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PCSO lottery taxes guide - is Lotto tax free?

Published: Thursday, April 5, 2018
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There was a long debate in the Philippines about introducing new taxes to the PCSO Lottery games.

What can we read about lottery taxes on the official PCSO site? To get a Sweepstake prize, we are required to have a community tax certificate when visiting the office. The site says that all Sweepstakes prizes paid are tax-free (due to Section 4 of R.A. 1169).

We couldn't find any information about regular Lotto prizes, so started to investigate different sources on the internet, most mass media based.

For very long time lottery wins in Lotto and Sweepstakes were tax-exempt but the government was pushing to reform the system in 2017. It would happen if House Bill 4774 were approved. And as we are writing this, we know it happened.

PCSO opposed this new tax. Chairman in February 2017 rejected the calls to impose new taxes on lottery winnings because all the Lotto winnings are already pre-taxed. The main disadvantage of new taxes is discouraging people from playing - because what is the point when you need to give back 20% of your prize?

It is excruciating because all lottery games have already taxes - for example, when buying a Php 20 Lotto ticket, you pay Php 6 for charity. Another Php 1 is paid as a tax.

When do I need to pay PCSO lottery taxes in the Philippines?

If you win a prize in any PCSO lottery game, the 20% final tax will be deducted from the prize amount before you receive your winnings. This means that you don't need to worry about paying the tax separately.

For example, if you win PHP 100,000 (Philippine peso) in the Lotto game, PHP 20,000 (20% of PHP 100,000) will be deducted as tax. This leaves you with a net prize of PHP 80,000.

However, it's important to note that you may still need to report your winnings as income in your annual tax return. Under the NIRC, all income, including winnings from lottery games, must be declared in your annual tax return.

Is pcso lotto tax free?

Starting January 1st, 2018 the lottery winnings of at least 10,000 PHP are taxed additional 20 percent. This tax already has made a significant change in remittances to the treasury. As PCSO stated in March 2018, it doubled to PHP 1 billion a month. Statistics show that player demand was not affected by the changes. Few small towns even raised their sales by 3 percent. Now the office is considering different marketing strategies to ensure people of good causes being supported by ticket sales. This may attract more buyers of the lottery products in Philippines.

20 percent PCSO tax is a part of a significant reform of tariff system in the Philippines, and as government states - is needed to provide stable economic growth.