BIR Ruling [DA-272-05]

June 21, 2005 BIR RULING [DA-272-05] Section 113; DA-174-2001 Avisado Agan Nidea Montenegro Linaac & Associates 3rd Floor, P&L Building, 116 Legaspi Street Legaspi Village, Makati City Attention: Attys. Rommel S. Agan J. Carlito M. Montenegro Gentlemen : This refers to your letter dated January 20, 2005 requesting in behalf of your client, Japan Radio Co.,Ltd. (JRC) (i) a confirmation that an unincorporated joint venture known as FF Cruz JRC Joint Venture may claim as value-added tax (VAT) input credit against its output VAT, the VAT it will pay on its importations and purchases of goods or services from the joint venture member and third party sub-contractors, which are evidenced by VAT registered invoices and receipts, and (ii) our opinion on whether or not the joint venture is entitled to claim for refund any excess/unapplied input VAT of the joint venture upon the completion of the project. It is represented that for the purpose of submitting joint pre-qualification documents to the Philippine Ports Authority (PPA) for the Construction Procurement and Installation of Equipment for Vessel Traffic Management System (Project) at the Port District of Manila, FF Cruz & Co.,Inc. entered into a joint venture agreement with Japan Radio Co.,Ltd. (JRC) with an equity sharing of 60-40 respectively; that after the opening of the bid and the conduct of bid evaluation and post qualification, the PPA awarded the contract to FF Cruz-JRC Joint Venture after finding its bid to be the single calculated and responsive bid; that on October 26, 2004 a Contract for the Procurement and Installation of Equipment for Vessel Traffic Management System at the Port District of Manila was executed by and between the PPA, as the implementing agency of the government, and FF Cruz and JRC as contractors and members of the FF Cruz JRC Joint Venture; that under the contract, the total contract price shall be paid to the JV only upon full completion of the project and fulfillment by the JV of all the terms and conditions of the contract and issuance by PPA of the corresponding Certificate of Completion and Acceptance. In reply, please be informed that to enable the joint venture to credit against its output VAT the input VAT derived from the separate domestic purchases of goods and services by the joint venture members, the invoices and/or receipts issued by the third parties or subcontractors must be issued to the consortium. The invoice and/or official receipt must indicate the purchaser of the goods and/or services as follows: "Sold to (name of co-venturer) as member of the ________ Joint Venture." The VAT-registered invoices must state as follows: "Description of Articles Unit Price Total xxx xxx xxx "For the specific scope of work of (name of joint venture/consortium member) for the Procurement and Installation of Equipment for Vessel Traffic Management System." The VAT official receipts must state as follows: "Received the amount of ________ as payment for services to (name of joint venture/consortium member) as member of the _________ Joint Venture for its specific scope of work in the Procurement and Installation of Equipment for Vessel Traffic Management System Project". acEHSI In addition, to support the joint venture's input tax credit, the VAT registered invoices and/or receipts issued by the third parties or sub-contractors must comply with the invoicing requirements as provided in Section 113 of the Tax Code of 1997. Any unutilized input VAT of the joint venture cannot be treated and recognized as cost by the co-venturers for income tax purposes. The unapplied input VAT of the joint venture, if any, may, however, be the subject of a tax credit or refund pursuant to Section 4.106-1 of Revenue Regulations No. 7-95. (BIR Ruling No. 002-97 dated January 14, 1997) 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group