Taxing Kobe and Dame

by: Mickey Ingles

Damian Lillard Kobe Bryant visited the Philippines last June and, man, basketball aficionados all went crazy. Can you blame us? Whenever you have a part-time rapper/full-time cold-blooded shooter and arguably one of the top five greatest basketball players ever (some say he’s not human!) coming to our basketball-crazy shores, you can expect us to all turn a lil’ nutty.

So, when these two NBA standouts announced their respective events, I bet we all asked the same questions. How do I get tickets? Is it possible to meet the Mamba? Will Baby Dame be droppin’ dimes? Why’s Kobe smiley-er now that he’s retired? What excuse can I tell my boss so I skip work and see them? How much taxes will Damian and Kobe pay in the Philippines?

Okay, fine, maybe not the last question. But being the tax nerd that I am, it got me thinking… Kobe and Dame probably made a killing for their events—and I’m sure our beloved Bureau of Internal Revenue (BIR) wasn’t going to pass up on some dimes dropped in their direction—so how much were the recently-retired Laker and D’ Lil going to be taxed for it?

Well, the first step is knowing what kind of taxpayers these two NBA players are. And knowing is, according to our favorite 80s PSAs, half the battle. For Philippine income tax purposes, they are non-resident aliens not engaged in trade or business (NRANETB). Kobe and Dame are non-resident aliens because they are not Filipino citizens (imagine if they were though, our Gilas backcourt would be stacked!) and they do not reside in the Philippines.[1] They are not engaged in trade or business because they only have casual transactions in the country[2] and their stay did not exceed 180 days during the calendar year.[3]

As NRANETB, they are taxed 25% of their entire income received from all sources within the Philippines.[4] This covers the fees they presumably made from shooting treys in Smart Araneta Coliseum and from talking about lasagna (yes, lasagna.) No preferential treatment is available to the two superstars under the US-RP Tax Treaty either, as income derived by athletes are generally taxed in the state where their performances take place.[5]

Aside from income tax, Kobe and Dame are also subject to 12% value-added tax (VAT), as performances in the Philippines are subject to VAT.[6]

If Kobe and Dame are subject to income tax and VAT, does this mean we’ll see them lining up in the BIR to file and pay their taxes anytime soon? Is this our chance to see them without shelling out moolah for tickets?

For us mortals who weren’t able to attend their events (and like hanging around the BIR during our free time), we wish. But, no—our NBA idols do not have to file their tax returns. The withholding tax system takes care of that.

NRANETB like Kobe and Dame don’t have to file tax returns.[7] That arduous duty belongs to their income payors,[8] i.e. the good folks who got (and presumably paid) Kobe and Dame to hop on a jet to Manila, lace up some pretty nice kicks, and mingle with fans. The income payors have to withhold the 25%—meaning they lop the 25% off the money they give Kobe and Dame and remit it to the BIR directly. And as the 25% is final withholding tax, the amount of income withheld constitutes a full and final payment of income tax due from the stars.[9] The same withholding system applies for their VAT liability.[10]

The same applies to other NBA stars who come over and earn from sources within the Philippines—except, of course, for Lakers guard Jordan Clarkson who is a citizen and will hopefully suit up for the Gilas national team soon.

Now that’s answered, we can ask the most important question of all… when’s the MJ a.k.a. the GOAT coming over? Let’s make it happen, people.

Mickey Ingles is the editor-in-chief of Batas Sportiva. He also wrote Tax Made Less Taxing, a book on Philippine taxes.


 

[1] National Internal Revenue Code (NIRC) Sec. 22.

[2] RR 2-40, Sec. 8.

[3] NIRC, Sec. 25 (A).

[4] NIRC, Sec. 25 (B).

[5] RP-US Tax Treaty of 1976, Article 17.

[6] NIRC, Sec. 108.

[7] RR 2-98, as amended, Section 2.57.

[8] Id.

[9] Id.

[10] RR 16-2005, as amended, Section 4.114-2.

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