Tax Increase on Jai-Alai and Horse-Racing Winnings

The tax under Section 260-A is collected through a withholding mechanism applied to each winning ticket’s corresponding “dividends.”
The operator, manager, or person in charge must withhold the tax prior to payment of the “dividends” to the winner.
Collection from horse owners of winning race horses uses the same timing and collection method as the withholding applied to winning ticket payouts.

Section 4 of Republic Act No. 1169—as amended by Section 2 of this Decree—provides that the Office shall hold charity horse race sweepstakes under regulations promulgated by the Board in accordance with Republic Act No. 309.
Section 4 authorizes the Board to determine the procedure for distribution of prizes when:
- holding a sweepstakes race to determine prizes is impossible due to war, public calamity, or other unforeseen or fortuitous event; or
- there is no sufficient number of horses to determine the major prizes.
The procedure must be determined “in the most just, equitable and expeditious manner.”

The horse races and the sale of tickets in the charity sweepstakes are exempt from all taxes, except for the internal revenue stamp requirement and the government share from the prize fund.
Each sweepstakes ticket must bear a twelve-centavos internal revenue stamp.
From the total prize fund derived from the proceeds of ticket sales, an amount equivalent to 5% of the total prize fund must be deducted.
The 5% deduction must be paid to the Bureau of Internal Revenue not later than ten days after each sweepstakes, as a substitute for the income tax previously collected from sweepstakes prize winners.
Prizes paid out from the resulting prize fund (after the 5% has been deducted) are exempt from income tax.

Tickets for the sweepstakes must be printed by the government.
The printed tickets are considered government securities for purposes of penalizing forgery or alteration.