BIR Ruling [DA-321-99]

May 26, 1999 BIR RULING [DA-321-99] EEI- E. E. Black Limited a Joint Venture UG 05, LG 08 and LG 09, Cityland Herrera Tower Herrera St., corner Valero St., Makati City Attention: Mr . Leonardo B . Hernandez Project Accountant and Mr . F . P . Pallen Finance & Accounting Officer Gentlemen : This refers to your letters dated May 26, 1997, March 3, 1998, 1999 requesting for a ruling that Engineering Equipment Inc . -Eugene E . Black (EEI-E . E . Black, Ltd .), a joint venture, be exempt from the 1% withholding tax. It is represented that EEI-E.E. Black, Ltd., is a joint venture which shall undertake the construction project for Philam Properties Corporation and act as general contractor for the project known as "Philamlife Tower"; that the said joint venture has been subjected to the 1% expanded withholding tax; and that Philam Properties Corporation withheld P1.077M in 1997 and it issued a certificate of creditable expanded withholding tax at source (BIR Form No. 2307) under the name of the Joint Venture which has no juridical personality. 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, it is our opinion that the joint venture of EEI-E.E. Black, Ltd. is not subject to the corporate income tax under Section 27 (A) of the Tax Code of 1997. Consequently, gross payments received by the said joint venture is not Subject to the 1% expanded withholding tax under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 2-98. (BIR Ruling Nos. DA-488-98 dated November 16, 1998, 018-99 dated February 11, 1999) Considering the foregoing, the joint venture of EEI-EE Black Ltd. for the construction of Philamlife Tower will not create a taxable joint venture within the meaning of Section 22(B), in relation to Section 27(A) of the Tax Code of 1997. However, the co-ventures are separately subject to the corporate income tax (35%; 34% effective January 1, 1998; 33% effective January 1, 1999) imposed under Section 27(A) of the Tax Code of 1997 on their taxable income respectively derived during the taxable year from all sources including those from the said construction project. Likewise, each of the co-ventures will be subject to the expanded withholding tax under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 2-98. Moreover, being the contractor of the project, the joint venture shall be subject to the 10% value-added tax pursuant to Section 102(a) of the Tax Code, as amended by R.A. No. 7716, otherwise known as the "Expanded Value Added Tax Law" and further amended by R.A. No. 8241. (BIR Ruling No. DA-226-96 dated July 5, 1996) In view of the foregoing, inasmuch as the EEI-EE Black Ltd. joint venture has no juridical personality to which the Certificate of Creditable Expanded Withholding Tax may be applied, it may file a claim for refund with the Appellate Division, this Bureau, relative to its creditable withholding tax in the amount of P1.077M which has been withheld by its client in 1997 within 2 years from payment of the tax pursuant to Section 204(C) 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, then this ruling will be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)