Philippine tax experts have studied the ban on Philippine Offshore Gaming Operators (POGO) and its tax implications for real estate owners who rent to these operators.
Philippine Offshore Gaming Operators (POGO) gained momentum under the Duterte administration to increase revenue and employment.
However, due to illegal activities associated with POGO hubs, President Ferdinand Marcos Jr. announced a complete ban in his State of the Nation Address in July 2024, promising to halt all operations by the end of the year.
If I offer lower rents to attract new tenants following the POGO ban, will my rental income tax obligations decrease accordingly?
Not necessarily. Your rental income tax depends on your total rental income, and while a decrease in income might mean reduced tax obligations, it does not automatically mean your overall tax obligations will decrease, as this depends on your total income and allowable deductions.
Can I claim deductions for my lost rental income? And can I deduct expenses for maintaining vacant properties?
No, you cannot deduct lost rental income on your Income Tax Return (ITR). However, you can claim deductions for expenses related to maintaining a property vacant during the tax year. Examples of deductible expenses under Section 34 of the Tax Code include:
If my rental income falls below the VAT threshold due to POGO tenants leaving, do I still need to pay VAT?
Yes, you still need to pay VAT. For commercial leases, VAT is immediately applicable on any rented unit regardless of the landlord's annual total income.
If the landlord is not VAT-registered and their annual total income is below 3 million pesos, they are required to pay a 3% percentage tax under Section 116 of the Tax Code.
