When the United States Center for Disease Control and Prevention (US CDC) recently lowered the COVID-19 risk level for traveling to the Philippines from “high” to “moderate,” many welcomed what was seen as a resolution to some of the mobility concerns of the region.
As we enter the 3rd quarter of 2022, the Philippines sets its sights on regaining its status as a highly attractive destination for companies exploring paths to economic recovery.
One business activity poised for a comeback is the POGO industry.
A Philippine Byword
Before the COVID pandemic, the term “POGO,” which stands for Philippine Offshore Gaming Operators, was already a Philippine byword. Chinese establishments and workers had become a ubiquitous part of day-to-day life.
The Philippine Amusement and Gaming Corporation. (PAGCOR) claims that POGOs have been in the country since early 2000. PAGCOR claims that POGOs have been in the country since early 2000. Furthermore, until the industry boom in 2016, the government has observed the influx of primarily Chinese online gaming company workers.
Before the proliferation of offshore gaming companies, many were unaware of the concepts, components, operations, and regulations of online gaming companies operating in the Philippines.
What are POGOs?
Philippine law defines a POGO entity as any offshore gaming service that offers gaming activities of chance via the internet, a network, or software. These networks and software are exclusively for authorized players outside the Philippines who have registered and established an online gaming account with a POGO operator.
A POGO’s service includes providing games to players, taking bets, and paying the winners. These offshore gaming companies operate in the Philippines but cater to overseas customers.
To legally operate, online gaming companies must be licensed by PAGCOR. Only foreigners based in another country are authorized to play. At the same time, foreign nationals in the Philippines and Filipinos residing abroad are not allowed to participate in online gaming activities according to POGO rules. This is to discourage or limit gambling among Filipinos, especially for minors. Failure to do so risks the company’s license(s) revocations.
Offshore Gaming Companies in the Philippines
Gambling activities are illegal in mainland China. As such, Chinese nationals resort to playing online casinos and other virtual betting games. Online casinos, for instance, chiefly cater to Chinese gamers and bettors from the mainland, which explains why online gaming companies continually recruit Mandarin-speaking personnel. This was a major contributing factor to the boom in the offshore gaming companies in the Philippines.
There are three license categories for offshore gaming companies:
- Category 1 involves services that have live streaming with online gambling dealers.
- Category 2 and 3 are sub-sectors of business process outsourcing (BPO) that provide back-office support.
However, the IT and Business Process Association of the Philippines (IBPAP), an umbrella industry group of BPOs, does not consider POGOs as BPOs. IBPAP’s members are registered with either the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BoI). POGOs get their license to operate from PAGCOR, a fact the group argues differentiates POGOs from BPOs.
Bouncing Back After the Slump
While offshore gaming companies boomed in the early years of the Duterte administration, the industry has suffered a bit of a downturn in the last two years. COVID-19 travel restrictions, lockdowns, and even natural calamities, such as the resulting work disruptions experienced in the Visayas in the aftermath of Typhoon “Rai” in December 2021, contributed to the slump in the last two years.
The imposition of a gaming tax on POGOs, which recently replaced other taxes such as franchise taxes, levies, and fees, likewise brought a wait-and-see stance among many investors.
Under the POGO law enacted last year, all offshore gaming licensees, whether Philippine or foreign-based, are considered active businesses in the Philippines. They must pay a 5-percent gaming tax on the gross gaming revenue or show receipts derived from their gaming operations.
With the new POGO law, foreigners employed by licensees and their service providers will also have to pay a final withholding tax of 25 percent on gross income, provided that the minimum final withholding tax is due from any taxable month from said employees is not less than P12,500. The new law also requires that the workers secure a tax identification number.
Despite the controversy of the new law, PAGCOR is confident it will be able to transition POGOs to the new setup while still fulfilling its mandate to support nation-building. With the reopening of the economy, PAGCOR has expressed readiness to service investors who wish to explore the establishment of online gaming companies in the Philippines.
Investors who wish to explore setting up online gaming companies in the Philippines may contact PAGCOR to seek more information on POGO requirements. PAGCOR has several offices nationwide, ready to cater to the needs of such investors.
How to Set Up a POGO Company
Establishing a POGO company requires commitment and compliance to a specific set of rules, processes, and guidelines governing Philippine laws. With the election of new Philippine government officials for 2022, investors are feeling optimistic about the future of POGO companies in the coming years. Here is a quick guide on how to set up a POGO company:
- Register your company with government agencies, namely the Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and potentially any of the following authorities: Philippine Amusement and Gaming Corporation (PAGCOR), Cagayan Economic Zone Authority (CEZA), APECO (Aurora Pacific Economic Zone and Freeport Authority), AFAB (Authority of the Freeport Area of Bataan). It should also be noted that companies that already have employees should register with Pag-IBIG, PhilHealth, and SSS. In contrast, those who will hire foreign workers should register with the Department of Labor and Employment (DOLE) and the Bureau of Immigration (BI).
- Accomplish documentary requirements. This will generally include:
- BIR Form No. 1903
- BIR Form N0. 1906
- SEC Certificate of Incorporation or license to do business in the Philippines
- Articles of Incorporation
- Mayor’s Business Permit
- Payment of Registration Fee
- Clear sample of receipts and invoices
- Appointment Letter of the Local Gaming Agent
- File finance and tax documents:
- General Information Sheet (GIS) and Annual Financial Statement (AFS) at the SEC
- BIR taxes
- Franchise Tax
- Income Tax
- Withholding Tax
- Annual Registration Fee
- Tax Returns
- Renew the following:
- Business Permit – Renewal should be done annually at your local City Hall.
- Offshore Gaming License – Process renewal every three years.
- Partner with a local gaming agent if you are a foreign-based operator.
- Ensure that your service providers are not limited to customer relations, live studio streaming, gaming software/ platform, IT support, and other strategic support services are licensed and registered with PAGCOR. Application fees range from US$30,000 to US$150,000.
- Conduct Know-Your-Customer (KYC) procedures as prescribed by the AMLC and enforce PAGCOR’s Customer Due Diligence (CDD) guidelines on clients/players.
- Be on the lookout for suspicious transactions and watch out for prohibited acts for POGO.
Get Help From Us
Another alternative to doing this long process yourself is to seek professional guidance to manage the many new requirements of establishing a POGO company in the Philippines from us.
Call us at +63 (02) 8540-9623, email firstname.lastname@example.org, or contact us here if you want to learn more with a FREE 30-minute consultation with one of our POGO business registration experts.