Philippine Tax Laws on Gambling Winnings Over ₱10,000

This is general information for the Philippines and not legal advice. Laws and BIR rules change; if you’re dealing with an actual prize, check the latest text of the National Internal Revenue Code (NIRC) as amended and any current BIR regulations.

1) The core rule: 20% final tax once a single prize exceeds ₱10,000

Under the NIRC (Tax Code) as amended (notably by RA 8424, RA 10963 “TRAIN,” and RA 11534 “CREATE”), “prizes and other winnings” received by individuals are treated in two buckets:

₱10,000 or less (per prize): Not subject to final withholding tax; instead, the amount is part of your regular taxable income and is taxed at your graduated rates (added to salary, business income, etc.).
More than ₱10,000 (per prize): Subject to a 20% final income tax, withheld at source by the payor. Because it’s a final tax, you don’t include that prize in your annual return anymore (no further tax due on it).

“Per prize” means you look at each winning separately. Multiple ₱9,000 wins are each below the threshold; one ₱11,000 win crosses it and the entire ₱11,000 (not only the excess) is hit by the 20% final tax.

Illustration: You win ₱100,000 in a casino or betting game. Final tax = 20% × 100,000 = ₱20,000 withheld. Net proceeds to you = ₱80,000. No need to report that prize in your annual return.

2) What counts as “gambling winnings”

The 20% final tax rule above applies to “prizes and other winnings”—which, in practice, includes cash or in-kind winnings from:

Lotteries, sweepstakes, and STL (PCSO-run games);
Casino games operated under PAGCOR or its licensees;
Bingo/charity games where the prize is a winning by chance;
Betting on races/sports (e.g., horse racing dividends, other regulated betting).

Raffles & promos: While not “gambling,” raffles/promos also create “prizes and other winnings.” The same ₱10,000 threshold/20% final tax mechanics apply.

3) PCSO/lotto special note

The treatment of PCSO (lotto/sweepstakes/STL) winnings has shifted in recent years:

TRAIN (effective 2018) temporarily exempted PCSO/lotto winnings from the 20% final tax.
CREATE (effective 2021) reinstated the 20% final tax on PCSO/lotto prizes exceeding ₱10,000.

If your win was ₱10,000 or less, it’s not subject to final tax and is instead part of your regular taxable income; if over ₱10,000, the 20% final tax applies (withheld by PCSO before release of proceeds).

4) Who is the winner? Individuals vs. entities

Individuals (citizens and resident aliens): Follow the ₱10,000 threshold rule above.
Nonresident aliens:
- Engaged in trade/business in the Philippines: generally taxed like residents (so the 20% final tax on a >₱10,000 prize applies).
- Not engaged in trade/business in the Philippines (NRA-NETB): generally subject to a 25% final tax on Philippine-sourced income, unless a specific preferential rule (e.g., the 20% final tax on prizes) or a tax treaty provides otherwise. In practice, payors withhold at the applicable final rate based on documentation on the winner’s status/treaty relief.
Corporations: The 20% final tax on prizes is an individual rule in the NIRC. If a juridical person somehow receives a “prize,” it typically ends up as regular taxable income subject to corporate income tax (not a 20% final tax). Payors should verify the recipient’s status before withholding.

5) Source of income and situs (when winnings are “Philippine-sourced”)

Winnings are Philippine-sourced if the game/draw/bet is conducted in the Philippines and/or the payor is a Philippine resident/entity (e.g., PCSO; a PAGCOR casino/licensee). Philippine-sourced winnings are taxable in the Philippines under the rules above, including the final tax withholding.

For non-resident winners, tax treaties (Article on “Other Income” or equivalent) may reduce or eliminate Philippine tax—but only if the winner applies for relief and submits the required documents to the payor (and, if required, the BIR) before payment. Absent treaty paperwork, payors must withhold at the domestic rate.

6) Withholding and paperwork (what the payor and the winner should see)

Payors/organizers/operators (PCSO, casinos, racing clubs, promo organizers) are withholding agents:

Withhold 20% final tax on any individual prize exceeding ₱10,000 (or the applicable rate for nonresidents).
Remit the tax to BIR using the current final-withholding forms/schedules (e.g., BIR Form 0619-F for monthly remittances and BIR Form 1601-FQ for quarterly filing, as applicable).
Issue BIR Form 2306 (Certificate of Final Tax Withheld at Source) to the winner for prizes subject to final tax; keep the required alphalists and prize logs.

Winners should expect:

Net proceeds if the payor withholds; or a requirement to settle the tax before release.
A BIR Form 2306 (for final tax) or written proof of tax paid.
For non-final (≤₱10,000) prizes: no final tax certificate—include the amount in your own income tax return.

7) Cash vs. non-cash prizes; “tax-free” promises; syndicates

Non-cash winnings (e.g., a car): The tax base is the fair market value (FMV) at the time you win. If the prize exceeds ₱10,000, the final tax is 20% of the FMV. If the organizer won’t (or can’t) withhold from the prize in kind, it will either:

Require you to pay the 20% in cash before releasing the prize; or
Shoulder the tax itself. (If the promo says “tax-free to the winner,” organizers usually gross up the cost so that after paying the 20% final tax from their own pocket, the winner still receives the full prize.)

Example – “tax-free” cash promise: Organizer wants the winner to receive ₱100,000 net. Grossed-up amount = 100,000 ÷ (1 − 0.20) = ₱125,000. Tax = 20% × 125,000 = ₱25,000 (paid by organizer). Winner receives ₱100,000 net.

Syndicates / shared tickets: The threshold and final tax apply per winner’s share. Ten co-winners splitting ₱100,000 each receiving ₱10,000: no final tax on each share (each co-winner must include ₱10,000 in regular income). If each share is ₱15,000, 20% final tax applies to each ₱15,000 share.

8) Timing: when the law in effect matters (PCSO timeline)

For PCSO games, the law in effect on the payout date controls:

2018–2020: PCSO/lotto prizes were exempt from the 20% final tax under TRAIN.
From 2021 onward: 20% final tax again applies to PCSO/lotto prizes over ₱10,000 under CREATE.

If your winning straddles a change (e.g., draw date vs. claim date), the payout/claim date and the then-effective rule determine the tax.

9) Record-keeping & reporting for winners

Final-taxed winnings (>₱10,000): Keep your BIR Form 2306 and proof of net proceeds. Do not include the amount in your Annual ITR; it’s already finally taxed.
Non-final winnings (≤₱10,000): Keep the prize notice/receipts; include the amount in your annual return as “other taxable income.”
Nonresidents/treaty claims: Keep treaty relief filings and any BIR confirmations provided to the payor before payout; without these, the payor withholds at domestic rates.

10) Practical FAQs

Q1: Is the 20% applied only to the excess over ₱10,000? No. Once a single prize exceeds ₱10,000, the entire prize is subject to 20% final tax (for individual winners under domestic rules).

Q2: Are casino chips/coupons “winnings”? When converted to cash or a thing of value and recognized as a prize/winning, the tax analysis above applies (look to the final cash/thing you actually receive).

Q3: Do local government taxes (LGU) hit the winner? LGU taxes generally burden operators/establishments, not winners. Winners deal with national income tax via final withholding.

Q4: Can the 20% be refunded/credited? No. It’s a final tax. BIR Form 2306 is proof that the income is already fully taxed.

11) Quick compliance checklist (for organizers/payors)

Identify the recipient’s status (resident individual, NRA engaged, NRA not engaged, corporation).
Determine if any single prize exceeds ₱10,000.
Apply 20% final tax (or applicable NRA/treaty rate); withhold before payout.
Remit via the correct BIR forms/schedules; issue BIR Form 2306 to the winner.
For non-cash prizes, determine FMV and arrange for tax settlement (collect or shoulder).
For PCSO games, apply the current rule (post-CREATE: 20% for >₱10,000).

Bottom line

For individual winners, a single prize over ₱10,000 is generally hit with a 20% final tax in the Philippines, withheld at source; ₱10,000 or less goes into your regular income.
PCSO/lotto prizes followed a special exempt window (2018–2020) but, from 2021 onward, prizes over ₱10,000 are again subject to 20% final tax.
Nonresidents and entities have different rules—verify status and documentation (including treaty relief) before payout.

If you have a specific winning, I can walk through the exact computation and paperwork based on your facts.