Property Company of Friends, Inc.

April 21, 2008 BIR RULING [DA-262-08] EO 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 letters dated April 9, 2008 requesting for a ruling on the tax consequence of the Income Tax Holiday (ITH) granted to Property Company of Friends, Inc. (Pro-Friends) by the Board of Investments (BOI) under Executive Order (E.O.) No. 226 otherwise known as the Omnibus Investments Code of 1987, for a period of four (4) years from start of commercial operations/selling. It appears that Pro-Friends is registered with the BOI as a New Developer of Mass Housing Projects on a Non-Pioneer status. It is the developer of the following mass housing projects located in the Province of Cavite, namely: Project Name Location Date of BOI Start of Registration Commercial Operation/ITH Amandala Village Carmona, Cavite 2008-059 February, 2008 Summit @ Ridgecrest Imus, Cavite 2008-060 February 2008 Alcove @ Ridecrest Imus, Cavite 2007-210 November, 2007 that you offer to your buyers a financing package through PAG-IBIG, GSIS, Banks and other Financial Institutions with a term range of 5 to 10 years to pay; that during the 4-year period, you will receive full payment of the housing units from the financing institutions and must recognize the sale in your books to avail of the tax holiday granted by the BOI; that the Deed of Absolute Sale in favor of the buyers will be executed only upon the buyer's full payment of the loan to financing institution, which is maybe after 5 to 10 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) 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