as fees, charges or levies of whatever nature,
whether National or Local, shall be assessed and collected under this Franchise
from the Corporation; nor shall any form of tax or charge attach in any way to the
earnings of the Corporation, except a Franchise Tax of five (5%) percent of the
gross revenue or earnings derived by the Corporation from its operation under
 this Franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any
kind, nature or description, levied, established or collected by any municipal, provincial,
or national government authority. (Emphasis and underscoring supplied)

Such exemption extends to PAGCOR's licensees pursuant to Section 13 (2) (b) of the
PAGCOR Charter, which provides:
(b) Others: The exemptions herein 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 Corporation or operator has any contractual
relationship in connection with the operations of the casino(s) authorized to be
conducted under this Franchise and to those receiving compensation or other
remuneration from the Corporation or operator as a result of essential facilities
furnished and/or technical services rendered to the Corporation or operator. (Emphasis
and underscoring supplied)

Considering the above-cited provisions, this Court clarified in Bloomberry Resorts and
Hotels, Inc. v. Bureau of Internal Revenue (Bloomberry), [80] that PAGCOR's tax privilege of
paying only a five percent (5%) franchise tax for income generated from its gaming
operations, in lieu of all other taxes, inures to the benefit of PAGCOR's licensees:
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.
xxx xxx xxx
Plainly, too, upon payment of the 5% franchise tax, petitioner's income from
its gaming operations of gambling casinos, gaming clubs and other similar
recreation or amusement places, and gaming pools, defined within the purview of
the aforesaid section, is not subject to corporate income tax. [81] (Emphasis and
underscoring supplied)
 Clearly, both law and jurisprudence mandate that PAGCOR's licensees are only liable
to pay a five percent (5%) franchise tax for income derived from its gaming operations.
However, a plain reading of the PAGCOR Charter and the ruling in Bloomberry shows that
the liability of paying the five percent (5%) franchise tax only applies to PAGCOR's licensees
which are connected to the operations of casinos and other related amusement places.
Stated differently, the payment of this five percent (5%) franchise tax only applies
to PAGCOR licensees which operate casinos and other related amusement places, and
excludes those licensees who derive profit from other means, such as POGOs. Thus,
POGOs, including offshore-based POGO licensees, are not taxed under the PAGCOR
Charter.
Prior to the Bayanihan 2 Law, there is No Law which
Imposes a Five Percent (5%) Franchise Tax on
POGO Licensees.
To recall, in 2017, the BIR issued RMC No. 102-2017, which is the first issuance which
dealt with the taxability of POGOs. RMC No. 102-2017 imposed, among others, a five
percent (5%) franchise tax upon the gross gaming revenues derived from gaming operations
of POGOs. Supposedly, such franchise tax is based on the PAGCOR Charter and settled
jurisprudence.
However, as stated above, the franchise tax liability of PAGCOR licensees only
applies to those which operate casinos and other related amusement places. It is
undeniable that POGOs do not fall within the contemplation of licensees who operate casinos
and other related amusement places. The PAGCOR Charter is clear, and when a law is clear,
there is no room for any interpretation.
Moreover, as aptly observed by Senior Associate Justice Estela Perlas-Bernabe
(Justice Perlas-Bernabe), when the PAGCOR Charter was enacted, offshore gaming was not
yet in existence. Thus, the PAGCOR Charter could not have contemplated virtual gaming
websites as "casinos and other related amusement places" mentioned under Section 13 (2)
(b) thereof. Consequently, the PAGCOR Charter cannot be said to have been the basis for
imposing tax on POGO Licensees. [82]
Simply then, when RMC No. 102-2017 was issued, there was no law imposing any
franchise tax on POGOs. Thus, RMC No. 102-2017 is invalid, insofar as it imposed
franchise taxes on POGOS, because it was passed without any statutory basis.
Likewise, as pointed out by Associate Justice Alfredo Benjamin Caguioa (Justice
Caguioa), [83] RMC No. 102-2017 is likewise invalid and unconstitutional because it
effectively amended the PAGCOR Charter when it imposed taxes on entities not taxed under
the law. It must be emphasized that the State's inherent power to tax is exclusively vested in
Congress. [84] Without such imprimatur from Congress, the BIR cannot arrogate upon itself
the authority to impose taxes, especially because "[t]he rule is that a tax is never presumed
and there must be clear language in the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation." [85]

Moreover, the BIR cannot enlarge or go beyond the provisions of the law it administers.
As held in Purisima v. Lazatin (Purisima): [86]
RR 2-2012 is unconstitutional.
According to the respondents, the power to enact, amend, or repeal laws belong
exclusively to Congress. In passing RR 2-2012, petitioners illegally amended the law —
a power solely vested on the Legislature.
We agree with the respondents.
The power of the petitioners to interpret tax laws is not absolute. The rule is that
regulations may not enlarge, alter, restrict, or otherwise go beyond the
provisions of the law they administer; administrators and implementors cannot
engraft additional requirements not contemplated by the legislature.

It is worthy to note that RR 2-2012 does not even refer to a specific Tax Code
provision it wishes to implement. While it purportedly establishes mere
administration measures for the collection of VAT and excise tax on the importation of
petroleum and petroleum products, not once did it mention the pertinent chapters of the
Tax Code on VAT and excise tax. (Emphasis supplied; citations omitted)

Indeed, the ruling in Purisima applies squarely in this case. The BIR encroached upon
the authority reserved exclusively for Congress when it issued RMC No. 102-2017 and
imposed a five percent (5%) franchise tax upon POGOs when the PAGCOR Charter itself
does not tax POGOs. RMC No. 102-2017 likewise failed to indicate which provisions of the
PAGCOR Charter it was implementing when it imposed the franchise tax. Accordingly, RMC
No. 102-2017, and consequently, RMC No. 78-2018, insofar as they imposed franchise
taxes on POGOS, are invalid and unconstitutional for being issued without any
statutory basis and for encroaching upon legislative power to enact tax laws.
The BIR can only Impose Income Tax upon Income
Derived from the Philippines; VAT can only be Imposed
for Services and Goods Consumed in the Philippines.
Apart from franchise tax, RMC No. 102-2017 likewise imposed income tax, VAT, and
other applicable taxes on offshore-based POGO licensees upon their income derived from
non-gaming operations or other related services.
 "Income from Other Related Services" is defined by RMC No. 102-2017 as "income or
earning realized or derived not from gaming operations but from such other necessary and
related services, shows, and entertainment." [87]
At this juncture, it is vital to recall that the principle of taxation is an inherent attribute of
sovereignty. As stated by Justice Perlas-Bernabe, taxation emanates from necessity, [88] and
is grounded on a mutually advantageous relationship between the State and those it
governs; every person surrenders a portion of their income for the running of the
government, and the government in turn, provides tangible and intangible benefits to serve
and protect those within its jurisdiction. [89] Similarly, Associate Justice Japar B. Dimaampao
(Justice Dimaampao) cited the principle of equality in taxation, which states that the
subjects of every state ought to contribute towards the support of the government, as nearly
as possible, in proportion to their respective abilities; that is, in proportion to the revenue
which they respectively enjoy under the protection of the state. [90]
Thus, it is within the context of whether or not POGOs, particularly offshore-based
POGO licensees, enjoy the protection of the State that this Court must determine whether the
Philippines may impose taxes upon them.
To resolve this query, it is vital to understand the services performed by offshore-based
POGO licensees to determine how they operate and how they derive revenues.
Under the POGO Rules and Regulations, POGOs are entities which provide and
participate in offshore gaming services. As stated above, offshore gaming refers to "the
offering by a licensee of PAGCOR authorized online games of chance via the Internet using a
network and software or program, exclusively to offshore authorized players excluding
Filipinos abroad, who have registered and established an online gaming account with the
licensee." [91] Offshore gaming has three components:
b.1.) prize consisting of money or something else of value which can be won
under the rules of the game;
b.2.) a player who:
b.2.a.) being located outside of the Philippines and not a Filipino citizen,
enters the game remotely or takes any step in the game by means of
a communication device capable of accessing an electronic
communication network such as the internet.
b.2.b.) gives or undertakes to give, a monetary payment or other
valuable consideration to enter in the course of, or for, the game; and

b.3.) the winning of a prize is decided by chance. [92]

 All these three components do not involve and are not performed within the Philippine
territory. None of these components likewise deals with Filipino citizens. To reiterate, the
placing of bets occurs outside the Philippines; the players must not be Filipino citizens, or
within the Philippines; and the payment of the prize also occurs outside of the Philippines.
Given the above, the only point of contact of an offshore-based POGO licensee to the
Philippines is that it is required, pursuant to its OGL, to engage the services of PAGCOR-
accredited local gaming agents and service providers for its offshore gaming operations. [93]
These service providers are separate and distinct entities from the offshore-based
POGO licensees. Simply put, the only transaction entered into by these offshore-based
POGO licensees are the service contracts with these service providers located in the
Philippines.
Because of the supposed continuing presence (through transacting with service
providers) of offshore-based POGO licensees in the Philippines, the BIR has categorized
offshore-based POGO licensees as resident foreign corporations. Notably, R.A. No. 11590
likewise classifies all POGO licensees, including offshore-based POGO licensees as
corporations "engaged in doing business in the Philippines." Nevertheless, the NIRC provides
that foreign corporations are only taxed for income derived in the Philippines:
SEC. 23. General Principles of Income Taxation in the Philippines. —
Except when otherwise provided in this Code:
xxx xxx xxx
(f) A foreign corporation, whether engaged or not in trade or business in the
Philippines, is taxable only on income derived from sources within the Philippines.
(Emphasis supplied)

In fact, R.A. No. 11590 likewise categorically provides that offshore-based

POGO licensees are only liable to pay income tax for income derived within the
Philippines.

As mentioned by Justice Perlas-Bernabe, Section 42 (A) [94] of the NIRC provides the
guidelines in determining what income is derived from sources within the Philippines, while
Section 42 (C) [95] thereof identifies what income is sourced without. In explaining the
concept of "source" vis-à-vis taxation, this Court stated in Manila Gas Corporation v. Collector
of Internal Revenue: [96] "[t]he word 'source' conveys only one idea, that of origin, and the
origin of the income was the Philippines." Thus, the test is to determine if the income
originated from the Philippines. [97]
A reading of Section 42 (A) and (C) of the NIRC makes it clear that for income derived
from the sale of services, the focal point is where the actual performance of the service
occurs. In this regard, the seminal case of Commissioner of Internal Revenue v. British
Overseas Airways Corporation (BOAC) [98] is instructive to understand the precise aspect of
the activity which triggers the taxable event, viz.:
The source of an income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the
Philippines, it is sufficient that the income is derived from activity within the
Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity
that produces the income. The tickets exchanged hands here and payments for
fares were also made here in Philippine currency. The situs of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred
within, Philippine territory, enjoying the protection accorded by the Philippine
government. In consideration of such protection, the flow of wealth should share
the burden of supporting the government.
xxx xxx xxx
BOAC, however, would impress upon this Court that income derived from
transportation is income for services, with the result that the place where the services
are rendered determines the source; and since BOAC's service of transportation is
performed outside the Philippines, the income derived is from sources without the
Philippines and, therefore, not taxable under our income tax laws. The Tax Court
upholds that stand in the joint Decision under review.
The absence of flight operations to and from the Philippines is not determinative
of the source of income or the situs of income taxation. Admittedly, BOAC was an off-
line international airline at the time pertinent to this case. The test of taxability is the
"source"; and the source of an income is that activity x x x which produced the
income. Unquestionably, the passage documentations in these cases were sold in the
Philippines and the revenue therefrom was derived from a business activity regularly
pursued within the Philippines. And even if the BOAC tickets sold covered the "transport
of passengers and cargo to and from foreign cities," it cannot alter the fact that
income from the sale of tickets was derived from the Philippines. The word
"source" conveys one essential idea, that of origin, and the origin of the income
herein is the Philippines. [99] (Emphasis supplied; citations omitted)

Thus, as observed by Justice Perlas-Bernabe, in BOAC, the Court held that, while the
actual transportation would occur outside the Philippines, the sale of tickets in the Philippines
[100]
already constituted a taxable activity. In this regard, in Commissioner of Internal
Revenue v. Baier-Nickel (Baier-Nickel), [101] this Court expounded on its ruling in BOAC, and
clarified that the "source" of income is not determined by where income is disbursed or
physically received, but rather, where the business activity that produced such income is
actually conducted:
Both the petitioner and respondent cited the case of Commissioner of Internal
Revenue v. British Overseas Airways Corporation in support of their arguments, but
the correct interpretation of the said case favors the theory of respondent that it is the
situs of the activity that determines whether such income is taxable in the
Philippines. The conflict between the majority and the dissenting opinion in the said
case has nothing to do with the underlying principle of the law on sourcing of income. In
fact, both applied the case of Alexander Howden & Co., Ltd. v. Collector of Internal
Revenue. The divergence in opinion centered on whether the sale of tickets in the
Philippines is to be construed as the "activity" that produced the income, as viewed by
the majority, or merely the physical source of the income, as ratiocinated by Justice
Florentino P. Feliciano in his dissent. The majority, through Justice Ameurfina Melencio-
Herrera, as ponente, interpreted the sale of tickets as a business activity that gave rise
to the income of BOAC. Petitioner cannot therefore invoke said case to support its
view that source of income is the physical source of the money earned. If such
was the interpretation of the majority, the Court would have simply stated that
source of income is not the business activity of BOAC but the place where the
person or entity disbursing the income is located or where BOAC physically received
the same. But such was not the import of the ruling of the Court. It even explained
in detail the business activity undertaken by BOAC in the Philippines to pinpoint the
taxable activity and to justify its conclusion that BOAC is subject to Philippine income
taxation. x x x.
xxx xxx xxx
The Court reiterates the rule that "source of income" relates to the property,
activity or service that produced the income. With respect to rendition of labor or
personal service, as in the instant case, it is the place where the labor or service was
performed that determines the source of the income. There is therefore no merit in
petitioner's interpretation which equates source of income in labor or personal service
with the residence of the payor or the place of payment of the income. [102] (Emphasis
supplied)

Applying the rulings of BOAC and Baier-Nickel to the instant case, it appears that
offshore-based POGO licensees derive no income from the sources within the
Philippines because the "activity" which produces income occurs and is located outside the
territory of the Philippines. Indeed, the flow of wealth or the income-generating activity — the
placing of bets less the amount of payout — transpires outside the Philippines.
Pertinently, apart from the disquisitions found in BOAC and Baier-Nickel, Justice
Dimaampao also observed the necessity to discuss the other jurisprudential tests to ascertain
whether a resident foreign corporation is "doing" or "engaging in" or "transacting" business in
the Philippines, to determine the taxability of POGOs, particularly offshore-based POGO
[103]
licensees, within the jurisdiction of the Philippines. These jurisprudential tests are as
follows:

1. Substance Test; [104]

2. Contract Test; [105]

3. Intention Test; [106] and

4. Actual Performance Test. [107]

Substance Test — the true test in determining whether a foreign corporation is
transacting business "seems to be whether [it] is continuing the body or substance of the
business or enterprise for which it was organized or whether it has substantially retired from it
and turned it over to another." [108] As noted by Justice Dimaampao, the Substance Test
implies a continuity of commercial dealings and arrangements, and contemplates, to the
extent, the performance of acts or works or the exercise of some of the functions normally
incident to, and in progressive prosecution of, the purpose of its organization. [109]
Contract Test — transactions entered into by a foreign corporation which constitute an
isolated transaction and are not a series of commercial dealings which signify an intent on
the part of such corporation to do business in the Philippines, does not fall under the category
of "doing business." Thus, as stressed by Justice Dimaampao, isolated transactions by a
foreign corporation do not constitute engaging in business in the Philippines. [110]
Intention Test — what is determinative of "doing business" is not really the number or
the quantity of the transactions, but the intention of the entity to continue the body of its
business in the country. The number and quantity are merely evidence of such intention. The
phrase "isolated transaction" has a definite and fixed meaning, i.e., a transaction or series of
transactions set apart from the common business of a foreign enterprise in the sense that no
intention to engage in a progressive pursuit of the purpose and object of the business
organization. As such, Justice Dimaampao noted in his Reflections that under the Intention
Test, the question of whether a foreign corporation is "doing business" does not necessarily
depend upon the frequency of its transactions, but more upon the nature and character of
the transactions.
Actual Performance Test — an essential condition to be considered as "doing
business" in the Philippines is the actual performance of specific commercial acts within
the territory of the Philippines, because, as aptly pointed out by Justice Dimaampao in his
Reflections, the Philippines has no jurisdiction over commercial acts performed in foreign
territories.
Applying these jurisprudential tests, as well as the discussion of what constitutes doing
business under Section 3 (d) of the Foreign Investments Act of 1991 (FIA), [111] it is
abundantly clear that the POGOs, particularly offshore-based POGO licensees, are not
doing, engaging in, nor transacting business in the Philippines. As emphasized by
Justice Dimaampao: first, the activities of offshore-based POGO licensees do not fall under
Section 3 (d) of the FIA; second, offshore-based POGO licensees only have a limited
presence in the Philippines; and third, the transactions of offshore-based POGO licensees
not performed in the Philippines are beyond our jurisdiction. [112]

In view of all the foregoing, and to answer the query above, it is apparent that POGOs,
particularly offshore-based POGO licensees, do not enjoy any protection from the State. To
be clear, the very nature of their operations and the limited presence of offshore-based
POGO licensees in the Philippines negate the concept of "doing business" in the Philippines;
and therefore, POGOs, particularly offshore-based POGO licensees cannot be taxed here.
Relevantly, while the application of the aforementioned jurisprudential tests, including
the rulings in BOAC and Baier-Nickel, and the provisions of the FIA, lead to the inescapable
conclusion that POGOs, particularly offshore-based POGO licensees, cannot be subjected to
tax in the Philippine jurisdiction, it must be borne in mind that the foregoing were promulgated
and enacted during a time when businesses require physical presence within a State to
provide certain services. As observed by both Justice Perlas-Bernabe and Justice
Dimaampao, with the proliferation of digital and online commerce, it becomes more
complicated and less straightforward to determine where the activity which produces income
occurs, as when the transaction is conducted over the internet. [113]

Thus, this Court finds it crucial to add a discussion with respect to the challenges of
taxing the "digital economy" as suggested by Justice Perlas-Bernabe. [114]
Justice Perlas-Bernabe explained that according to the Organization for Economic
Cooperation and Development (OECD), the digital economy brought about the emergence of
new business models which may "quickly cause existing businesses to become obsolete."
[115]
From a tax perspective, the digital economy likewise poses several challenges because
of the following key features:
• Mobility, with respect to (i) the intangibles on which the digital economy relies
heavily, (ii) users, and (iii) business functions as a consequence of the decreased
need for local personnel to perform certain functions as well as the flexibility in
many cases to choose the location of servers and other resources.
 • Reliance on data, including in particular the use of so-called "big data."
• Network effects, understood with reference to user participation, integration and
synergies.
• Use of multi-sided business models in which the two sides of the market may be in
different jurisdictions.
• Tendency toward monopoly or oligopoly in certain business models relying heavily
on network effects.

• Volatility due to low barriers to entry and rapidly evolving technology. [116]

To illustrate, the mobility of users in the digital economy allows them to: (1) carry on
commercial activities remotely across borders; and (2) use of virtual private networks (VPNs)
or proxy servers that could mask the location of where the digital transaction actually occurs.
[117] Meanwhile, with respect to the mobility of business functions, the digital economy allows
entities to coordinate activities across several territories in one central point while being
geographically removed from both the location where the business operations are carried out
and where the suppliers or customers are serviced. [118]
Thus, as observed by Justice Perlas-Bernabe, the complexity of the digital economy
could allow businesses to avoid a taxable presence or escape taxation anywhere by simply
working around local laws and outdated conceptions of permanent establishments. As stated
by the OECD:
5.2.1.1 Avoiding a taxable presence
In many digital economy business models, a non-resident company may interact
with customers in a country remotely through a website or other digital means (e.g., an
application on a mobile device) without maintaining a physical presence in the country.
Increasing reliance on automated processes may further decrease reliance on local
physical presence. The domestic laws of most countries require some degree of
physical presence before business profits are subject to taxation. In addition, under
Articles 5 and 7 of the OECD Model Tax Convention, a company is subject to tax on its
business profits in a country of which it is a non-resident only if it has a permanent
establishment (PE) in that country. Accordingly, such non-resident company may not be
subject to tax in the country in which it has customers.
Companies in many industries have customers in a country without a PE in that
country, communicating with those customers via phone, mail, and fax and through
independent agents. That ability to maintain some level of business connection within a
country without being subject to tax on business profits earned from sources within that
country is the result of particular policy choices reflected in domestic laws and relevant
double tax treaties, and is not in and of itself a BEPS issue. However, while the ability of
 a company to earn revenue from customers in a country without having a PE in that
country is not unique to digital businesses, it is available at a greater scale in the digital
economy than was previously the case. Where this ability, coupled with strategies that
eliminate taxation in the State of residence, results in such revenue not being taxed
anywhere, BEPS concerns are raised. In addition, under some circumstances, tax in a
market jurisdiction can be artificially avoided by fragmenting operations among multiple
group entities in order to qualify for the exceptions to PE status for preparatory and
auxiliary activities, or by otherwise ensuring that each location through which business
is conducted falls below the PE threshold. Structures of this type raise BEPS concerns.
[119]

To combat this, the OECD offers several proposals, such as revising treaty terms on
Permanent Establishments, and implementing better domestic foreign corporation rules
among countries. [120]

However, as mentioned by Justice Perlas-Bernabe, to which this Court concurs, until

such time as existing tax treaties and tax laws are revised and revisited to account for the
digital economy, this Court must apply the laws as they currently are. Since, as explained
above, no income is derived from sources within the Philippines, offshore-based
POGO licensees cannot be subjected to income tax.
All things considered, RMC No. 102-2017, and consequently, RMC No. 78-2018,
should be struck down, insofar as they imposed income tax and other applicable taxes upon
offshore-based POGO licensees, notwithstanding the fact that offshore-based POGO
licensees do not derive any income from sources within the Philippines.
Section 11 (f) and (g) of the Bayanihan 2
Law are Unconstitutional for Being Riders.
The title of the Bayanihan 2 Law reads: "An Act Providing for COVID-19 Response and
Recovery Interventions and Providing Mechanisms to Accelerate the Recovery and Bolster
the Resiliency of the Philippine Economy, Providing Funds Therefor, and for Other
Purposes." Meanwhile, Section 11 thereof lists the sources of funding to address the COVID-
19 pandemic, which includes, among others, the following:
SECTION 11. Sources of Funding. — The enumerated subsidy and stimulus
measures, as well as all other measures to address the COVID-19 pandemic shall be
funded from the following:
xxx xxx xxx
(f) Amounts derived from the five percent (5%) franchise tax on the gross
bets or turnovers or the agreed pre-determined minimum monthly
revenues from gaming operations, whichever is higher, earned by offshore
 gaming licensees, including gaming operators, gaming agents, services-
providers and gaming support providers;
(g) Income tax, VAT, and other applicable taxes on income from non-gaming
operations earned by offshore gaming licensees, operators, agents, service
providers and support providers.

The tax shall be computed on the peso equivalent of the foreign currency used,
based on the prevailing official exchange rate at the time of payment, otherwise the
same shall be considered as a fraudulent act constituting underdeclaration of taxable
receipts or income, and shall be subject to interests, fines and penalties under Sections
248(B), 249(B), 253, and 255 of the National Internal Revenue Code of the
Philippines.

After two (2) years or upon a determination that the threat of COVID-19 has
been successfully contained or abated, whichever comes first, the revenues derived
from franchise taxes on gross bets or turnovers under paragraph (f) and income
from non-gaming operations under paragraph (g) shall continue to be collected
and shall accrue to the General Fund of the Government. The BIR shall implement
closure orders against offshore gaming licensees, operators, agents, service providers
and support providers who fail to pay the taxes due, and such entities shall cease to
operate. [121] (Emphasis supplied)

To determine whether certain provisions are riders, it is vital to understand the rationale
behind its prohibition. Such proscription against riders was explained by this Court in Fariñas
v. Executive Secretary, [122] thus:

Section 26(1), Article VI of the Constitution provides:

SEC. 26. (1) Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.
The proscription is aimed against the evils of the so-called omnibus bills and log-
rolling legislation as well as surreptitious and/or unconsidered encroaches. The
provision merely calls for all parts of an act relating to its subject finding
expression in its title.
To determine whether there has been compliance with the constitutional
requirement that the subject of an act shall be expressed in its title, the Court laid clown
the rule that —
Constitutional provisions relating to the subject matter and titles of statutes
should not be so narrowly construed as to cripple or impede the power of legislation.
The requirement that the subject of an act shall be expressed in its title should receive
a reasonable and not a technical construction. It is sufficient if the title be
comprehensive enough reasonably to include the general object which a statute
 seeks to effect, without expressing each and every end and means necessary or
convenient for the accomplishing of that object. Mere details need not be set forth.
The title need not be an abstract or index of the Act. [123] (Emphasis supplied; citations
omitted)

Similarly, and as observed by Justice Perlas-Bernabe, [124] in Atitiw v. Zamora, [125] this
Court elucidated that the rationale for the prohibition against riders is to prevent hodge-podge
or log-rolling legislation, and to ensure that all provisions of a statute have some reasonable
relation to the subject matter as expressed in the title thereof:
The rationale against inserting a rider in an appropriations bill under the specific
appropriation clause embodied in Section 25(2), Article VI of the Constitution is similar
to that of the "one subject in the title clause provided in Section 26(1) also of Article VI,
which directs that every provision in a bill must be germane or has some
reasonable relation to the subject matter as expressed in the title thereof. The
unity of the subject matter of a bill is mandatory in order to prevent hodge-podge
or log-rolling legislation, to avoid surprise or fraud upon the legislature, and to
fairly appraise the people of the subjects of legislation that are being considered.
[126]
(Emphasis supplied; citation omitted)

Following such jurisprudential guides, it is evident that all provisions of a law must be
germane to the purpose of the law, and contemplated by the title thereof.
Here, the respondents admit that the Bayanihan 2 Law is not a tax measure. Simply
stated, the Bayanihan 2 Law was not enacted to impose new taxes in order to address the
COVID-19 pandemic. In fact, and as pointed out by Justice Perlas-Bernabe, [127] the
proponents of House Bill No. 6953 and Senate Bill No. 1564, the precursors of the Bayanihan
2 Law, all characterized the same as "socioeconomic relief efforts," [128] a "stopgap measure,"
[129] or a "stimulus bill." [130]

While the title of the law contains the phrase "providing funds therefor," it must be
emphasized that all other provisions relating to sources of funding under Section 11, except
for Section 11 (f) and (g), are already existing taxes. The Bayanihan 2 Law merely realigns
these already existing sources of funding and funnels it to be used for COVID-19 relief
measures.
However, as expounded above, before the passage of the Bayanihan 2 Law, there was
no law in effect which imposes franchise taxes upon offshore-based POGO licensees.
Similarly, there was also no statutory basis to impose income tax and VAT upon offshore-
based POGO licensees before the enactment of the Bayanihan 2 Law. This means that the
Bayanihan 2 Law, specifically Section 11 (f) and (g), appear to introduce new tax impositions.
 Such conclusion is likewise supported by the fact that, unlike the other provisions
under Section 11 of the Bayanihan 2 Law that are temporary in nature, Section 11 (f) and (g)
thereof were intended to outlive the December 19, 2020 expiration date of the Bayanihan 2
Law, viz.:
After two (2) years or upon a determination that the threat of COVID-19 has
been successfully contained or abated, whichever comes first, the revenues derived
from franchise taxes on gross bets or turnovers under paragraph (f) and income from
non-gaming operations under paragraph (g) shall continue to be collected and shall
accrue to the General Fund of the Government. The BIR shall implement closure
orders against offshore gaming licensees, operators, agents, service providers and
support providers who fail to pay the taxes due, and such entities shall cease to
operate. (Emphasis supplied)

Indeed, and as emphasized by Justice Perlas-Bernabe, [131] if all sources of funding

under Section 11 of the Bayanihan 2 Law are already existing taxes, there would be no need
to specify that the collections thereof after the COVID-19 pandemic has been thwarted would
accrue to the General Fund of the Government. The logical implication of this statement,
therefore, is that prior to the Bayanihan 2 Law, there was no statute which imposed the same
taxes as found in Section 11 (f) and (g) of the Bayanihan 2 Law; and consequently, the
foregoing provisions are new tax measures.
Thus, this Court is convinced that Section 11 (f) and (g) of the Bayanihan 2 Law
are not germane to the purpose of the law, and therefore, violates the "one subject,
one title rule" of the Constitution. The imposition of new taxes, camouflaged as part of a
long list of existing taxes, cannot be contemplated as an integral part of a temporary COVID-
19 relief measure. Invariably, Section 11 (f) and (g) of the Bayanihan 2 Law are
unconstitutional, in so far as it imposes new taxes on POGO licensees.
On this score alone, the Consolidated Petitions must be granted. Section 11 (f)
and (g) of the Bayanihan 2 Law are unconstitutional. Consequently, the Assailed Tax
Issuances, specifically RR No. 30-2020 and RMC No. 64-2020, which merely implement
Section 11 (f) and (g) of the Bayanihan 2 Law, are likewise invalid for having no legal basis.
All in all, before the enactment of R.A. No. 11590, there is no valid law which imposes
taxes upon POGOs, including offshore-based POGO licensees. However, this Court deems it
proper to emphasize that R.A. No. 11590 cannot be applied retroactively. [132] Thus,
POGOs, including offshore-based POGO licensees such as the petitioners, cannot be made
liable for taxes prior to the enactment and effectivity of R.A. No. 11590.
WHEREFORE, premises considered, the Petition for Certiorari and Prohibition [With
Application for a Temporary Restraining Order and/or Writ of Preliminary Injunction] dated
August 20, 2020 in G.R. No. 252965 and the Petition for Certiorari and Prohibition (With
Application for Temporary Restraining Order/Writ of Preliminary Injunction) dated November
17, 2020 in G.R. No. 254102 are GRANTED. Section 11 (f) and (g) of Republic Act No.
11494, Revenue Regulations No. 30-2020; Revenue Memorandum Circular No. 64-2020;
Revenue Memorandum Circular No. 102-2017; and Revenue Memorandum Circular No. 78-
2018, in so far as they impose franchise tax, income tax, and other applicable taxes upon
offshore-based POGO licensees are declared NULL and VOID for being contrary to the
Constitution and other relevant laws.
SO ORDERED.
Gesmundo, C.J., Caguioa, Hernando, Carandang, Inting, Zalameda, M.V. Lopez,
Rosario, J.Y. Lopez and Marquez, JJ., concur.
Perlas-Bernabe, J., please see the concurring & dissenting opinion.
Leonen, J., I dissent. See separate opinion.
Lazaro-Javier, J., pls. see dissenting opinion.
Dimaampao, [*] J., is on official leave.

Separate Opinions
PERLAS-BERNABE, J., concurring and dissenting:

I concur in striking down Section 11 (f) and (g) of Republic Act No. (RA) 11494 [1]
(Bayanihan 2 Law) for being unconstitutional, and Revenue Regulations No. (RR) 30-2020,
Revenue Memorandum Circular No. (RMC) 64-2020, as well as parts of RMC 102-2017 and
RMC 78-2018 (collectively, the Assailed Tax Issuances), for having been issued contrary to
relevant tax laws and RA 9487, or the "PAGCOR Charter." [2] However, I respectfully dissent
insofar as the ponencia purports that the instant case has already been rendered moot and
academic by the enactment of RA 11590, entitled "An Act Taxing Philippine Offshore Gaming
Operations, Amending for the Purpose Sections 22, 25, 27, 28, 106, 108, and Adding New
Sections 125-A and 288-G of the National Internal Revenue Code of 1997, as amended, and
for Other Purposes." [3]
I.
As pointed out by Associate Justice Alfredo Benjamin S. Caguioa (Justice Caguioa)
during the Court's deliberations, the issue in the instant petition has not been rendered moot
[4]
and academic by RA 11590. The general rule is that laws do not have retroactive effect,
unless the contrary is provided. [5] This principle of prospectivity applies whether the statute is
original or amendatory, [6] such as RA 11590. It bears stressing that nowhere in RA 11590
does it provide for the retroactive application of any of its provisions, including its repealing
clause which expressly mentions the PAGCOR Charter and the Bayanihan 2 Law, as well as
their corresponding rules and regulations, e.g., the Assailed Tax Issuances. In fact, the
aforesaid principle finds particular significance in tax statutes and tax rules and regulations
for it has been settled that the taxing authority's right to receive tax collections accrues the
moment the said tax is deemed payable under the provisions of the relevant tax law, and
must be paid without delay once it is due. [7] Thus, prior to the Court passing upon the legality
or constitutionality of tax laws or revenue measures, the same must enjoy the presumption of
validity and must be said to produce legal effects, unless otherwise enjoined.
Here, the Court issued a temporary restraining order (TRO) on January 5, 2021 which
prevented the Bureau of Internal Revenue (BIR) from enforcing the provisions of the
Bayanihan 2 Law and the Assailed Tax Issuances. However, while the BIR was prevented
from implementing the foregoing, it does not necessarily follow that the taxes that could have
been exacted therefrom did not accrue in favor of the State. Rather, the issuance of a TRO in
this case simply means that the State, through the BIR, could not yet demand the payment
of said taxes. Consequently, had the Court deemed it proper to uphold the Assailed Tax
Issuances and the Bayanihan 2 Law, petitioners, and any other similarly situated taxpayers,
would have been liable for all the accrued taxes up until the effectivity date of RA 11590
which repealed them. On the other hand, if the Court had struck down the Assailed Tax
[8]
Issuances and Section 11 (f) and (g) of the Bayanihan 2 Law, as it eventually did, then no
taxes would have accrued since a void act cannot give rise to any right or obligation. [9]

Therefore, what the Court had to resolve in this case was not whether petitioners, and
other similarly situated taxpayers, were liable for any taxes after the passage of RA 11590,
but rather if they were liable for the payment of taxes from the issuance of RMC 102-2017 up
until the effectivity of RA 11590. Hence, the issues presented in the instant petition have not
been rendered moot and academic and are, in fact, ripe for judicial review.
II.
On the validity of Section 11 (f) and (g) of the Bayanihan 2 Law, I concur with the
ponencia that the same are unconstitutional for being riders. [10] A "rider" is any provision
"which is alien to or not germane to the subject or purpose of the bill in which it is
incorporated," [11] and is specifically proscribed by Sections 25 (2) and Section 26 (1), Article
VI of the 1987 Constitution, to wit:
ARTICLE VI
The Legislative Department
xxx xxx xxx
 Sec. 25. x x x. —
(2) No provision or enactment shall be embraced in the general
appropriations bill unless it relates specifically to some particular appropriation therein.
Any such provision or enactment shall be limited in its operation to the appropriation to
which it relates.

xxx xxx xxx

Sec. 26. (1) Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.

The rationale for the prohibition against riders is to "to prevent hodge-podge or log-
rolling legislation, to avoid surprise or fraud upon the legislature, and to fairly appraise the
people of the subjects of legislation that are being considered." [12] Jurisprudence has laid
down a "germaneness" standard to test whether a provision is a rider, i.e., that the provision
must have some reasonable relation to the subject matter as expressed in the title thereof.
[13 ]

As the ponencia aptly pointed out, Bayanihan 2 Law was not intended to be a tax
measure. Its full title reads: "An Act Providing for COVID-19 Response and Recovery
Interventions and Providing Mechanisms to Accelerate the Recovery and Bolster the
Resiliency of the Philippine Economy, Providing Funds Therefor, and for Other Purposes."
The proponents of House Bill No. 6953 and Senate Bill No. 1564, the pre-cursors of the
Bayanihan 2 Law, all characterized the Act as "socioeconomic relief efforts," [14] a "stopgap
measure," [15] or a "stimulus bill." [16] At its core, the law intends to empower the government
to further address the COVID-19 pandemic while providing some measure of financial
assistance to the public for a limited time. [17]
A close reading of the provisions of the Bayanihan 2 Law would show that there are
two (2) main pillars to this relief measure: (1) empowering the President to exercise the
necessary powers under Section 23 (2), Article VI of the Constitution to address a national
[18]
emergency; and (2) providing for the appropriations of the funds necessary to enable the
response and recovery interventions under the law. [19]

The assailed provisions of the Bayanihan 2 Law are found under Section 11 thereof,
captioned "Sources of Funding." A perusal of paragraphs (a) to (e), however, would show that
these identify already-existing funds that are to be realigned or funds previously identified
under the FY 2020 Budget of Expenditures and Sources of Financing (BESF). [20]
Paragraphs (f) and (g), on the other hand, if read on their own, appear to introduce new tax
impositions, to wit:
 SECTION 11. Sources of Funding. — The enumerated subsidy and stimulus
measures, as well as all other measures to address the COVID-19 pandemic shall be
funded from the following:
xxx xxx xxx
(f) Amounts derived from the five percent (5%) franchise tax on the
gross bets or turnovers or the agreed pre-determined minimum monthly
revenues from gaming operations, whichever is higher, earned by
offshore gaming licensees, including gaming operators, gaming agents,
service providers and gaming support providers;
(g) Income tax, VAT, and other applicable taxes on income from non-
gaming operations earned by offshore gaming licensees, operators,
agents, service providers and support providers.
xxx xxx xxx

Neither provision identifies any pre-existing tax laws from which such tax liabilities
would arise. Undeniably, it appears to be a new revenue measure altogether. Moreover,
unlike the other provisions of this temporary relief statute, Section 11 (f) and (g) were
intended to outlive the December 19, 2020 expiration date of RA 11494, viz.:
After two (2) years or upon a determination that the threat of COVID-19 has
been successfully contained or abated, whichever comes first, the revenues derived
from franchise taxes on gross bets or turnovers under paragraph (f) and income from
non-gaming operations under paragraph (g) shall continue to be collected and shall
accrue to the General Fund of the Government. The BIR shall implement closure
orders against offshore gaming licensees, operators, agents, service providers and
support providers who fail to pay the taxes due, and such entities shall cease to
operate. (emphasis supplied)

Had Section 11 (f) and (g) merely directed the collection of funds from existing tax
exactions to the COVID-19 intervention measures of the Bayanihan 2 Law, there would be no
need to specify that the collections thereof after the pandemic has abated would accrue to
the General Fund. The logical implication of including this paragraph is that prior to the
Bayanihan 2 Law, there was no statute which imposed the same taxes as found in Section 11
(f) and (g); necessarily, the foregoing provisions should be considered as new tax measures.
The question now devolves as to whether introducing new tax measures is germane to
the subject matter of the Bayanihan 2 Law. It is my considered view that it is not. As above-
mentioned, the two (2) pillars which characterize the law are its emergency power provisions
and the special appropriations to fund the same. Moreover, the law was never intended to
remain effective for an extended period of time; hence, it provides for its own expiration date
in Section 18 thereof. It was simply a necessary "stopgap" to further bolster the government's
efforts to address the COVID-19 pandemic. Undoubtedly, the Executive can neither exercise
emergency powers nor re-allocate funding without a statute passed by Congress. These
exigencies are what impelled the passage of the Bayanihan 2 Law. Surely, tax measures
intended to remain effective for an indefinite amount of time are anathema to the admitted
limited lifespan of an act passed to provide only temporary relief, and cannot be said to be
germane to the subject matter of the said law.
Given the foregoing, I concur with the ponencia that Section 11 (f) and (g) should be
struck down for being riders to the Bayanihan 2 Law in contravention of Section 26 (1) of the
Constitution. [21] Necessarily, RR 30-2020 and RMC 64-2020, which merely implement
Section 11 (f) and (g) of RA 11494, should similarly be struck down since it is a basic legal
principle that the spring cannot rise higher than its source. [22]
III.
In determining the validity of RMC 102-2017 and RMC 78-2018, it becomes imperative
to identify the statutory basis of the BIR in circulating these issuances and the obligations
they impose on taxpayers, such as herein petitioners.
The subject of RMC 102-2017 reads: "Taxation of Taxpayers Engaged in Philippine
Offshore Gaming Operations." The prelude of the circular is clear that the BIR's aim was to
"adapt existing taxes" to Philippine Offshore Gaming Operations (POGOs) to lessen the tax
leak from their activities:
The Bureau of Internal Revenue (BIR), not a newcomer to the workings and tax
issues presented by online business transactions through the internet, feels that the
challenge in gaming operations is how to implement a fair and equitable taxation of
online gaming businesses, how to monitor the revenues and revenue-generating
activities of POGO and how to adapt existing taxes to POGO so as to lessen the so-
called "lost potential tax revenues." This is the perspective from which the current issue
of taxing taxpayers engaged in POGO should be viewed. [23]

The BIR further states that "online activity is sufficient to constitute doing business in
the Philippines x x x." Hence, it imposed regulatory and administrative requirements to
POGOs, which was further outlined in RMC 78-2018. [24] It likewise clarified that the following
taxes apply to POGOs:
1. Income from gaming operations are subject to the five percent (5%)
franchise tax which are in lieu of all other taxes, whether national or local;
2. Income from their other related services or non-gaming operations will be
subject to normal income tax, value-added tax (VAT), and other applicable
 taxes;
3. Other entities, such as gaming agents, service providers, and gaming
support providers, who provide specific components to a POGO Licensee's
own offshore gaming services, and who are themselves registered as a
POGO Licensees, shall also be subject to the five percent (5%) franchise
tax for their gaming activities, and normal income tax, value-added tax
(VAT), and other applicable taxes for their non-gaming operations;
4. Income payments of any Licensee for the purchase of goods and services
shall be subject to withholding taxes;
5. Compensation, fees, commission or any other form of remuneration as a
result of services rendered to POGO Licensees or the other entities shall be
subject to withholding taxes; and
6. Purchases and sale of goods or services shall be subject to existing tax
laws and revenue issuances.
Petitioners in G.R. No. 254102 argue that RMC 102-2017 is void for lack of statutory
basis since there is no law imposing any kind of taxes on the offshore gaming revenue of
foreign-based POGO Licensees. [25] They posit that income of foreign-based POGO
Licensees are necessarily income derived from sources outside of the Philippines since the
generating "activity," i.e., the games of chance, occur abroad. Even the National Internal
Revenue Code (Tax Code) limits the taxation of foreign corporations to income derived from
within the Philippines. Moreover, they argue that the PAGCOR Charter could likewise not be
the basis for the taxation of POGOs considering that when it was enacted in 1983, offshore
gaming through the internet did not yet exist. Considering that no tax law allows the taxation
of foreign-source income of foreign corporations, RMC 102-2017 has no legal basis. [26]
Aside from the lack of statutory basis, petitioners also attack RMC 102-2017 on the grounds
of violation of the rule on territoriality of taxation. They argue that imposing taxes on foreign-
sourced income violates the basic principle that the taxing power of a State does not extend
beyond its territorial limits. [27] With respect to RMC 78-2018, petitioners advance that since
this issuance merely enforces RMC 102-2017, the latter's infirmity likewise extends to the
former. [28]
For their part, respondents, in their consolidated comment, counter that RMC 102-2017
did not impose a tax but merely interpreted the provisions of the PAGCOR Charter. They
argue that the mere fact that POGOs are Licensees of PAGCOR already subjects them to the
five percent (5%) franchise tax. Respondents maintain that the POGOs' gaming and income
generating activities are rendered in the Philippines through their service providers, and that
the placement of online bets are "just a small portion of a POGO [L]icensee's gaming
activity." In any case, respondents insist that even if petitioners' income is derived from
sources outside the Philippines, it still would not exempt them from the five percent (5%)
franchise tax since a franchise tax is imposed on the exercise of enjoying a franchise. Hence,
the mere fact that petitioners operate within the Philippines would make them liable for the
[29]
same. With respect to RMC 78-2018, respondents argue that this merely provides
guidelines on the registration of POGOs and it enjoys the presumption of legality. [30]

As earlier stated, while I concur with the majority in striking down RMC 102-2017 and
RMC 78-2018 for want of statutory basis, I would like to offer my own views regarding the
matter as it presents an opportunity to propound on principles in an emerging area of tax law,
i.e., the taxation of the digital economy.
In the above-enumeration of the alleged applicable taxes, RMC 102-2017 draws from
both the PAGCOR Charter and the Tax Code. Specifically, items 1 to 3 on the treatment of
income from gaming and non-gaming operations of POGOs and other entities, are derived
from the language of Section 13 of the PAGCOR Charter, [31] whereas items 4 to 6 are
applications of Section 57 [32] of the Tax Code on withholding taxes. Hence, the issue to
resolve is whether RMC 102-2017 went beyond the ambit of these statutes so as to
constitute an invalid exercise of quasi-legislative power; particularly, with regard to the
application of the taxes therein to the income of offshore or foreign-based POGO Licensees.
However, even before delving into the import of the above-mentioned statutes for the
applicable taxes, it must first be determined if offshore or foreign-based POGO Licensees are
even taxable in the Philippines.
The power of taxation is an inherent attribute of sovereignty which every independent
[33]
government may exercise even without express conferment by the people. Taxation
emanates from necessity, [34] and is grounded on a mutually advantageous relationship
between the State and those it governs; every person surrenders a portion of their income for
the running of the government, and the government in turn, provides tangible and intangible
benefits to serve and protect those within its jurisdiction. [35] Indeed, it seems only logical to
exact a tax from those who stand to benefit, whether directly or indirectly, from the
[36]
expenditure of public funds derived from the same. Necessarily, implied within the power
[37]
to tax is the power to choose what or whom to tax. Undoubtedly, the State may tax any
persons, property, income, or business within its territorial limits. [38] In this regard, it should
be clarified that even non-resident aliens or foreign corporations may likewise be subjected to
the State's power to tax if they have availed of the State's resources or protection in some
[39]
manner in the conduct of an income-generating activity. However, the State's choice of
who specifically to tax is not unbridled, and is, in fact, restrained by the fundamental rights
enshrined in our Constitution, specifically, the due process clause. [40]

As a rule, the State's power to tax does not extend beyond its territorial limits. [41] Case
law holds that "[i]f an interest in property is taxed, the situs of either the property or interest
must be found within the State. If an income is taxed, the recipient thereof must have a
domicile within the State or the property or business out of which the income issues must be
situated within the State so that the income may be said to have a situs therein. Personal
property may be separated from its owner and he may be taxed on its account at the place
where the property is although it is not a citizen or resident of the State which imposes the
tax." [42] This territorial limitation of taxation is what necessitates the taxation of only income
derived from sources "within" the Philippines for non-resident aliens and foreign corporations.
If the income was derived or sourced within the Philippines, then naturally, the non-resident
alien or foreign corporation should give a portion of the said income to the government as a
reasonable payment for its protection and for allowing the facility of the transaction which
made the generation of income possible in the first place. [43] Hence, keeping in mind this
limitation, it is apt to determine whether income was derived or sourced within the Philippines
relative to the sale of services which POGOs are engaged in.
[44]
Section 42 (A) of the Tax Code provides the guidelines in determining what income
is sourced within the Philippines, whereas Section 42 (C) [45] identifies what are income
sourced without. The word "source" connotes "origin"; [46] the test is to determine if the
income originated from the Philippines. A reading of the foregoing provisions makes it
clear that for income derived from the sale of services, the focal point is where the actual
performance of the service occurs. On this score, it is instructive to refer to the seminal
[47]
case of Commissioner of Internal Revenue v. British Overseas Airways Corp. (BOAC) to
understand the precise aspect of the activity which triggers the taxable event, viz.:
The source of an income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the Philippines, it is
sufficient that the income is derived from activity within the Philippines. In BOAC's
case, the sale of tickets in the Philippines is the activity that produces the
income. The tickets exchanged hands here and payments for fares were also
made here in Philippine currency. The situs of the source of payments is the
Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory,
enjoying the protection accorded by the Philippine government. In consideration of such
protection, the flow of wealth should share the burden of supporting the government.
xxx xxx xxx
 The absence of flight operations to and from the Philippines is not
determinative of the source of income or the situs of income taxation. Admittedly,
BOAC was an off-line international airline at the time pertinent to this case. The test of
taxability is the "source"; and the source of an income is that activity . . . which
produced the income. Unquestionably, the passage documentations in these cases
were sold in the Philippines and the revenue therefrom was derived from a
business activity regularly pursued within the Philippines. And even if the BOAC
tickets sold covered the "transport of passengers and cargo to and from foreign cities,"
it cannot alter the fact that income from the sale of tickets was derived from the
Philippines. The word "source" conveys one essential idea, that of origin, and the
origin of the income herein is the Philippines.

xxx xxx xxx [48] (emphases supplied; citations omitted)

In BOAC, the transaction involved the sale of air transport to passengers. Even though
the actual transportation would occur outside of the Philippines, the Court held that the sale
of tickets here already constituted a taxable activity. However, the Court had occasion to
expound on this doctrine in Commissioner of Internal Revenue v. Baier-Nickel (Baier-Nickel).
[49] In Baier-Nickel, the Court clarified that the "source" was not determined by where the
income is disbursed or physically received, but rather where the business activity that
produced the income was actually conducted, viz.:
Both the petitioner and respondent cited the case of Commissioner of Internal
Revenue v. British Overseas Airways Corporation in support of their arguments, but
the correct interpretation of the said case favors the theory of respondent that it is the
situs of the activity that determines whether such income is taxable in the Philippines.
The conflict between the majority and the dissenting opinion in the said case has
nothing to do with the underlying principle of the law on sourcing of income. In fact, both
applied the case of Alexander Howden & Co., Ltd. v. Collector of Internal Revenue. The
divergence in opinion centered on whether the sale of tickets in the Philippines is to be
construed as the "activity" that produced the income, as viewed by the majority, or
merely the physical source of the income, as ratiocinated by Justice Florentino P.
Feliciano in his dissent. The majority, through Justice Ameurfina Melencio-Herrera, as
ponente, interpreted the sale of tickets as a business activity that gave rise to the
income of BOAC. Petitioner cannot therefore invoke said case to support its view
that source of income is the physical source of the money earned. If such was
the interpretation of the majority, the Court would have simply stated that source
of income is not the business activity of BOAC but the place where the person or
entity disbursing the income is located or where BOAC physically received the
same. But such was not the import of the ruling of the Court. It even explained in
detail the business activity undertaken by BOAC in the Philippines to pinpoint the
 taxable activity and to justify its conclusion that BOAC is subject to Philippine income
taxation. x x x.
xxx xxx xxx
The Court reiterates the rule that "source of income" relates to the property,
activity or service that produced the income. With respect to rendition of labor or
personal service, as in the instant case, it is the place where the labor or service
was performed that determines the source of the income. There is therefore no
merit in petitioner's interpretation which equates source of income in labor or personal
service with the residence of the payor or the place of payment of the income.

xxx xxx xxx [50] (emphases and underscoring supplied; citations omitted)

However, this reading of the law flows from the dated notion that a business requires
physical presence within the State to provide its services, or a more analog form of
conducting business. With the proliferation of digital commerce, there is now the added
complication of specifically pinpointing where the "activity that produced the income" occurs
when the transaction is conducted over the internet, as in the case of offshore gaming.
This is essentially the same complication when resolving the situs of taxation rules
under current tax conventions that bind the Philippines. It bears noting that "[t]he purpose of
these international agreements is to reconcile the national fiscal legislations of the contracting
parties in order to help the taxpayer avoid simultaneous taxation in two different jurisdictions.
More precisely, the tax conventions are drafted with a view towards the elimination of
international juridical double taxation, which is defined as the imposition of comparable taxes
in two or more states on the same taxpayer in respect of the same subject matter and for
identical periods." [51] Aside from the rules on situs of taxation under Section 42 of the Tax
Code, the provisions on Permanent Establishments, as found in tax treaties, can also serve
as basis for determining whether an entity or activity is taxable in one Contracting State or the
Other, since treaties also form part of the law of the land under our Constitution. [52]

For example, the Permanent Establishment provision in the Republic of the Philippines
(RP)-United States of America (US) Tax Treaty defines a "permanent establishment" as a
"fixed place of business through which a resident of one of the Contracting States engages in
a trade or business," [53] and includes a "seat of management," "branch," "office," "store or
other sales outlet," "factory," "workshop," "warehouse," "mine, quarry, or other place of
extraction of natural resources," or "building site or construction or assembly project or
[54]
supervisory activities." Interestingly, an almost exact same definition is found in the RP-
China Tax Treaty, [55] as well as other tax treaties. [56]
 However, since the traditional meaning of Permanent Establishment is a "fixed place"
of business, it stands to reason that it requires the occupation of a physical premises or some
manner of installation or spaces used for the carrying on of business within the Contracting
[57]
State. It bears emphasizing that treaties should be interpreted "in accordance with the
ordinary meaning to be given to the terms of the treaty in their context." [58] The fact that
offshore gaming and other digital transactions were not yet existing at the time these treaties
were ratified lends credence to the view that virtual spaces, such as gaming websites or
portals, could not constitute "fixed places" amounting to Permanent Establishments. If
anything, it would be the server which hosts the website or portal which could constitute a
"place of business" for purposes of constituting a Permanent Establishment.
This is the challenge of taxing the "digital economy" as observed by the Organization
for Economic Cooperation and Development (OECD) — specifically: (1) the mobility of users
that allow them to carry on commercial activities remotely across borders, compounded by
the use of virtual private networks (VPNs) or proxy servers that could mask the location of
where the digital transaction actually occurs; (2) the mobility of business functions that allow
entities to coordinate activities across several territories in one central point while being
geographically removed from both the location where the business operations are carried out
and where the suppliers or customers are serviced; and (3) the volatility due to further rapidly
evolving technology. [59]

As the OECD observed, the complexity of the digital economy could allow businesses
to avoid a taxable presence or escape taxation anywhere by working around local laws and
outdated conceptions of Permanent Establishments, viz.:
5.2.1.1 Avoiding a taxable presence
In many digital economy business models, a non-resident company may interact
with customers in a country remotely through a website or other digital means (e.g., an
application on a mobile device) without maintaining a physical presence in the country.
Increasing reliance on automated processes may further decrease reliance on local
physical presence. The domestic laws of most countries require some degree of
physical presence before business profits are subject to taxation. In addition, under
Articles 5 and 7 of the OECD Model Tax Convention, a company is subject to tax on its
business profits in a country of which it is a non-resident only if it has a permanent
establishment (PE) in that country. Accordingly, such non-resident company may not be
subject to tax in the country in which it has customers.
Companies in many industries have customers in a country without a PE in that
country, communicating with those customers via phone, mail, and fax and through
independent agents. That ability to maintain some level of business connection within a
country without being subject to tax on business profits earned from sources within that
 country is the result of particular policy choices reflected in domestic laws and relevant
double tax treaties, and is not in and of itself a [base erosion and profit shifting (BEPS)]
issue. However, while the ability of a company to earn revenue from customers in a
country without having a PE in that country is not unique to digital businesses, it is
available at a greater scale in the digital economy than was previously the case. Where
this ability, coupled with strategies that eliminate taxation in the State of residence,
results in such revenue not being taxed anywhere, BEPS concerns are raised. In
addition, under some circumstances, tax in a market jurisdiction can he artificially
avoided by fragmenting operations among multiple group entities in order to qualify for
the exceptions to PE status for preparatory and auxiliary activities, or by otherwise
ensuring that each location through which business is conducted falls below the PE
threshold. Structures of this type raise BEPS concerns. [60]

The OECD itself proposes several ways to combat the potential "double non-taxation"
of the digital economy, including the revision of treaty terms on Permanent Establishments,
and implementing better domestic foreign corporation rules among countries. [61]

Nevertheless, until such time as the existing tax treaties are revisited, or the rules on situs
under Section 42 of the Tax Code are amended to account for the digital economy, of which
offshore gaming conducted by POGOs are naturally part of, the Court must apply the laws as
they currently are and not go beyond their auspices.
Therefore, it is my view that if the foregoing prevalent principles are applied in the
present case, the Philippines cannot tax the offshore revenues of foreign-based POGO
Licensees.
IV.
At this juncture, it must be clarified that foreign-based POGO Licensees do not conduct
their business in the same manner as Philippine-based POGO Licensees. The former are
required to engage the services of PAGCOR-accredited Service/Support Providers for the
conduct of their online gaming activities, [62] while the latter conduct the activities themselves.
However, as pointed out by the ponencia, the Service Providers and Support Providers are
separate entities from the foreign-based POGO Licensees. While the Licensee is the one that
offers the gaming activities to bettors, the actual conduct of the online gaming activities is
conducted by the Service Providers and Support Providers. Applying the above-discussed
principles in BOAC and Baier-Nickel, the activity that generates the income for the foreign-
based POGO Licensee is the placing of bets and paying out of winnings to the bettors found
outside of the Philippines, whereas the gaming activity is the non-revenue generating
component of the whole service. Hence, none of the revenues generated by the foreign-
based POGO Licensees can be said to be sourced within the Philippines. On the other hand,
the fees paid by the POGO Licensees for the services rendered by the Service Providers and
Support Providers can be said to be sourced within the Philippines.
Furthermore, nothing in the version of the Tax Code prior to the amendments under RA
11590 provides for the taxation of the income derived from sources without the Philippines for
foreign corporations. Neither was there any tax law that could be said to govern foreign-
based Licensees specifically. This was similarly the observation of the proponents of House
Bill No. 5777 and Senate Bill No. 2232, the precursor bills of RA 11590:

Interpellation of Representative Zarate on House Bill No. 5777 [63]

REP. ZARATE.
Yes, thank you for that. But there was one hearing that I attended which in fact
said that out of the 60, only 10 were actually paying, and in fact, President Duterte
...
REP. SALCEDA.
Dalawa iyan, sa BIR oo, pero sa PAGCOR, oo, lahat.
REP. ZARATE.
So, ang . . .
REP. SALCEDA.
So, pasensya ka na kasi ang tanong mo ay sino ang nagbabayad. Kung ang
nagbabayad sa BIR, sampu, oo; ang nagbabayad sa PAGCOR, lahat.
REP. ZARATE.
Lahat sila, nagbabayad ng 2 percent.
REP. SALCEDA.
Sa PAGCOR.
REP. ZARATE.
Yes. Now that was . . .
REP. SALCEDA.
And kaya naman, kaya naman ganoon po ay dahil wala naming tax regime e.
REP. ZARATE.
Yes, yes, oo. So, that . . .
REP. SALCEDA.
Kaya nga inilalagay natin ito.
REP. ZARATE.
 So, iyon iyong POGO BC or before COVID?
REP. SALCEDA.
Yes. (emphases supplied)

Sponsorship Speech of Senator Cayetano on Senate Bill No. 2232 [64]

The reason for this is because, at present, nowhere under the National
Internal Revenue Code, otherwise known as the NIRC, as amended, can we
find explicit tax provisions pertaining to the offshore gaming licensees including
gaming operators, gaming agents, and service providers.
xxx xxx xxx
Hence, the long-standing question about the tax obligations of POGOs
conducting business in our country remain unanswered and unaddressed, which
means billions worth of revenue losses for our government.
Having, said these, it is high time that we clarify and establish the taxation
regime of offshore gaming licensees, including gaming operators, gaming agents,
service providers, and gaming support providers, and incorporate these entities in the
Philippine taxation system.
As your Chair of the Senate Ways and Means Committee, we have reviewed the
various bills, listened to government agencies, industry and other stakeholders. I
believe that legislating the tax regime of the POGOs and incorporating the same in the
NIRC is a step towards the right direction.
It will not only plug the loopholes in our country's tax code that led to issues
of confusion surrounding the operation of POGOs, but it will also prevent similar
issues in the future, which could gravely undermine our government's power to
impose and collect the right taxes.
By addressing these gaps in our tax system, we can maximize the POGO
industry's potential as a revenue source. In turn, we will have more resources in our
country's coffers to fund programs that will improve people's lives and help us build
back hotter following this global health and economic crisis. (emphases supplied)

It is a basic principle that laws shall not be construed as imposing a tax unless they do
so clearly and expressly, and any doubt must be strictly construed against the government.
[65] Consequently, RMC 102-2017 could not have drawn validity from the provisions of the
Tax Code, or any other tax law, to cover offshore revenues of foreign-based POGO
Licensees during the period prior to the effectivity of RA 11590.
There is also no merit to respondents' contention that even if their income is deemed
sourced without the Philippines, they would still be liable for the five percent (5%) franchise
tax under the PAGCOR Charter since a franchise tax is imposed on the exercise of enjoying
a franchise. In the first place, it should be emphasized that franchise tax, like any other tax, is
still subject to the territoriality principle since, as above-discussed, to hold otherwise would
amount to a violation of the due process clause. In this regard, while the five percent (5%)
franchise tax is an exaction, it is simultaneously an exemption granted to exempt PAGCOR
[66]
and its Licensees from regular taxes. This is the clear import from the wording of Section
13 of the PAGCOR Charter itself:
SECTION 13. Exemptions. —
xxx xxx xxx
(2) Income and Other Taxes. — (a) Franchise Holder: No tax of any kind or
form, income or otherwise, as well as fees, charges or levies of whatever nature,
whether National or Local, shall be assessed and collected under this Franchise from
the Corporation; nor shall any form of tax or charge attach in any way to the earnings of
the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or
earnings derived by the Corporation from its operation under this Franchise. Such tax
shall be due and payable quarterly to the National Government and shall be in lieu of
all kinds of taxes, levies, fees or assessments of any kind, nature or description,
levied, established or collected by any municipal, provincial, or national government
authority.
(b) Others: The exemption herein 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
Corporation or operator has any contractual relationship in connection with the
operations of the casino(s) authorized to be conducted under this Franchise and to
those receiving compensation or other remuneration from the Corporation or operator
as a result of essential facilities furnished and/or technical services rendered to the
Corporation or operator.
xxx xxx xxx (emphases supplied)

As a form of tax exemption, it necessarily implies that the PAGCOR Licensees are
subject to tax in the first place. Moreover, any form of tax exemption must be strictly
construed to benefit only those clearly covered thereby. [67] The ponencia aptly observed that
Section 13 (2) (b) which forms the basis for the extension of the tax exemption to Licensees
clearly apply only to those engaged in "the operations of the casino(s) authorized to be
conducted under this Franchise and to those receiving compensation or other
remuneration from the Corporation or operator as a result of essential facilities furnished
and/or technical services rendered to the Corporation or operator." [68]
 Given that the PAGCOR Charter and its amendment through RA 9487 [69] were
promulgated at the time offshore gaming was not yet in existence, it could not have
contemplated virtual gambling websites as the "casinos" mentioned under Section 13
(2) (b) thereof. Consequently, the PAGCOR Charter cannot be said to have been the basis
for imposing a tax on the offshore revenues of foreign-based POGO Licensees. Hence, RMC
102-2017 could likewise not draw its validity from the PAGCOR Charter.
As a result, RMC 102-2017 must be struck down but only insofar as the foregoing
points are concerned. As above-mentioned, RMC 102-2017 itemizes several taxes and the
others are not necessarily void or subject to the Court's review at present. Petitioners
themselves limit their attack based on the taxation of the offshore revenue of foreign-based
POGO Licensees. Hence, the circular should only be invalidated to the extent that it went
beyond both the Tax Code and the PAGCOR Charter in imposing a tax on the said foreign-
based Licensees. Corollary thereto, RMC 78-2018 is similarly void only as it applies to the
same foreign-based POGO Licensees since it was merely in further implementation of RMC
102-2017.
As a final note, it should be borne in mind that RA 11590 sought to impose the five
percent (5%) franchise tax on POGO Licensees, without any distinction as to whether such
gaming revenues were realized within or without the Philippines. [70] Whether this constitutes
a valid exercise of the power of taxation, however, is a matter that should be resolved
separately should a case be brought before the Court specifically challenging RA 11590. I
wish to reiterate that my views are confined to the particular period from the issuance of RMC
102-2017 up until the effectivity of RA 11590.
LAZARO-JAVIER, J., dissenting:
With the digital age comes the proliferation of online gaming and gambling. Games of
chance are now within the fingertips of every Filipino in the comfort of their respective homes.
The entry of these online gaming and gambling entities was so swift even government was at
a quandary on their proper tax treatment. It took time before the conundrum got definitively
resolved upon the enactment of Republic Act 11590 (RA 11590), [1] An Act Taxing Philippine
Offshore Gaming Operations (POGOs).
The law introduced Section 125-A of the National Internal Revenue Code (NIRC), thus:
SEC. 125-A. Gaming Tax on Services Rendered by Offshore Gaming
Licensees. — Any provision of existing laws, rules or regulations to the contrary
notwithstanding, the entire gross gaming revenue or receipts or the agreed
predetermined minimum monthly revenue or receipts from gaming, whichever is higher,
shall be levied, assessed, and collected a gaming tax equivalent to five percent (5%), in
lieu of all other direct and indirect internal revenue taxes and local taxes, with respect to
 gaming income: Provided, That the gaming tax shall be directly remitted to the Bureau
of Internal Revenue not later than the 20th day following the end of each month:
Provided, further, That the Philippine Amusement and Gaming Corporation or any
special economic zone authority or tourism zone authority or freeport authority may
impose regulatory fees on offshore gaming licensees which shall not cumulatively
exceed two percent (2%) of the gross gaming revenue or receipts derived from gaming
operations and similar related activities of all offshore gaming licensees or a
predetermined minimum guaranteed fee, whichever is higher: Provided, furthermore,
That for purposes of this Section, gross gaming revenue or receipts shall mean gross
wagers less payouts: Provided, finally, That the taking of wagers made in the
Philippines and the grave failure to cooperate with the third-party auditor sell result in
the revocation of the license of the offshore gaming licensee.
The Philippine Amusement and Gaming Corporation or any special economic
zone authority or tourism zone authority or freeport authority shall engage the services
of a third-party audit platform that would determine the gross gaming revenues or
receipts of offshore gaming licensees. To ensure that the proper taxes and regulatory
fees are levied, periodic reports about the results of the operation showing, among
others, the gross gaming revenue or receipts of each offshore gaming licensee shall be
submitted to the Bureau of Internal Revenue by the Philippine Amusement and Gaming
Corporation or any special economic zone authority or tourism zone authority or
freeport authority as certified by their third-party auditor: Provided, That the third-party
auditor shall be independent, reputable, internationally-known, and duly accredited as
such by an accrediting or similar agency recognized by industry experts: Provided,
finally, That nothing herein shall prevent the Bureau of Internal Revenue and the
Commission on Audit from undertaking a post-audit or independent verification of the
gross gaming revenues determined by the third-party auditor. [2]

Verily, the taxability of POGOs is now beyond question. Section 125-A, NIRC imposes
a five percent (5%) gaming tax on all income derived from gaming operations and twenty-five
percent (25%) income tax on income derived from non-gaming operations from sources
within the Philippines on offshore-based POGO licensees such as petitioners here.
I nevertheless agree with the ponencia that the passage of RA 11590 should not deter
the Court from ruling on the validity of the assailed tax issuances and petitioners' consequent
tax liabilities, if any, prior to the enactment of RA 11590.
With all due respect, however, I disagree with the finding of the ponencia that offshore-
based POGO licensees derive no income from sources within the Philippines, hence, cannot
be subjected to income tax. As will be discussed: (1) petitioners are foreign corporations
"doing business" in the Philippines under the twin characterization test; (2) the Philippines
has jurisdiction over petitioners under the sliding scale test; and (3) they are taxable as
resident foreign corporations under the NIRC on sources from within the Philippines.
Offshore-based POGO licensees are deemed "doing
business" in the Philippines
Under the twin characterization test laid out by this Court in the landmark case of
[3]
Mentholatum Co., Inc. v. Mangiliman, a foreign corporation is considered "doing
business" in the Philippines when:
a. The foreign corporation is continuing the body or substance of the business
or enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another; and
b. The foreign corporation is engaged in activities which implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent,
the performance of acts or works or the exercise of some of the functions
normally incident to, and in progressive prosecution of, the purpose and
object of its organization. [4]
xxx xxx xxx
This definition has since been adopted with qualification in various pieces of legislation.
[5] For instance, Republic Act No. 7042, [6] the Foreign Investment Act of 1991, defines
"doing business" thus:
"d) The phrase 'doing business' shall include soliciting orders, service
contracts, opening offices, whether called 'liaison' offices or branches; appointing
representatives or distributors domiciled in the Philippines or who in any calendar year
stay in the country for a period or periods totalling one hundred eight(y) (180) days or
more; participating in the management, supervision or control of any domestic
business, firm, entity, or corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements, and contemplate to
that extent the performance of acts or works; or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business organization; Provided, however,
That the phrase 'doing business' shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor, nor having a nominee director or officer
to represent its interests in such corporation, nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its own name and for
its own account." [7] (Emphasis supplied)

More, Section 1, Republic Act No. 5455 [8] decrees:

 "SECTION 1. Definition and scope of this Act. — (1) x x x the phrase "doing
business" shall include soliciting orders, purchases, service contracts, opening offices,
whether called "liaison" offices or branches; appointing representatives or distributors
who are domiciled in the Philippines or who in any calendar year stay in the Philippines
for a period or periods totaling one hundred eighty days [180] or more; participating in
the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose
and object of the business organization." (Emphasis supplied)

In Article 65 [n], Presidential Decree No. 1789, [9]

the Omnibus Investment Code of
1981, a similar definition has been provided.
ARTICLE 65. Definition of Terms. — As used in this Book, the term "investment"
shall mean equity participation in any enterprise formed, organized[,] or existing under
the laws of the Philippines; and the phrase "doing business" shall include soliciting
orders, purchases, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods
totalling one hundred eighty [180] days or more; participating in the management,
supervision or control of any domestic business firm, entity or corporation in the
Philippines, and any other act or acts that imply a continuity of commercial
dealings or arrangements and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the
business organization. (Emphases supplied)

There are other statutes defining the term "doing business" in the same wise, and as
may be observed, one common denominator among then all is the concept of "continuity."
[10]

Indeed, the twin-characterization test (i.e., transactions must be for the pursuit of
the main business, and with intent to continue the same for some time) has become the
hallmark of what constitutes "doing business in the Philippines." [11] What is determinative of
"doing business" is not just the number or the quantity of the transactions, but also the
intention of an entity to continue the body of its business in the country. The fact that it
derives income from its activities should also be considered. [12]
Here, it is admitted that in pursuit of their main business (i.e., offshore gaming),
petitioners applied for a Philippine Amusement and Gaming Corporation (PAGCOR) license
for offshore gaming operations with the intent to continue their main line of business here. In
fact, they conducted their offshore gaming operations through the services of PAGCOR-
accredited local gaming agents and service providers for its gaming operations.
The ponencia focuses on the so called three (3) components of offshore gaming:
1. Prize consisting of money or something else of value which can be won
under the rules of the game;
2. A player who:
a. Being located outside of the Philippines and not a Filipino citizen,
enters the game remotely or takes any step in the game by means of
a communication device capable of accessing an electronic
communication network such as the internet;
b. Gives or undertakes to give, a monetary payment or other valuable
consideration to enter in the course of, or for, the game; and
3. The winning of a prize is decided by chance.
to support the conclusion that offshore-based POGO licensees such as petitioners are not
doing business in the Philippines.
But offshore gaming activities are said to be not supposedly performed within the
Philippine territory only because they are done on the virtual plane.
Hence, the question is, may offshore-based POGO licensees be deemed doing
business in the Philippines though their transactions are done online?
I believe so.

In SEC-OGC Opinion No. 17-03 dated April 4, 2017, [13] the Securities and Exchange
Commission (SEC) was faced with the same dilemma relative to the inquiry of Sony
Computer Entertainment Hong Kong (SCEH) on the license requirement for foreign
corporations doing business in the Philippines:
By way of a background, you stated that SCEH is a company organized and
existing under the laws of Hong Kong and operates Sony Entertainment Network (SEN)
in Singapore, Indonesia, Taiwan, Malaysia, Thailand, and Hong Kong. SEN is an online
platform that offers various content and services such as an online community and an
online gaming system, which requires a SEN account in order to participate. Since SEN
is an internet-based system, persons in the Philippines can create a SEN account to
participate in the online community and to purchase content from and/or use SEN's
services even if the SCEH does not have a physical presence in the Philippines. A SEN
account holder can buy content and services from SEN only by using funds from an
 associated SEN online wallet, which can be funded by using a credit or debit card or a
prepaid card where available.
Finally, SEN employees are located in Hong Kong while SEN's servers are
based in the United States.
SCEH is seeking confirmation that it is not engaged in doing business in the
Philippines and will not be required to obtain a license for the following activities:
1) Offer and sale of SEN services on the internet without restricting persons
located in the Philippines from availing of these services (Maintenance);
2) Assuming that Maintenance, by itself, is not considered doing business in
the Philippines, accepting online payments for using SEN in any currency,
including Philippine currency;
3) Marketing or advertising the SEN in the Philippines through (a) online and
printed publications, and (b) television and radio commercials, which is
based on the enumerated acts constituting not "doing business" provided in
Section 1(f) of the Implementing Rules and Regulations (IRR) of the
Foreign Investment Act of 1991 (FIA); and

4) Further, as a form of expansion, hiring Independent Contractors for

marketing or advertising of its products and the selling of prepaid cards in
relation to its online gaming services.
xxx xxx xxx

Using the twin-characterization test, the SEC found SCEH to be "doing business" in
the Philippines, viz.:
You stated that there is no reason to consider that SCEH will be doing
business in the Philippines since the activities of SCEH are carried outside of the
Philippines, considering that its employees are in Hong Kong, that its property is
outside the Philippines, and that the SEN servers are in the United States.

However, we opine that the activities SCEH proposes to undertake shall be

considered as "doing business" in the Philippines since the twin characterization
test is satisfied in this case. First, the following activities indicate that SCEH will
be continuing the body or substance of the business of SCEH for which it was
organized in the Philippines, to wit: (i) funding of the SEN online wallet; (ii) offering
and selling SEN services; (iii) accepting online payments for using SEN in any currency,
including Philippine currency; (iv) marketing or advertising; and (v) hiring Independent
Contractors for marketing or advertising of its products and the selling of prepaid in
relation to its online gaming services.
 Second, the above-mentioned enumerated activities are transactions
consummated within the Philippines although they are done in virtual plane. The
following salient points of the online commercial transactions, or e-commerce, will find
themselves in the Philippines:

(i) The creation of a new SEN account will take place in the Philippines in
order to participate in SEN;
(ii) The offering for sale and sale of online content and services of SEN will be
made to the SEN account holder who is located in the Philippines;

(iii) The funding of the SEN online wallet will take place in the Philippines as
will be further discussed below;
(iv) The payment of the sale of online content and services of SEN will be
made from the Philippines by the SEN account holder; and
(v) The delivery of the online content and services of SEN will be made in the
Philippines.
The salient points above-mentioned are evidenced by the use of an IP address
through a device (e.g., PlayStation 4, computer, HDTV or mobile device) used by the
SEN account holder. IP address is short for Internet Protocol (IP) address. The IP is the
method or protocol by which data is sent from one computer to another on the Internet.
Each computer (known as a host) on the Internet has at least one IP address that
uniquely identifies it from all other computers on the Internet, An IP address consists of
four numbers, each of which contains one to three digits, with a single dot (.) separating
each number or set of digits (e.g., 78.125.0.209). Moreover, an IP address may reveal
such information as the continent, country, region, and city in which a computer is
located; the ISP (Internet Service Provider) that services that particular computer; and
such technical information as the precise latitude and longitude of the country, as well
as the locale, of the computer. The location of an IP address can be traced through the
use of an IP geolocation service.

Here, once the SEN account holder enters the SEN online store through his
device, he may view the content or service which is offered to him for sale that is sent
to his device in the Philippines. Thereafter, the SEN account holder may accept the
offer of the content or service from the Philippines by clicking "Confirm Purchase."
Once it is purchased, the acceptance of the offer is transmitted from his IP Address
through his device in the Philippines to the virtual plane, and the content or service is
delivered through said virtual plane to the account of the SEN account holder who is in
the Philippines. The SEN account holder will then download the content or service
through his device through his IP address located in the Philippines. Clearly, such
transaction(s) will be consummated in the Philippines.
 Furthermore, it must be remembered that the offering for sale and the sale
of content and services, and the funding of the SEN online wallet, are intricately
connected since the sale of the SEN content and services cannot be
consummated without the funding of said SEN online wallet. Since the SEN online
wallet funded by credit cards and debit cards, it, thus, logically and reasonably means
that may be SCEH will likewise have arrangements with the credit card/debit card
issuers here in the Philippines.
The permission to use and buy from the SEN online store through the funding of
the SEN online wallet also clearly indicates that there is intent to continue the main
business for a period of time. Once the SEN account holder puts funds in the SEN
online wallet, he can resume transactions on the SEN while his account is still active
(subject of course, to the SEN's rules on membership in the network), thereby
maintaining a business relationship with the SCEH even if the transactions are
intermittent and infrequent and even if the SEN user only purchases credit and uses
them up at one time.
xxx xxx xxx

SCEH averred that it was not doing business in the Philippines since the activities of
SCEH were carried outside of the Philippines, its employees were in Hong Kong, its property
was outside the Philippines, and that the SEN servers were located in the United States
(U.S.). Offshore-based POGO licensees raised the same arguments save for the tact that
they conducted their offshore gaming operations through the services of PAGCOR-accredited
local gaming agents and service providers for its gaming operations.
Despite the averments of SCEH, the SEC still opined that the activities SCEH
proposed to undertake would deem it as "doing business" in the Philippines since the twin
characterization test was satisfied. First, the enumerated activities to be undertaken by
SCEH indicated that it would be continuing in the Philippines the substance of the business
for which it was organized. Second, the SCEH enumerated activities which were considered
consummated within the Philippines, albeit done in a virtual plane. I see no reason not to
apply the same ruling to offshore-based POGO licensees whose footprints are all over the
Philippines; they entered into contracts with PAGCOR-accredited local gaming agents and
service providers in furtherance of their main line of business, i.e., gaming operations.
Verily, the gaming operations conducted by offshore-based POGO licensees within the
Philippines through the services of PAGCOR-accredited local gaming agents and service
providers for its offshore gaming operations implies the continuity of commercial dealings and
arrangements, and contemplates the performance of acts incident to, and in the progressive
prosecution of their business. These services will not be provided intermittently but for a long
period of time in the Philippines. Accordingly, petitioners are considered resident foreign
corporations doing business here in the Philippines.
Petitioners' activities are deemed consummated in
the Philippines, hence, they are proper subjects of
government regulations and taxes
In the U.S., there is currently no statute or case law which addresses the question of
whether owning or operating a website or online platform constitutes "doing business." [14]
Numerous court opinions, however, have addressed a similar issue: whether a corporation's
internet activities in a foreign State is sufficient to justify the court of that State in exercising
personal jurisdiction over the corporation.
Exploring the issue of "jurisdiction" with regard to websites is useful in determining
where the online activities of a corporation are deemed consummated and, corollarily,
whether it need to "qualify [or obtain a license] to do business" based on its website or online
activities. One requisite for courts to obtain personal jurisdiction is that the corporation has
"minimum contacts" with the foreign state, such that its ability to be sued there "does not
offend the traditional notions of fair play and substance."

In Zippo Mfg. Co. v. Zippo Dot Com, Inc., [15] the U.S. District Court for Western
District of Pennsylvania elucidated on the State's jurisdiction over non-resident defendants in
cases involving the latter's internet activities:
xxx xxx xxx
The Constitutional limitations on the exercise of personal jurisdiction differ
depending upon whether a court seeks to exercise general or specific
jurisdiction over a non-resident defendant. [16] General jurisdiction permits a court
to exercise personal jurisdiction over a non-resident defendant for non-forum related
activities when the defendant has engaged in "systematic and continuous" activities in
the forum state. [17] In the absence of general jurisdiction, specific jurisdiction
permits a court to exercise personal jurisdiction over a non-resident defendant
for forum-related activities where the "relationship between the defendant and
the forum falls within the 'minimum contacts' framework" of International Shoe
Co. v. Washington [18] and its progeny. [19] Manufacturing does not contend that we
should exercise general personal jurisdiction over Dot Com. Manufacturing concedes
that if personal jurisdiction exists in this case, it must be specific.
A three-pronged test has emerged for determining whether the exercise of
specific personal jurisdiction over a non-resident defendant is appropriate: (1)
the defendant must have sufficient "minimum contacts" with the forum state, (2)
the claim asserted *1123 against the defendant must arise out of those contacts,
and (3) the exercise of jurisdiction must be reasonable. [20] The "Constitutional
touchstone" of the minimum contacts analysis is embodied in the first prong, "whether
the defendant purposefully established" contacts with the forum state. [21] Defendants
who "'reach out beyond one state' and create continuing relationships and obligations
with the citizens of another state are subject to regulation and sanctions in the other
State for consequences of their actions." [22] "[T]he foreseeability that is critical to the
due process analysis is x x x that the defendant's conduct and connection with the
forum State are such that he should reasonably expect to be haled into court there." [23]
This protects defendants from being forced to answer for their actions in a foreign
jurisdiction based on "random, fortuitous or attenuated" contacts. [24] "Jurisdiction is
proper, however, where contacts proximately result from actions by the defendant
himself that create a 'substantial connection' with the forum State." [25]
The "reasonableness" prong exists to protect defendants against unfairly
inconvenient litigation. [26] Under this prong, the exercise of jurisdiction will be
reasonable if it does not offend "traditional notions of fair play and substantial
justice." [27] When determining the reasonableness of a particular forum, the court
must consider the burden on the defendant in light of other factors including: "the forum
state's interest in adjudicating the dispute; the plaintiff's interest in obtaining convenient
and effective relief, at least when that interest is not adequately protected by the
plaintiff's right to choose the forum; the interstate judicial system's interest in obtaining
the most efficient resolution of controversies; and the shared interest of the several
states in furthering fundamental substantive social policies." [28]
2. The Internet and Jurisdiction
In Hanson v. Denckla, the Supreme Court noted that "[a]s technological progress
has increased the flow of commerce between States, the need for jurisdiction has
undergone a similar increase." [29] Twenty seven years later, the Court observed
that jurisdiction could not be avoided "merely because the defendant did not
physically enter the forum state." [30] The Court observed that:

[I]t is an inescapable fact of modern commercial life that a substantial

amount of commercial business is transacted solely by mail and wire
communications across state lines, thus obviating the need for physical
presence within a State in which business is conducted.
Enter the Internet, a global "'super-network' of over 15,000 computer networks used by
over 30 million individuals, corporations, organizations, and educational institutions
worldwide." [31] "In recent years, businesses have begun to use the Internet to provide
information and products to consumers and other businesses." [32] The Internet makes
it possible to conduct business throughout the world entirely from a desktop. With this
 global revolution looming on the horizon, the development of the law concerning the
permissible scope of personal jurisdiction based on Internet use is in its infant stages.
The *1124 cases are scant. Nevertheless, our review of the available cases and
materials reveals that the likelihood that personal jurisdiction can be
constitutionally exercised is directly proportionate to the nature and quality of
commercial activity that an entity conducts over the Internet. This sliding scale is
consistent with well developed personal jurisdiction principles. At one end of the
spectrum are situations where a defendant clearly does business over the Internet.
If the defendant enters into contracts with residents of a foreign jurisdiction that
involve the knowing and repeated transmission of computer files over the
Internet, personal jurisdiction is proper. E.g.[,] CompuServe, Inc. v. Patterson, 89
F.3d 1257 (6th Cir. 1996). At the opposite end are situations where a defendant has
simply posted information on an Internet Web site which is accessible to users in
foreign jurisdictions. A passive Web site that does little more than make information
available to those who are interested in it is not grounds for the exercise personal
jurisdiction. E.g.[,] Bensusan Restaurant Corp. v. King, 937 F. Supp. 295
(S.D.N.Y.1996). The middle ground is occupied by interactive Websites where a user
can exchange information with the host computer. In these cases, the exercise of
jurisdiction is determined by examining the level of interactivity and commercial
nature of the exchange of information that occurs on the Web site. E.g.[,] Maritz,
Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D.Mo.1996).
Traditionally, when an entity intentionally reaches beyond its boundaries to
conduct business with foreign residents, the exercise of specific jurisdiction is
proper. [33] Different results should not be reached simply because business is
conducted over the Internet. x x x
xxx xxx xxx

Thus, the Sliding Scale Test or Zippo Test was born. This test was based on the
premise that "the likelihood that 'personal jurisdiction' can be constitutionally exercised is
directly proportionate to the nature and quantity of commercial activity that an entity conducts
over the internet." At one end of the scale are "passive" websites, which alone generally do
not generate sufficient contacts with a foreign state to establish personal jurisdiction since
they are only used to post information therein. At the other end of the scale are "active"
websites, which generate sufficient business over the internet to establish personal
jurisdiction. "Interactive" websites Pall in the center of the scale since they are hybrid sites
that contain elements of both passive and active websites, and courts determine whether to
exercise personal jurisdiction over the interactive website owner on a case-by-case basis.
Verily, the Sliding Scale Test was specifically tailored to aid courts in determining
whether the nature and level of a non-resident defendant's internet activity constitute
"minimum contacts" for jurisdictional purposes. I submit that the same test is applicable here
in determining whether the Philippines may regulate and tax offshore-based POGOs in view
of the nature and extent of their operations here.
Here, the Court can take judicial notice of the fact that offshore-based POGO licensees
have conducted gaming operations through PAGCOR-accredited local gaming agents and
service providers for its gaming operations. The enormity of the transactions has been
noticeable not only from the end of the BIR and PAGCOR but by the Legislature itself through
congressional hearing by both Houses in aid of legislation, ranging from taxability,
immigration issues, rise of criminal activities, etc. Billions of foreign currency transactions go
through these entities day by day aided by the internet. It is not merely a passive website as
money has been changing hands here in the Philippines.
Offshore-based POGO licensees are taxable as
resident foreign corporations
Since offshore-based POGO licensees are deemed to be doing business here, they
squarely fall under the definition of "resident foreign corporations" in Section 22 (H) of the
NIRC, thus:
SEC. 22. Definitions. — When used in this Title:
(H) The term 'resident foreign corporation' applies to a foreign corporation
engaged in trade or business within the Philippines. [34]

Consequently, they are subject to income tax in accordance with Section 23 of the
NIRC:
SEC. 23. General Principles of Income Taxation in the Philippines. — Except when
otherwise provided in this Code:
(A) A citizen of the Philippines residing therein is taxable on all income derived from
sources within and without the Philippines;
(B) A nonresident citizen is taxable only on income derived from sources within the
Philippines;
(C) An individual citizen of the Philippines who is working and deriving income from
abroad as an overseas contract worker is taxable only on income derived from sources
within the Philippines: Provided, That a seaman who is a citizen of the Philippines and
who receives compensation for services rendered abroad as a member of the
complement of a vessel engaged exclusively in international trade shall be treated as
an overseas contract worker;
(D) An alien individual, whether a resident or not of the Philippines, is taxable only
on income derived from sources within the Philippines;
 (E) A domestic corporation is taxable on all income derived from sources within and
without the Philippines; and
(F) A foreign corporation, whether engaged or not in trade or business in the
Philippines, is taxable only on income derived from sources within the
Philippines. [35] (Emphases supplied)

As the provision plainly states, a foreign corporation, whether engaged or not in trade
or business in the Philippines, is subject to Philippine income taxation on income received
from all sources within the Philippines. This rule is based on the source concept defined as:
Source concept. The jurisdiction to impose income tax is based either on the
relationship of the income (tax object) to the taxing state (commonly known as the
source or situs principle) or the relationship of the taxpayer (tax subject) to the taxing
state based on residence or nationality. Under the source principle, a State's claim to
tax income is based on the State's relationship to that income. [36]

In CIR v. Baier-Nickel, [37] the Court provided a background on sourcing of income

under the Internal Revenue Code of the U.S. from whence our Tax Code originated:
The following discussions on sourcing of income under the Internal Revenue Code of
the U.S., are instructive:
The Supreme Court has said, in a definition much quoted but often debated, that
income may be derived from three possible sources only: (1) capital and/or (2) labor;
and/or (3) the sale of capital assets. While the three elements of this attempt at
definition need not be accepted as all-inclusive, they serve as useful guides in any
inquiry into whether a particular item is from "sources within the United States"
and suggest an investigation into the nature and location of the activities or
property which produce the income.
If the income is from labor the place where the labor is done should be decisive;
if it is done in this country, the income should be from "sources within the United
States." If the income is from capital, the place where the capital is employed
should be decisive; if it is employed in this country, the income should be from
"sources within the United States." If the income is from the sale of capital
assets, the place where the sale is made should be likewise decisive.
Much confusion will be avoided by regarding the term "source" in this fundamental light.
It is not a place, it is an activity or property. As such, it has a situs or location, and if that
situs or location is within the United States the resulting income is taxable to
nonresident aliens and foreign corporations.
The intention of Congress in the 1916 and subsequent statutes was to discard the
1909 and 1915 basis of taxing nonresident aliens and foreign corporations and to make
the test of taxability the "source," or situs of the activities or property which
 produce the income. The result is that, on the one hand, nonresident aliens and
nonresident foreign corporations are prevented from deriving income from the United
States free from tax, and, on the other hand, there is no undue imposition of a tax when
the activities do not take place in, and the property producing income is not employed
in, this country. Thus, if income is to be taxed, the recipient thereof must be
resident within the jurisdiction, or the property or activities out of which the
income issues or is derived must be situated within the jurisdiction so that the
source of the income may be said to have a situs in this country.
The underlying theory is that the consideration for taxation is protection of life
and property and that the income rightly to be levied upon to defray the burdens
of the United States Government is that income which is created by activities and
property protected by this Government or obtained by persons enjoying that
protection. [38] (Emphases supplied)
The important factor which determines the source of income of personal services,
therefore, is not the residence of the payor, or the place where the contract for service
is entered into, or the place of payment, but the place where the services were actually
rendered. [39]

For the source of income to be considered as coming from the Philippines, it is

sufficient that the income is derived from activity within the Philippines, e.g., sale of tickets in
the Philippines is the activity that produces the income as the tickets exchanged hands here
and payments for fares were also made here in Philippine Currency. The situs of the source
of payments is the Philippines. The flow of wealth proceeded from, and occurred within,
Philippine territory, enjoying the protection accorded by the Philippine government. In
consideration of such protection, the flow of wealth should share the burden of supporting the
government. [40]
Here, I respectfully submit that the services of offshore-based POGO licensees —
"offering by a licensee of PAGCOR authorized online games of chance via the Internet using
a network and software or program, exclusively to offshore authorized players excluding
Filipinos abroad, who have registered and established an online gaming account with the
licensee" — are being rendered here. These enumerated activities are transactions
deemed to have been consummated within the Philippines, albeit done on the virtual
plane. From placing the bet to winning a bet, the commercial transaction, e-commerce or any
sort of virtual transactions find themselves within the Philippines through the services of
PAGCOR-accredited local gaming agents and service providers for its offshore gaming
operations.
In an emerging digital economy, no clear boundaries has been set nor a scope of
authority or imposition has been taken up by the Legislature. Even then, if the Philippines that
has substantial connection with the assets or services which are subject to tax, e.g., enrolled
under the Philippine Payment System, or the delivery of goods and services are in the
Philippines, then the government can assert that the Philippines is the tax situs for the digital
transaction.
At any rate, offshore-based POGO licensees should
be subject to tax in exchange for the privileges they
enjoy
While PAGCOR insists that none of the components of offshore gaming are being
performed within Philippine territory, I cannot take its submission hook, line and sinker. At the
back of my mind, so many questions linger as to their operations:
a. Why is there a proliferation of foreigners in the Philippines engaged in such
operations?
b. Why are there numerous offices, residential condominiums rented
specifically for POGO operations and other array of services for them?
c. If the only transaction entered into by these offshore-based POGO
licensees are the service contracts with these service providers located in
the Philippines, what interest do they have here in the Philippines?
It is an open secret that PAGCOR and other institutions have provided aide and
protection to these entities to the point that even the government could not explain their
proliferation. Since their inception, they enjoyed protection here in the Philippines, it is high
time they contribute to the expenditures of the government.

In Lorenzo v. Posadas, Jr., [41] this benefit-based taxation was mentioned by the
Court, but it nevertheless emphasized that the obligation to pay taxes rests on governmental
existence and necessity, to wit:

Taxes are essential to the very existence of government. [42] The obligation to pay
taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by
the government, but upon the necessity of money for the support of the state. [43] For
this reason, no one is allowed to object to or resist the payment of taxes solely because
no personal benefit to him can be pointed out. [44]
xxx xxx xxx

This basis of taxation was subsequently articulated in CIR v. Algue, Inc., [45] where the
Court pronounced:
It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and operate it.
 Hence, despite the natural reluctance to surrender part of one's hard earned
income to the taxing authorities, every person who is able to must contribute his
share in the running of the government. The government for its part, is expected
to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This symbiotic
relationship is the rationale of taxation and should dispel the erroneous notion that it
is an arbitrary method of exaction by those in the seat of power. [46] (Emphasis and
italics supplied)
xxx xxx xxx

Thus, the basis of taxation is the existence of a social contract, characterized as a

symbiotic relationship between the State and its citizens — offshore gaming licensees in this
case, which compel reciprocal duties of protection and support between the parties. In
Abakada Guro Party List v. Ermita, [47] the Supreme Court restated the basis of taxation —
"The expenses of government, having for their object the interest of all, should be borne by
everyone, and the more man enjoys the advantages of society, the more he ought to hold
himself honored in contributing to those expenses."
As a result, I register my dissent and vote to dismiss the Petition.
LEONEN, J., dissenting:
The consolidated cases must be dismissed, as the issues they raise were rendered
moot by the passage of Republic Act No. 11590 which amended the National Internal
Revenue Code, codified the 5% franchise tax on gaming operations of Philippine Offshore
Gaming Operators (POGOs), and considered the operations of offshore gaming licensees as
doing business in the Philippines, among others.
In any case, the assailed issuances are not unconstitutional.
The assailed statute, Republic Act No. 11494, or the "Bayanihan to Recover as One
Act" (Bayanihan 2), is an emergency measure enacted by the legislature which the President
deemed necessary and urgent to address the pandemic. It enjoys a presumption of
constitutionality which petitioners did not overcome.
The Bayanihan 2 does not violate the "one subject, one title" rule in Article VI, Section
26 (1) of the Constitution. [1]

The title of the law is clear, "An Act Providing for COVID-19 Response and Recovery
Interventions and Providing Mechanisms to Accelerate the Recovery and Bolster the
Resiliency of the Philippine Economy, Providing Funds Therefor, and for Other Purposes."
It sought to "[e]nhance the financial stability of the country to support government programs
in combatting the COVID-19 pandemic." [2]
 Section 11 (f) and (g) which outlined the taxes imposed on POGOs cannot be deemed
riders when they are undoubtedly germane to the subject matter of the Bayanihan 2.
Dismissing the provisions as tax measures irrelevant to the statute's purpose — to provide
the sources of funds for the various government projects to meet the pandemic — is grasping
at straws.
Further, the imposition of a 5% franchise tax, in lieu of other taxes, on the gaming
operations of offshore gaming licensees, whether they be Philippine- or foreign-based, was
not introduced by Bayanihan 2. It is not a new tax measure.
Presidential Decree No. 1869 created the Philippine Amusement and Gaming
Corporation (PAGCOR) to "centralize and integrate the right and authority to operate and
conduct games of chance" [3] and conferred it with broad powers. [4] PAGCOR was granted
"the rights, privileges and authority to operate and license gambling casinos, gaming clubs
and other similar recreation or amusement places, gaming pools, i.e., basketball, football,
bingo, etc. except jai-alai, whether on land or sea, within the territorial jurisdiction of the
Republic of the Philippines: Provided, That the corporation shall obtain the consent of the
local government unit that has territorial jurisdiction over the area chosen as the site for any
of its operations." [5]
Under Presidential Decree No. 1869, PAGCOR franchise holders are assessed and
held liable for a franchise tax of 5% of the gross revenue or earnings derived from operations
under the franchise, in lieu of all taxes. [6]

In line with its aim to "[e]nsure that online games are properly regulated and
monitored," [7] PAGCOR issued the Rules and Regulations for Philippine Offshore Gaming
Operations on September 1, 2016. It provided the requirements for an offshore gaming
license and the grounds for its suspension and cancellation.
On February 2, 2017, Executive Order No. 13, series of 2017 was issued, titled
"Strengthening the Fight against Illegal Gambling and Clarifying the Jurisdiction and Authority
of Concerned Agencies in the Regulation and Licensing of Gambling and Online Gaming
Facilities, and for Other Purposes." It reiterated the jurisdiction of concerned agencies,
among which is PAGCOR, in regulating online gaming operations. It stated that "nothing shall
prohibit the duly licensed online gambling operator from allowing the participation of persons
physically located outside Philippine territory."
On December 27, 2017, the Bureau of Internal Revenue issued Revenue
Memorandum Circular No. 102-17 on the "Taxation of Taxpayers Engaged in Philippine
Offshore Gaming Operations." This was later followed by Revenue Memorandum Circular
No. 78-2018 which outlined the registration process for offshore gaming operations.
 The Commissioner of Internal Revenue who has the exclusive and original jurisdiction
"to interpret provisions of the Tax Code and other tax laws," [8] was well within its rights when
it issued the revenue circulars. The 5% franchise tax, in lieu of other taxes on PAGCOR
licensees, was not newly imposed by the agency, but was provided for in Presidential Decree
No. 1869. Thus, in its interpretation of existing tax laws on PAGCOR licensees and its
issuance of Revenue Memorandum Circular Nos. 102-17 and 78-2018, the Commissioner of
Internal Revenue did not encroach upon the legislative power to impose taxes. It merely
issued guidelines to clarify existing tax measures.
The ponencia harps on territoriality issues. However, there is merit in respondents'
argument that "what is being collected is a tax not based on income, but rather, on the
exercise of a privilege." [9] We have allowed POGOs to operate under licenses that the
PAGCOR issued. We cannot, on one hand, issue offshore gaming licenses to POGOs, and
on the same breath, reject their taxability. When we let licensees operate in the Philippines,
pass through our borders, and set up game servers in the country, [10] it is not unreasonable
nor unconstitutional to impose the same 5% franchise tax which is collected from other
PAGCOR franchise holders.
It was error for petitioners to argue that Philippine-based and offshore POGO licensees
must be treated differently, considering that PAGCOR, the agency that regulates their
operations, issues the same gaming license to both. The 5% franchise tax was imposed by
virtue of their license to operate. Petitioner Saint Wealth's argument that it should not be
subjected to any Philippine tax since all of its operations are located abroad [11] and offshore-
based POGO licensees must be similarly treated with foreign corporations not engaged in
trade or business in the Philippines [12] is untenable. Precisely, its game servers are here
because they could not operate in their home country. Thus, offshore-based POGO licensees
granted franchises by PAGCOR are naturally engaged in business in the Philippines.
I join Justice Amy C. Lazaro-Javier in concluding that offshore-based POGO licensees
are doing business in the Philippines, and adopt the findings in a Securities and Exchange
Commission Opinion with similar facts:
SCEH averred that it was not doing business in the Philippines since the
activities of SCEH were carried outside of the Philippines, its employees were in Hong
Kong, its property was outside the Philippines, and that the SEN servers were located
in the United States (U.S.). Offshore-based POGO licensees raised the same
arguments save for the fact that they conducted their offshore gaming operations
through the services of PAGCOR-accredited local gaming agents and service providers
for its gaming operations.
 Despite the averments of SCEH, the SEC still opined that the activities SCEH
proposed to undertake would deem it as "doing business" in the Philippines since the
twin characterization test was satisfied. First, the enumerated activities to be
undertaken by SCEH indicated that it would be continuing in the Philippines the
substance of the business for which it was organized. Second, the SCEH enumerated
activities which were considered consummated within the Philippines, albeit done in a
virtual plane. I see no reason not to apply the same ruling to offshore-based POGO
licensees whose footprints are all over the Philippines; they entered into contracts with
PAGCOR-accredited local gaming agents and service providers in furtherance of their
main line of business, i.e., gaming operations.
Verily, the gaming operations conducted by offshore-based POGO licensees
within the Philippines through the services of PAGCOR-accredited local gaming agents
and service providers for its offshore gaming operations implies the continuity of
commercial dealings and arrangements, and contemplates the performance of acts
incident to, and in the progressive prosecution of their business. These services will not
be provided intermittently but for a long period of time in the Philippines. Accordingly,
petitioners are considered resident foreign corporations doing business in the
Philippines. [13] (Emphasis in the original)

I likewise agree that petitioners' activities are consummated here which subject them to
government regulations — among which is taxation:
For the source of income to be considered as coming from the Philippines, it is
sufficient that the income is derived from activity within the Philippines, e.g., sale of
tickets in the Philippines is the activity that produces the income as the tickets
exchanged hands here and payments for fares were also made here in Philippine
currency. The situs of the source of payments is the Philippines. The flow of wealth
proceeded from, and occurred within, Philippine territory, enjoying the protection
accorded by the Philippine government. In consideration of such protection, the flow of
wealth should share the burden of supporting the government.
Here, I respectfully submit that the services of offshore-based POGO
[licensees] "offering by a licensee of PAGCOR authorized online games of chance via
the Internet using a network and software or program, exclusively to offshore
authorized players excluding Filipinos abroad, who have registered and established on
online gaming account with the licensee" — are being rendered here. These
enumerated activities are transactions deemed to have been consummated
within the Philippines, albeit done on the virtual plane. From placing the bet to
winning a bet, the commercial transaction, e-commerce or any sort of virtual
transactions find themselves within the Philippines through the services of PAGCOR-
accredited local gaming agents and service providers for its offshore gaming
operations. [14] (Emphasis in the original)
 The transnational nature of POGOs blur borderlines and facilitate the possibility of non-
taxation in any of the jurisdiction where they operate. The revenue from gambling operations
may not be worth the kind of values they instill, the politics they infect, the health they risk,
and the lives they destroy. Thus, allowing gambling operations and issuing licenses for them
entail the corresponding duty to strictly regulate them, and efficiently collect their enforced
contributions.
Bayanihan 2 was an urgent piece of legislation passed by Congress and signed by the
President. [15] The statute and the revenue regulations were acts of the legislature and the
concerned administrative agency that has expertise over the matter. These bodies are
presumed to have acted meticulously, aware of their constitutional and statutory bounds.
Absent any showing of grave abuse of discretion, judicial restraint must be exercised in
reviewing the technical details of their issuances.
ACCORDINGLY, I vote to DENY the consolidated Petitions.

Footnotes

* On official leave.

1. Rollo (G.R. No. 252965), pp. 3-54; Rollo (G.R. No. 254102), pp. 3-119.

2. Rollo (G.R. No. 252965), p. 16.

3. Rollo (G.R. No. 254102), p. 22.

4. Id.

5. POGO RULES AND REGULATIONS, Section 4 (b).

6. Id.

7. Id., Section 6; Rollo (G.R. No. 254102), p. 23.

8. REVENUE MEMORANDUM CIRCULAR NO. 102-2017, paragraph IV (2).

9. Id.

10. REVENUE MEMORANDUM CIRCULAR NO. 78-2018, paragraph B.

11. Rollo (G.R. No. 254102), p. 28.

12. BAYANIHAN 2 LAW, Section 11.

13. Rollo (G.R. No. 252965), pp. 26-27.

14. Id. at 32.

15. Id. at 33-36.

16. Id. at 35.

17. Id. at 36.

18. Id. at 36-38.

19. Id. at 38-40.

20. Id. at 45.

21. Rollo (G.R. No. 254102), pp. 31-39.

22. Id. at 32-33.

23. Id. at 33.

24. Id. at 39-41.

25. Id. at 39-40.

26. Id. at 40-41.

27. Id. at 41-46.

28. Id. at 41-44.

29. Id. at 46-50.

30. Id. at 46.

31. Id. at 46-49.

32. Id. at 50-51.

33. Id. at 51.

34. Id. at 51-52.

35. Id. at 52-55.

36. Id. at 54.

37. Id. at 54-55.

38. Id. at 55.

39. Id. at 56.

40. Id. at 60.

41. Id. at 57-58.

42. Id. at 58.

43. Id.

44. Id. at 57-58.

45. Id. at 211-215.

46. Rollo (G.R. No. 252965), pp. 101-176.

47. Id. at 117-129.

48. Id. at 130.

49. Id. at 132-134.

50. Id. at 129-134.

51. Id. at 135-143.

52. Id. at 136-137.

53. Id. at 138-139.

54. Id. at 140.

55. Id. at 142-143.

56. Id. at 143-155.

57. Id. at 146-147.

58. Id. at 147.

59. Id. at 147-148.

60. Id. at 148.

61. Id. at 155-165.

62. Id. at 155-159.

63. Id. at 159.

64. Id. at 159-160.

65. Id. at 160.

66. Id. at 163.

67. Id. at 168.

68. Id. at 170.

69. Id.

70. See REPUBLIC ACT NO. 11590, Section 2.

71. Id., Section 8.

72. Id., Section 4.

73. Id., Section 5.

74. Id., Sections 6 and 7.

75. Id., Section 13.

76. 807 Phil. 133 (2017).

77. Id. at 140-141.

78. 522 Phil. 705 (2006).

79. Id. at 754.

80. 792 Phil. 751 (2016).

81. Id. at 767-768.

82. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 18.

83. Justice Caguioa's Comments, p. 2.

84. Film Development Council of the Philippines v. Colon Heritage Realty Corporation, 760
Phil. 519, 535 (2015); Purisima v. Lazatin, 801 Phil. 395, 426 (2016).

85. Light Rail Transit Authority v. Quezon City, G.R. No. 221626, October 9, 2019.

86. Supra note 84 at 425-426.

87. RMC No. 102-2017, paragraph IV (1) (b).

88. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 9. Phil.
Guaranty Co., Inc. v. Commissioner of Internal Revenue, 121 Phil. 755, 760 (1965).

89. Id.; Commissioner of Internal Revenue v. Algue, Inc., 241 Phil. 829, 836 (1988).

90. Justice Dimaampao's Reflections, p. 1; Smith, Adam, "The Wealth of Nations," Bantam Classic
(2003).

91. POGO RULES AND REGULATIONS, Section 4 (b).

92. Id.

93. See PAGCOR Manual, p. 2.

94. Section 42 (A) of the NIRC provides:

Section 42. Income from Sources within the Philippines. —

(A) Gross Income from Sources within the Philippines. — The following items of gross income
shall be treated as gross income from sources within the Philippines:

xxx xxx xxx

(3) Services. — Compensation for labor or personal services performed in Philippines[.]

(Emphasis supplied)

95. Section 42 (C) of the NIRC provides:

Section 42. Income from Sources within the Philippines. —

xxx xxx xxx

(C) Gross Income from Sources without the Philippines. — The following items of gross income
shall be treated as income from sources without the Philippines:

xxx xxx xxx

(3) Compensation for labor or personal services performed without the Philippines[.]
(Emphasis supplied)

96. 62 Phil. 895, 901 (1936).

97. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 10.

98. 233 Phil. 406 (1987).

99. Id. at 422-424.

100. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, pp. 10-11.

101. 531 Phil. 480 (2006).

102. Id. at 491-493.

103. Justice Dimaampao's Reflections, p. 3.

104. Id.; The Mentholatum Co., Inc. v. Mangaliman, 72 Phil. 524, 528 (1941).

105. Id.; Pacific Vegetable Oil Corporation v. Singzon, 96 Phil. 986 (1955).

106. Id.; Eriks Pte. Ltd. v. Court of Appeals, 335 Phil. 229, 239 (1997).

107. Id.; B. Van Zuiden Bros., Ltd. v. GTVL Manufacturing Industries, Inc., 551 Phil. 231, 237
(2007).

108. The Mentholatum Co., Inc. v. Mangaliman, supra note 104 at 528.

109. Justice Dimaampao's Reflections, pp. 3-4.

110. Id. at 4.

111. Section 3 (d) of the FIA provides:

Section 3. Definitions. — As used in this Act:

xxx xxx xxx

d) The phrase "doing business" shall include soliciting orders, service contracts, opening
offices, whether called "liaison" offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the country for a period or
periods totalling one hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or of the
purpose and object of the business organization: Provided, however, That the phrase "doing
business" shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of
rights as such investor; nor having a nominee director or officer to represent its interests
in such corporation; nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its own account[.]
(Emphasis supplied)

112. Justice Dimaampao's Reflections, p. 5.

113. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 12; Justice
Dimaampao's Reflections, p. 5.

114. Id. at 13.

115. See OECD (2014), Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base
Erosion and Profit Shifting Project, OECD Publishing, Paris, p. 73; available at
https://doi.org/10.1787/9789264218789-en.

116. See OECD (2014), Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base
Erosion and Profit Shifting Project, OECD Publishing, Paris, p. 84; available at
https://doi.org/10.1787/9789264218789-en.

117. See OECD (2014), Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base
Erosion and Profit Shifting Project, OECD Publishing, Paris, p. 85; available at
https://doi.org/10.1787/9789264218789-en.

118. Id.

119. See OECD (2014), Addressing the Tax Challenges of the Digital Economy, DECD/G20 Base
Erosion and Profit Shifting Project, OECD Publishing, Paris, p. 102; available at
https://doi.org/10.1787/9789264218789-en.

120. See OECD (2014), Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base
Erosion and Profit Shifting Project, OECD Publishing, Paris, pp. 112-121; available at
https://doi.org/10.1787/9789264218789-en.

121. BAYANIHAN 2 LAW, Section 11.

122. 463 Phil. 179 (2003).

123. Id. at 198.

124. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, pp. 2-3.

125. 508 Phil. 321 (2005).

126. Id. at 335.

127. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 3.

128. See Sponsorship Remarks of Deputy Speaker Villafuerte, House of Representatives Journal
No. 59, June 1-5, 2020, p. 101.

129. See Interpellation of Representative Abante, House of Representatives Records, August 5,

2020, p. 45.
130. Id. at 46; see also Interpellations of Senator Recto, Senate Journal No. 67, June 1, 2020, p.
614.

131. Concurring and Dissenting Opinion, Senior Associate Justice Perlas-Bernabe, p. 5.

132. CIVIL CODE, Article 4.

PERLAS-BERNABE, J., concurring and dissenting:

1. Entitled "AN ACT PROVIDING FOR COVID-19 RESPONSE AND RECOVERY

INTERVENTIONS AND PROVIDING MECHANISMS TO ACCELERATE THE
RECOVERY AND BOLSTER THE RESILIENCY OF THE PHILIPPINE ECONOMY,
PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES," approved on
September 11, 2020.

2. See ponencia, p. 40.

3. See id. at 22-23.

4. See Letter of Justice Caguioa to J. Gaerlan dated October 4, 2021.

5. See Article 4 of the CIVIL CODE OF THE PHILIPPINES.

6. See Co v. Court of Appeals, 298 Phil. 221, 226 (1993).

7. See Film Development Council of the Philippines v. Colon Heritage Realty Corp., G.R. Nos.
203754 & 204418 (Resolution), October 15, 2019.

8. See ponencia, p. 40.

9. See Commissioner of Internal Revenue v. San Roque Power Corp., 719 Phil. 137, 157 (2013).

10. See ponencia, pp. 36-40.

11. Atitiw v. Zamora, 508 Phil. 321, 334 (2005).

12. Id. at 335.

13. Id.

14. See Sponsorship Remarks of Deputy Speaker Villafuerte, House of Representatives Journal
No. 59, June 1 to 5, 2020, p. 101.

15. See Interpellation of Representative Abante, House of Representatives Records, August 5,

2020, p. 45.
16. See Interpellation of Representative Abante, House of Representatives Records, August 5,
2020, p. 46; and Interpellation of Senator Recto, Senate Journal No. 67, June 1, 2020, p. 614.

17. The effectivity of the law is only until the next adjournment of the Eighteenth Congress on
December 19, 2020, viz.:

SECTION 18. Effectivity. — Except as otherwise specifically provided herein, this Act shall be in
full force and effect until the next adjournment of the Eighteenth Congress on December 19,
2020. This Act shall take effect immediately upon its publication in a newspaper of general
circulation or in the Official Gazette: Provided, That Section 4 (cc) of this Act shall be deemed to
be in effect since Republic Act No. 11469 expired.

18. Section 4 of RA 11494 reads:

SECTION 4. COVID-19 Response and Recovery Interventions. — Pursuant to Article VI,

Section 23 (2) of the Constitution, the President is hereby authorized to exercise powers that
are necessary and proper to undertake and implement the following COVID-19 response and
recovery interventions:

xxx xxx xxx

19. Section 10 of RA 11494 reads:

SECTION 10. Appropriations and Standby Fund. — The amounts that will be raised under
Section 4, paragraphs (pp), (qq), (rr), (ss), (sss) and (ttt) of this Act shall be used for the
response and recovery interventions for the COVID-19 pandemic authorized in this Act. x x x

20. Section 11, paragraphs (a) to (e) of RA 11494 reads:

SECTION 11. Sources of Funding. — The enumerated subsidy and stimulus measures, as well
as all other measures to address the COVID-19 pandemic shall be funded from the following:

(a) 2020 GAA: Provided, That funds for the herein authorized programs and projects shall be
sourced primarily from the unprogrammed funds and savings realized from modified, realigned
or reprogrammed allocations for operational expense of any government agency or
instrumentality under the Executive Department, including, but not limited to, travelling
expenses, supplies and materials expenses, professional services, general services, advertising
expenses, printing and publication expenses, and other maintenance and operating expenses in
the 2020 GAA;

(b) Savings pooled pursuant to Republic Act No. 11469 and Section 4, paragraphs (pp), (qq),
(rr), (ss), (sss) and (ttt) of this Act;
 (c) Excess revenue collections in anyone of the identified tax or non-tax revenue sources from
its corresponding revenue collection target, as provided in the FY 2020 Budget of Expenditures
and Sources of Financing (BESF);

(d) New revenue collections or those arising from new tax or non-tax sources which are not part
of nor included in the original sources included in the FY 2020 BESF;

(e) All amounts derived from the cash, funds, and investments held by any GOCC or any
national government agency;

21. See ponencia, p. 40.

22. See Republic v. Bajao, 601 Phil. 53, 59 (2009).

23. See RMC 102-2017.

24. The subject of RMC 78-2018 reads "Registration Requirements of Philippine Offshore
Gaming Operators and its Accredited Service Providers."

25. Rollo (G.R. No. 254102), p. 54.

26. Id. at 54-55.

27. Id. at 55.

28. Id. at 55-56.

29. Rollo (G.R. No. 252965), pp. 140-142

30. Id. at 142-143.

31. SECTION 13. Exemptions. —

xxx xxx xxx

(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever nature, whether National or Local,
shall be assessed and collected under this Franchise from the Corporation; nor shall any form of
tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of
five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation
under this Franchise. Such tax shall be due and payable quarterly to the National Government
and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or
description, levied, established or collected by any municipal, provincial, or national government
authority.
 (b) Others: The exemptions herein 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 Corporation or operator has any
contractual relationship in connection with the operations of the casino(s) authorized to be
conducted under this Franchise and to those receiving compensation or other remuneration
from the Corporation or operator as a result of essential facilities furnished and/or technical
services rendered to the Corporation or operator.

32. Section 57 of the Tax Code, as amended by RA Nos. 10963 and 11534 reads:

Sec. 57. Withholding of Tax at Source. —

(A) Withholding of Final Tax on Certain Incomes. — Subject to rules and regulations the
Secretary of Finance may promulgate, upon the recommendation of the Commissioner,
requiring the filing of income tax return by certain income payees, the tax imposed or prescribed
by Sections 24 (B) (1), 24 (B) (2), 24 (C), 24 (D) (1); 25 (A) (2), 25 (A) (3), 25 (B), 25 (C), 25 (D),
25 (E), 27 (D) (1), 27 (D) (2), 27 (D) (3), 27 (D) (5); 28 (A) (4), 28 (A) (5), 28 (A) (7) (a), 28 (A)
(7) (b), 28 (A) (7) (c), 28 (B) (1), 28 (B) (2), 28 (B) (3), 28 (B) (4), 28 (B) (5) (a), 28 (B) (5) (b), 28
(B) (5) (c); 33; and 282 of this Code on specified items of income shall be withheld by payor-
corporation and/or person and paid in the same manner and subject to the same conditions as
provided in Section 58 of this Code.

(B) Withholding of Creditable Tax at Source. — The Secretary of Finance may, upon the
recommendation of the Commissioner, require the withholding of a tax on the items of income
payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons
as provided for by law, at the rate of not less than one percent (1%) but not more than thirty-two
percent (32%) thereof, which shall be credited against the income tax liability of the taxpayer for
the taxable year.

(C) Tax-free Covenant Bonds. — In any case where bonds, mortgages, deeds of trust or other
similar obligations of domestic or resident foreign corporations, contain a contract or provisions
by which the obligor agrees to pay any portion of the tax imposed in this Title upon the obligee
or to reimburse the obligee for any portion of the tax or to pay the interest without deduction for
any tax which the obligor may be required or permitted to pay thereon or to retain therefrom
under any law of the Philippines, or any state or county, the obligor shall deduct bonds,
mortgages, deeds of trust or other obligations, whether the interest or other payments are
payable annually or at shorter or longer periods, and whether the bonds, securities or
obligations had been or will be issued or marketed, and the interest or other payment thereon
paid, within or without the Philippines, if the interest or other payment is payable to a
nonresident alien or to a citizen or resident of the Philippines.
 (Note: Section 57 [B] was amended by RA 10963, which took effect on January 1, 2018. A new
paragraph was also introduced by RA 11534, which took effect in April 2021. However, RMC
102-2017 was promulgated prior to these amendments, hence, the original wording is
footnoted.)

33. See Film Development Council of the Phils. v. Colon Heritage Realty Corp., 760 Phil. 519, 537
(2015).

34. Phil. Guaranty Co., Inc. v. Commissioner of Internal Revenue, 121 Phil. 755, 760 (1965).

35. Commissioner of Internal Revenue v. Algue, Inc., 241 Phil. 829, 836 (1988).

36. See Lutz v. Araneta, 98 Phil. 148, 153 (1955).

37. See id.

38. See Cargill Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 203346,
September 9, 2020.

39. Alexander Howden & Co., Ltd. v. Collector of Internal Revenue, 121 Phil. 579, 582 (1965).

40. Article III, Section 1 of the 1987 Constitution reads:

SECTION 1. No person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws.

41. Manila Gas Corp. v. Collector of Internal Revenue, 62 Phil. 895, 900 (1936).

42. Id.

43. See Phil. Guaranty Co., Inc. v. Commissioner of Internal Revenue, supra note 32.

44. Section 42. Income from Sources within the Philippines. —

(A) Gross Income from Sources within the Philippines. — The following items of gross income
shall be treated as gross income from sources within the Philippines:

xxx xxx xxx

(3) Services. — Compensation for labor or personal services performed in the Philippines:

xxx xxx xxx

45. Section 42. Income from Sources within the Philippines. —

xxx xxx xxx

 (C) Gross Income from Sources without the Philippines. — The following items of gross income
shall be treated as income from sources without the Philippines:

xxx xxx xxx

(3) Compensation for labor or personal services performed without the Philippines;

xxx xxx xxx

46. Manila Gas Corp. v. Collector of Internal Revenue, supra note at 901.

47. 233 Phil. 406 (1987).

48. Id. at 422-424.

49. 531 Phil. 480 (2006).

50. Id. at 491-493.

51. Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., 368 Phil. 388, 404 (1999).

52. See Pharmaceutical and Health Care Association v. Duque III, 561 Phil. 386, 398 (2007).

53. See Article 5 (1) of the RP-US Tax Treaty.

54. See Article 5 (2) of the RP-US Tax Treaty.

55. See Article 5 of the RP-China Tax Treaty.

56. See Article 5, RP-Singapore Tax Treaty; Article 5, RP-Japan Tax Treaty; and Article V, RP-
Canada Tax Treaty, as examples.

57. Organization for Economic Cooperation and Development (OECD), Commentaries on the
Articles of the Model Tax Convention, p. 93 (2010).

58. Vienna Convention on the Law of Treaties, Section 3, Article 31.1 (1969).

59. OECD/G20 Base Erosion and Profit Shifting Project, Addressing the Tax Challenges of the
Digital Economy, pp. 84-95 (2014).

60. OECD/G20 Base Erosion and Profit Shifting Project, Addressing the Tax Challenges of the
Digital Economy, p. 102 (2014).

61. OECD/G20 Base Erosion and Profit Shifting Project, Addressing the Tax Challenges of the
Digital Economy, pp. 112-121 (2014).

62. See Section 6, PAGCOR Offshore Rules and Regulations.

63. Congressional Record Vol. 5, February 1, 2021, p. 46.

64. Senate Journal Session No. 63, May 25, 2021, p. 791.

65. See Bureau of Internal Revenue v. First E-Bank Tower Condominium Corp., G.R. Nos. 215801
& 218924, January 15, 2020.

66. See Phil. Amusement and Gaming Corp. v. Bureau of Internal Revenue, 749 Phil. 1010 (2014).

67. Commissioner of Internal Revenue v. Philippine Airlines, Inc., 535 Phil. 95, 109 (2006).

68. See ponencia, p. 24.

69. Entitled "AN ACT FURTHER AMENDING PRESIDENTIAL DECREE NO. 1869, OTHERWISE
KNOWN AS PAGCOR CHARTER," approved on June 20, 2007.

70. See Section 125-A, in relation to Section 22 (II), of the Tax Code, as amended by RA 11590.

LAZARO-JAVIER, J., dissenting:

1. An Act Taxing Philippine Offshore Gaming Operations, Amending for the Purpose Sections 22,
25, 27, 28, 106, 108, and Adding New Sections 125-A and 288 (G) of the National Internal
Revenue Code of 1997, as Amended and for Other Purposes. (Republic Act No. 11590,
Approved on September 22, 2021).

2. Id.

3. 72 Phil. 524-531 (1941).

4. Id. at 528.

5. MR Holdings, Ltd. v. Bajar, et al., 430 Phil. 443, 462 (2002).

6. An Act to Promote Foreign Investments, Prescribes the Procedures for Registering Enterprises
Doing Business in the Philippines, and for Other Purposes.

7. Section 3 (d) of Republic Act No. 7042, Approved on June 13, 1991 (as amended).

8. An Act to Require that the Making of Investments and the Doing of Business within the
Philippines by Foreigners or Business Organizations Owned in Whole or in Part by Foreigners
Should Contribute to the Sound and Balanced Development of the National Economy on a Self-
Sustaining Basis, and for Other Purposes, Enacted without Executive Approval, September 30,
1968 (65 O.G. No. 29, p. 7410).

9. A Decree to Revise, Amend and Codify the Investment, Agricultural, and Export Incentives Acts
to be known as the Omnibus Investment Code (Presidential Decree No. 1789, Signed on
January 16, 1981).
10. Supra note 5 at 464.

11. C. Villanueva, Philippine Corporate Law (2010 ed.), p. 986.

12. See Cargill, Inc. v. Intra Strata Assurance Corporation, Inc., 629 Phil. 320, 333 (2010).

13. SEC-OGC Opinion No. 17-03 Re: Foreign Corporation; Doing Business; Online Gaming,
issued by Hon. Camilo S. Correa, General Counsel of Securities and Exchange Commission.

14. Id.

15. Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997),
https://law.justia.com/cases/federal/district-courts/TSupp/952/1119/1432344/. (Accessed on
December 27, 2021, 9:19 PM), citing Mellon, 960 F.2d at 1221.

16. Id., Mellon, 960 F.2d at 1221.

17. Id., Helicopteros Nacionales de Colombia S.A. v. Hail, 466 U.S. 408, 414-16, 104 S. Ct. 1868,
1872-73, 80 L. Ed. 2d 404 (1984).

18. Id., International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945).

19. Id., Mellon, 960 F.2d at 1221.

20. Id.

21. Id., Burger King Corp. v. Rudzewicz, 471 U.S. 162, 475, 105 S. Ct. 2174, 2183-84, 85 L. Ed.
2d 528 (1985) (citing International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S. Ct. 154,
159-60, 90 L. Ed. 95 (1945)).

22. Id., citing Travelers Health Assn. v. Virginia, 339 U.S. 643, 647, 70 S. Ct. 927, 929, 94 L. Ed.
1154 (1950).

23. Id., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L.
Ed. 2d 490 (1980).

24. Id., Keeton v. Hustler Magazine, Inc., 456 U.S. 770, 774, 104 S. Ct. 1473, 1478, 79 L. Ed. 2d
790 (1984).

25. Id., Burger King, 471 U.S. at 475, 105 S. Ct. at 2183-84 (citing McGee v. International Life
Insurance Co., 355 U.S. 220, 223, 78 S. Ct. 199, 201, L. Ed. 2d 223 (1957)).

26. Id., World-Wide Volkswagen, 444 U.S. at 292, 100 S. Ct. at 564-65.

27. Id., International Shoe, 326 U.S. at 316, 66 S. Ct. at 158.

28. Id., World-Wide Volkswagen, 444 U. S. at 292, 100 S. Ct. at 564.

29. Id., Hanson v. Denckla, 357 U.S. 235, 250, 78 S. Ct. 1228, 1237-39, 2 L. Ed. 2d 1283 (1958).

30. Id., Burger King, 471 U.S. at 476, 105 S. Ct. at 2184.

31. Id., Panavision Intern., L.P. v. Toeppen, 938 F. Supp. 616 (C.D.Cal. 1996) (citing American Civil
Liberties Union v. Reno, 929 F. Supp. 824, 830-48 (E.D.Pa. 1996)).

32. Id.

33. Id., Burger King, 471 U.S. at 475, 105 S. Ct. at 2183-84.

34. AN ACT AMENDING THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,

AND FOR OTHER PURPOSES, Republic Act No. 8424, December 11, 1997.

35. Id.

36. Concepts and Issues, 1. International Doubie Taxation, UN Committee of Experts on

International Cooperation in Tax Matters Seventh session, Geneva 24-28 October 2011, Item 5
(h) of the provisional agenda, Revision of the Manual for the Negotiation of Bilateral Tax
Treaties.

37. CIR v. Juliane Baier-Nickel, 531 Phil. 480-490 (2006).

38. Id. at 488-489.

39. Id. at 489.

40. See CIR v. British Overseas Airways Corporation, 223 Phil. 406, 422 (1987).

41. Pablo Lorenzo v. Juan Posadas, Jr., 64 Phil. 363, 370 (1937).

42. Id., citing Dobbins v. Erie County, 16 Pet., 435; 10 Law. ed., 1022; Kirkland v. Hotchkiss, 100
U.S., 491; 25 Law. ed., 558; Lane County v. Oregon, 7 Wall, 71, 19 Law. ed., 101; Union
Refrigerator Transit Co. v. Kentucky, 199 U.S., 194; 26 Sup. Ct. Rep. 26, 50 Law. ed., 150;
Charles River Bridge v. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.

43. Id., citing Dobbins v. Erie County.

44. Id., citing Thomas v. Gay, 169 U.S. 264; 42 Sup. Ct. Rep. 340; 43 Law. ed., 740.

45. CIR v. Algue, 241 Phil. 829-836 (1988).

46. Id at 836.

47. 506 Phil. 1, 74 (2005).

LEONEN, J., dissenting:

1. Every bill passed by the Congress shall embrace only one subject which shall be expressed in
the title thereof.

2. Republic Act No. 11494 (2020), Sec. 3 (l).

3. Presidential Decree No. 1869 (1983), Sec. 1 (a).

4. Presidential Decree No. 1869 (1983), Sec. 3 (1) provides:

SECTION 3. Corporate Powers. — The Corporation shall have the following powers and
functions, among others:

xxx xxx xxx

1) to do anything and everything necessary, proper, desirable, convenient or suitable for the
accomplishment of any of the purpose or the attainment of any of the objects or the furtherance
of any of the powers herein stated, either alone or in association with other corporations, firms
or individuals, and to do every other act or thing incidental, pertaining to, growing out of, or
connected with, the aforesaid purposes, objects or powers, or any part thereof.

5. Presidential Decree No. 1869 (1983), Sec. 10, as amended by Republic Act No. 9487 (2007),
Sec. 1.

6. Presidential Decree No. 1869 (1983), Sec. 13 (2).

7. Rules and Regulations for Philippine Offshore Gaming Operations (2016), Sec. 2 (b).

8. TAX CODE, Title I, Sec. 4, as amended by Rep. Act No. 8424 (1997), Tax Reform Act of 1997.

9. Ponencia, p. 17.

10. Id. at 19.

11. Id. at 8.

12. Id. at 9.

13. J. Lazaro-Javier, Dissenting Opinion, p. 8.

14. J. Lazaro-Javier, Dissenting Opinion, p. 14.

15. Genalyn Kabiling, President signs into law Bayanihan 2, MANILA BULLETIN, September 11,
2020, <https://mb.com.ph/2020/09/11/president-signs-into-law-bayanilian-2/> (last accessed
January 6, 2021).

n Note from the Publisher: Written as "Section 65" in the official copy.