Property Company of Friends, Inc.

April 14, 2008 BIR RULING [DA-245-08] E.O. 226; DA-456-07 Property Company of Friends, Inc. 55 Tinio St., Brgy. Addition Hills Mandaluyong City Attention: Ms. Girlie B. Seco OIC-Realty Services Division Gentlemen : This refers to your letter dated February 11, 2008 requesting for a tax exemption certificate on account of your registration with the Board of Investments (BOI) under Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987." It is represented that Property Company of Friends, Inc. (Pro-friends) is a developer of various mass housing projects located mostly in the Province of Cavite; that it applied for income tax incentives with the Board of Investments for some of your projects, i.e. , One Lancaster Lane Subdivision; that on January 23, 2008, BOI Certificate No. 2008-023 has been issued in its favor as a New Developer of Low Cost Housing Project (One Lancaster Lane Subdivision Imus, Cavite); that pursuant to the Specific Terms and Conditions accompanying its BOI registration, Pro-Friends is entitled to the following incentives: "7. The firm shall be entitled to the following incentives: a. Income Tax Holiday (ITH) for a period of four (4) years from January 2008 or actual start of commercial operations, whichever is earlier, but in no case earlier than the date of registration. The ITH shall be limited only to the revenue generated from this registered project (One Lancaster Lane Subdivision Imus, Cavite). Revenues from units with selling price exceeding P3.0M shall not be covered by ITH. "In the Availment of ITH, the firm shall secure endorsement/certification from the HLURB that it has faithfully complied with the approved development plan." that Pro-Friends offers to its buyers a financing package through PAG-IBIG, GSIS, Banks and other Financial Institutions with a loan term ranging from 5 to 15 years to pay; that during the 4-year period, Pro-Friends will receive full payment of the lot and housing units from the financing institutions upon completion of the documentary requirement including the contract to sell; and that since Pro-Friends was paid in full, the said sale must be recognized in its books to avail of the tax holiday granted by the BOI although the Deed of Absolute Sale in favor of the buyer will be executed only upon the buyer's full payment of the loan to the financing institution, which is maybe after 5 to 15 years or more. In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98, implementing Section 57 (B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987. (BIR Ruling No. DA-072-98 dated March 11, 1998) DEIHSa Accordingly, since Pro-Friends is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of 4 years, this Office is of the opinion, as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 2-98, on income payments received by it during the aforementioned period with respect to its registered activity, subject however to the condition that both the BOI General and Specific Terms and Conditions for the grant of ITH are met during the said period. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service