Philippine Offshore Gaming Opertors (POGOs) gained momentum under the Duterte administration to boost revenue and jobs. However, due to illegal activities tied to POGO hubs, President Ferdinand Marcos Jr. announced a total ban during his July 2024 State of the Nation Address, promising to stop all operations by the end of the year.
If I offer lower rent to attract new tenants in light of the POGO ban, will my rental income tax obligations decrease accordingly?
Not necessarily. Your rental income tax will depend on your gross rental income, and though a decrease in revenue may mean that you could face less tax liabilities, this does not mean that you will have an automatic decrease in overall tax obligations, since this depends on your overall income and allowable deductions.
Can I claim deductions for income that I’ve lost? How about the costs associated with maintaining vacant properties, can that be deductible?
No, you cannot claim lost rental income as a deductible expense on your Income Tax Return (ITR). However, you can claim any deductions for costs associated with maintaining your vacant properties, as long as the property remains vacant during that taxable year. Examples of deductible expenses under Section 34 of the Tax Code include the following:
If my rental income drops below the VAT threshold due to vacating POGO tenants, do I still need to pay VAT?
Yes, you would still need to pay VAT taxes. For commercial leases, any units rented out are immediately subject to VAT regardless of the owner’s gross annual receipts. In cases where the owner is a non-VAT registered person, and the gross annual receipts are less than ₱3 million, then they would be subject to a percentage tax of 3% in line with Section 116 of the Tax Code.
The information provided in the article above is for general knowledge and information. We’re always happy to hear from you! If you want to know how these regulations affect your business, CONSULT ACG or email us at consult@acg.ph.