Tax on Prizes from Small Town Lotteries

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BIR REVENUE MEMORANDUM CIRCULAR NO. 74-90: Tax on Prizes from Small Town Lotteries

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Title Supreme Court: Tax on Prizes from Small Town Lotteries

Law: Bir Revenue Memorandum Circular No. 74-90

Decision Date: Aug 1, 1990

Prizes from small town lotteries are subject to a 20% final tax if exceeding P3,000, while those below this threshold are subject to income tax, as mandated by the Philippine Charity Sweepstakes Office and the Tax Code.

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Tax Exemption Limitations Under Existing Laws

Section 4 of Republic Act No. 1169 exempts from all taxes only the holding of horse race sweepstakes by PCSO and ticket sales therein.
Consequently, STL is not covered by this tax exemption and is subject to taxation.

Taxability of Prizes from Small Town Lotteries

Prizes from STL exceeding Three Thousand Pesos (P3,000.00) are subject to a twenty percent (20%) final withholding tax under Section 21(c)(1) of the Tax Code.
Prizes below P3,000.00 are subject to regular income tax under Section 21(a) of the Tax Code.

Responsibilities of STL Operators Regarding Tax Withholding

The authorized entity (individual, corporation, company, or juridical entity) conducting the STL is responsible for withholding the 20% final tax before prize payout, as mandated by Section 50(a) of the Tax Code.

Taxation of Income Derived from Conducting STL

Income earned by entities conducting STL operations is subject to regular income tax, apart from the taxation on prizes awarded.

Administrative Guidance and Enforcement

The Circular emphasizes the need for wide publicity to ensure compliance and awareness among all parties involved.
Issuance and enforcement by the Commissioner of Internal Revenue ensures adherence to tax provisions related to STL prizes and income.

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