More tax incentives to encourage support for national athletes
By: Atty. Euney Marie J. Mata-Perez on August 29,2024
We are very proud of Carlos Yulo, our Olympic gold medalist. He did not only win two Olympic gold medals, giving glory to our country, but his performance at the Olympics was also hailed by the Olympic Committee itself as “as a dazzling display of power and grace”. (Twitter post)
Yulo’s success did not happen overnight; it resulted from years of practice and hard work. Rightly so, he has been given numerous rewards and prizes, cash or otherwise, from various government bodies and private institutions.
Will his rewards and prizes be tax exempt?
Yulo’s rewards are exempt from income tax. Republic Act (RA) No. 7549, a law passed in 1992, provides that all prizes and awards granted to athletes in local and international sports tournaments and competitions held in the Philippines or abroad and sanctioned by their respective national sports associations shall be exempt from income tax. The National Internal Revenue Code (passed in 1997) (Tax Code) also clearly excludes donations received by Yulo from his Gross Income, and Section 32(B)(7)(d) of the Tax Code provides that “all prizes and awards granted to athletes in local and international sports competitions whether held in the Philippines or abroad and sanctioned by their national sports associations” are excluded from the gross income of the athlete.
On the part of the donor, RA No. 7549 states that such prizes and awards given to winning athletes shall be deductible in full from the gross income of the donor and shall be exempt from the payment of donor’s tax. However, unlike RA No. 7549, the Tax Code does not expressly state the exemption of the donors from donor’s tax. Thus, in a prior statement addressing the prizes received by Hidilyn Diaz, the BIR stated that it “presupposes that the generous donors have already paid the donor’s tax on these items.”
It should be noted though RA No. 7549 was promulgated earlier in 1992 before the promulgation of the Tax Code in 1997. In Antonio, Jr. v. Commissioner of Internal Revenue (CTA. Case No. 6157, July 9, 2001), the Court of Tax Appeals (CTA) clarified that RA No. 7549 “remains to be the governing special law on the matter of granting tax-free prizes and awards to athletes in local and international sports competitions,” and thus, the Tax Code did not repeal or supersede it. In this case, the CTA clarified though that the tax exemption under RA No. 7549 applies only if such prizes and awards were granted in local and international sports competitions that are duly sanctioned by their respective national sports associations, and that the latter term shall mean only those that are accredited by the Philippine Olympic Committee, otherwise the exemption does not apply.
Unfortunately, while Yulo’s rewards and prizes are clearly income tax exempt, such exemption does not extend to incentives or emoluments granted to competing athletes prior to their winning any competition. The language of RA No. 7549 and the Tax Code speaks of “prizes and awards” of athletes, showing that these are those granted to winning athletes.
In this regard, it is good to know that House Bill No. 10723 seeks to amend RA No.10966, the National Athletes and Coaches Benefits and Incentives Act, to clearly exempt from any local or national taxes, fees or charges any and all incentives, rewards, bonuses and other forms of emoluments received by competing or winning national athletes and coaches, whether from public or private persons or entities. HB No. 10723 thus proposes to extend the exemption to those emoluments and incentives given to athletes “prior to the competition”, without distinction as to whether said national athletes are winners or not. HB No. 10723 also clarifies that the incentive applies whether the grantor or donor be public or private entities.
RA No. 10966 already grants several incentives to duly registered athletes and coaches, such as a 20% discount from all establishments providing transportation services, hotels, restaurants, recreation centers, and purchases of medicine and sports equipment, a 20% discount on admission fees charged by theaters, cinema houses, and other similar establishments, and free medical and dental consultations in government hospitals and similar establishments. Privately-owned establishments which grant the said 20% discounts mentioned above shall enjoy tax deductions equivalent to the discounts extended to the national athletes and coaches.
HB No. 10723 was approved on second reading on August 14, 2024. Its proposed amendments to RA No. 10966 will certainly encourage the support of our national athletes even during their training stage, since the tax incentives and privileges will no longer be limited to awards received after a win. It will also clearly extend the tax benefits to both public and private donors and to the amounts granted during pre-competition activities. All of these are critical to the success of our athletes. We thus look forward to its passage.
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 has been ranked as one of the top 100 lawyers of the Philippines by Asia Business Law Journal and is the incoming Chair of the Tax Committee of the Management Association of the Philippines. She acknowledges the contribution of Joshua Rizlan A. Simbillo in this article. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com