BIR Ruling

July 31, 1970 Mr. Francisco C. Mercado 68 Morong Street Quezon City S i r : This refers to your letter dated May 11, 1970 stating the following: "A certain corporation is registered with the Securities and Exchange Commission as a Real Estate Broker. Said corporation entered into contract with various landowners as a joint venture for purposes of developing the land and converting the same into subdivision. For the purpose of selling the subdivided lots, the corporation hired the services of a license Realtor to act as its agent. The Realtor pays his monthly percentage tax based on his gross receipt of 5% commission received from the corporation." You now want to be informed as to whether under the foregoing representations, said corporation is subject to real estate broker's percentage tax. In reply, I have the honor to inform you that since the contract entered into by the corporation with the various landowners is a joint venture between them for the purpose of developing the land and converting the same into subdivision, and it appearing that a hired license realtor undertakes the selling of the subdivided lots and pays the corresponding percentage tax on his commission, the corporation becomes a co-principal with the landowners, and therefore, not subject to real estate broker's tax. However, the joint venture between the corporation and the landowners is subject to real estate dealer's fixed tax under Section 182(A)(3)(aa) of the Tax Code, as amended by Republic Act No. 6110. aisa dc Moreover, the joint venture between the corporation and the landowners falls within the purview of the term "corporation" under Section 84(b) of the Tax Code. Consequently, the joint venture is subject to corporate income tax provided for in Section 24(a) of the Tax Code, as amended by R. A.. No. 5431. (Collector of Internal Revenue vs. Batangas Transportation Co. and Laguna-Tayabas Bus Co., G.R. No. L-9692, January 6, 1958). Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue