QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 74-90)
It cites Section 10 of Republic Act (RA) No. 1169 as amended by B.P. Blg. 42 and P.D. No. 1157, and also relevant provisions of the Tax Code—specifically Section 21(c)(1) and Section 50(a).
Because RA No. 1169 (under Section 4) exempts only the holding of horse race sweepstakes by the PCSO and the sale of tickets in such sweepstakes. Small Town Lotteries are not included in that specific exemption.
Only the holding of horse race sweepstakes by the PCSO and the sale of tickets in the said sweepstakes are exempt from taxes.
The Circular states that PCSO winnings are not subject to the 20% withholding tax under Section 21(c)(1). However, STL prizes are different because STL is not embraced within the exemption for PCSO horse race sweepstakes.
A final tax of twenty percent (20%) applies if the prize amount is more than ₱3,000.00.
If the prize is less than ₱3,000.00, it is subject to income tax pursuant to Section 21(a) of the Tax Code.
The individual, corporation, company, or juridical entity authorized by the PCSO to conduct the small town lottery—the party paying the prize—must withhold the final 20% tax.
Section 50(a) of the Tax Code, as cited in the Circular.
It is a final tax of 20%, as stated in the Circular.
Yes. It states that the income derived by the party conducting the small town lottery is subject to income tax.
Small town lotteries must be endorsed by a resolution passed by the Sangguniang Panlalawigan or Sangguniang Panglunsod.
PCSO promulgates rules and regulations governing experimental runs of various numbers games for STL, and PCSO resolutions require local government endorsement for holding such lotteries.
RA No. 1169’s exemption covers only PCSO horse race sweepstakes and ticket sales; STL is not included, so STL prizes follow the Tax Code rules on winnings—final 20% if over ₱3,000, and income tax if under ₱3,000.
Withhold the 20% final tax pursuant to Section 50(a) before paying the net prize to the winner.
The prize is subject to a final 20% withholding tax before payment to the winner.
It is subject to income tax pursuant to Section 21(a) of the Tax Code.