BIR Ruling [DA-288-00]

July 24, 2000 BIR RULING [DA-288-00] 27 (A), 57 (B), 108 (A); 057-96 DA-288-2000 Ms . Banaria and Company Second Floor, Alforque Building 935 Aurora Boulevard Quezon City Attention: Mr . Marcelino S . Banaria Managing Partner Gentlemen : This refers to your letter dated March 6, 2000 requesting for a ruling that a joint venture undertaking the construction of a government project is exempt from the payment of the 1% expanded holding tax. It is represented that your client, C. M. Pancho Construction, Inc., J. E. Manalo & Co. Inc. and Dimson (Manila), Inc., a joint venture duly organized and existing according to law with office address at 71-A Scout Borromeo St., Diliman, Quezon City, have entered into a Joint Venture Agreement dated September 27, 1996 for the purpose of constructing the Infanta-Gen. Nakar Road in Quezon Province under Package 6L-3. In reply, please be informed that pursuant to Section 22(B) of the Tax Code of 1997, the term "corporation" shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts ( cuentas en participacion ), associations, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. Such being the case, the joint venture of C. M. Pancho Construction, Inc., J. E. Manalo & Co. Inc. and Dimson (Manila), Inc. is not subject to the corporate income tax under Section 27 of the Tax Code of 1997. Consequently, gross payments received by said joint venture is not subject to the 1% expanded withholding tax prescribed by Section 57(B) of the Tax Code of 1997 and implemented by Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 2-98. However, the co-venturers, C. M. Pancho Construction, Inc., J. E. Manalo & Co. Inc. and Dimson (Manila), Inc. are separately subject to the 32% corporate income tax imposed under Section 27(A) of the Tax Code of 1997 effective January 1, 2000 on their taxable income derived by them from the aforesaid project. Moreover, as contractor, the joint venture shall be subject to the 10% value-added tax under Section 108(A) of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group