VALUE ADDED TAX Held: YES.

Petitioner is exempt from the payment of VAT, because

PAGCOR vs. BIR
G.R. No. 172087 | March 15, 2011
Ratio: With the amendment by R.A. No. 9337 of Section 27 (c) of the National
Internal Revenue Code of 1997 by omitting PAGCOR from the list of
government corporations exempt for income tax, the legislative intent is to
require PAGCOR to pay corporate income tax. However, nowhere in R.A.
No. 9337 is it provided that PAGCOR can be subjected to VAT. Thus, the
provision of RR No. 16-2005, which the respondent BIR issued to implement
the VAT law, subjecting PAGCOR to 10% VAT is invalid for being contrary to
R.A. No. 9337.
Facts: PAGCOR was created pursuant to P.D. No. 1067-A, which was
enacted on January 1, 1977. Simultaneous to its creation, PD No. 1067-B
was issued exempting PAGCOR from any type of tax, except a franchise tax
of 5% of the gross revenue.
PAGCOR’s charter, PD No. 1869, is a special law that grants petitioner
exemption from taxes.
With the amendment by R.A. No. 9337 of Section 27 (c) of the National
Internal Revenue Code of 1997 by omitting PAGCOR from the list of
government corporations exempt for income tax, the legislative intent is to
require PAGCOR to pay corporate income tax. However, nowhere in R.A.
No. 9337 is it provided that PAGCOR can be subjected to VAT. Thus, the
provision of RR No. 16-2005, which the respondent BIR issued to implement
the VAT law, subjecting PAGCOR to 10% VAT is invalid for being contrary to
R.A. No. 9337.
.

To consolidate the laws pertaining to the franchise and powers of PAGCOR,

P.D. No. 1869 was issued. Section 13 of said decree provides that the
PAGCOR was exempt from custom duties, taxes and other imposts on
importation and income and other kinds of taxes.

P.D. No. 1931 removed the tax exemption privilege of PAGCOR. Said
privilege was restored by Letter of Instruction No. 1430.

R.A. 8424 or the National Internal Revenue Code took effect on January 1,
1998. Section 27 of said law states the GOCCs, except Philhealth, PAGCOR,
SSS, GSIS and PCSO, shall pay for corporate income tax. However,
pursuant to the enactment of R.A. No. 9337, PAGCOR was removed those
exempt from the payment of corporate income tax.

Different groups assailed the validity and constitutionality of RA 9337 via

petition for certiorari. On September 1, 2005, the Court dismissed all the
petitions. On the same date, the BIR issued Revenue Regulation No. 16-
2005, specifically identifying PAGCOR as one of the franchisees subject to
10% VAT imposed under Section 108 of the NIRC.

Issue: Whether or not PAGCOR is still exempt from VAT with the enactment
of R.A. No. 9337?