INCENTIVES TO WINNING NATIONAL ATHLETES
By Euney Marie Mata-Perez on July 29, 2021
I cannot not write about this, because the nation is still in euphoria, and so am I. It took a woman and a fellow Zamboangueño, Hidilyn Diaz, to bag our country’s first-ever Olympic gold medal. Her victory was not accidental. It was the product of hard work, perseverance, and on top of these, prayers. The Olympic gold medal was actually the second medal she wore at the awarding ceremonies. The first medal she wore was the miraculous medal of Our Lady of Grace. Hidilyn shared that she, with her friends, prayed the Novena to Our Lady of Grace nine days before the competition.
But from a tax and legal point of view, what does Hidilyn’s victory mean? We now all heard that she is set to receive cash rewards and gifts, like a house and a condominium unit.
Taxation of national athlete’s prizes or rewards
Resident Filipino citizens are taxable on their worldwide income, i.e., income earned from the Philippines and abroad. (Nonresident citizens are taxable only on Philippine-sourced income). Hidilyn is a Filipino citizen and considered a resident citizen. This is despite that she reportedly stayed in Malaysia for almost two years now to train for the Olympics.
Hidilyn’s rewards and prizes from the Philippine government and other private individuals and/or corporations in the Philippines will be deemed Philippine-sourced. If not properly managed, her rewards and prizes could form part of her gross income in the calculation of her net taxable income, which could be taxed at the high 35-percent income tax rate.
However, under Section 32(B)(7)(d) of the National Internal Revenue Code (Tax Code), all prizes and awards granted to athletes in international sports competitions sanctioned by the respective national sports associations are excluded from the athlete’s taxable income. For the “exclusion” (which is the correct term, “not exemption”) to apply, the competition must be “sanctioned” by the national sports association, which in this case, is the Philippine Sports Commission (PSC), and the prize must be granted in (or pursuant to) the competition.
Under Republic Act (RA) 10699, or the “National Athletes and Coaches Benefits and Incentives Act,” which was passed in 2015, Hidilyn shall be entitled to a P10-million cash prize in addition to an Olympic Gold Medal of Valor to be issued by the PSC. Thus, the P10-million reward under this Act will not be taxable pursuant to Section 37(B)(7)(d) of the Tax Code.
The same nontaxability, however, may not apply to the other gifts or rewards, which were promised to Hidilyn by various private companies. If they are given in the form of gifts, they may be subject to a 6-percent donor’s tax. However, if not properly tax-managed, these “gifts” could be subject to a high 35-percent income tax, which is imposed on the net taxable of individuals in excess of P8 million.
To help inspire our aspiring Filipino athletes, we list the other benefits given under RA 10699.
Any national athlete who wins in an international competition shall be entitled to the following benefits:
1. Retirement benefit lump sum equivalent to 25 percent of his/her total cash incentives computed from the start of his/her active sports career up to the last day of retirement from active competition or training
2. Scholarship benefits in the form of full tuition fees from state colleges or universities for a college or university degree; and
3. Priority in scholarship grants and study under their programs subject to the Commission on Higher Education and Technical Education and Skills Development Authority regulations and policies and qualifications for all applicants
The amount necessary for the implementation of the cash incentives and retirement benefits under RA 10966 shall be taken from the net cash income of the Philippine Amusement and Gaming Corp.
Benefits of all national athletes
Any national athlete is also entitled to the following incentives:
1. 20-percent discount from all establishments relative to the utilization of transportation services, hotels and other lodging establishments, restaurants and recreation centers and purchase of medicine and sports equipment anywhere in the country
2. 20-percent discount on admission fees charged by theaters, cinema houses and other similar places of culture, leisure and amusement
3. Free medical and dental consultations in government hospitals and similar establishments anywhere in the country
4. Coverage in the National Health Insurance Program of the Philippine Health Insurance Corp.
5. A comprehensive social security program to be formulated by the Social Security System
6. Priority in existing livelihood programs being undertaken by various government agencies
7. Priority in national housing programs, affordable pabahay loans and other housing opportunities subject to the guidelines and qualifications set by the National Housing Authority or the Home Development Mutual Fund and
8. Use of living quarters and training centers set up and maintained by the PSC while preparing and training for international competitions
The benefits under RA 10699 apply only to “national” athletes and their coaches. “National athletes” shall refer to athletes including persons with disabilities who are Filipino citizens, members of the national training pool, recognized and accredited by the Philippine Olympic Committee and the PSC, including athletes with disabilities and who have represented the country in international sports competitions.
The future of athletes like Hidilyn is very bright. But the same may not apply to other aspiring athletes, most especially those who are not yet considered “national” athletes. So, the country may experience more gold and euphoria, other Filipino athletes should also be given government support and encouragement, through a good system of benefit and incentives.
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Euney Marie J. Mata-Perez is a CPA-lawyer and the managing partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and is the president of the Asia-Oceania Tax Consultants’ Association.