BIR Ruling [DA-366-A-00]

October 23, 2000 BIR RULING [DA-366-A-00] 27 (A), 57 (B), 108 (A) 057-96 J.H. Pajara Construction Corporation 6th Floor Strata 100 Building Emerald Avenue, Ortigas Center Pasig City Attention: Engr . Jaime H . Pajara Joint Venture-Managing Partner Gentlemen : This refers to your letter dated August 8, 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 withholding tax. It is represented that the Joint Venture of J.H. Pajara Construction Corporation/Persan Construction, a joint venture duly organized and existing according to law with office address at the 6th Floor Strata Building, Emerald Avenue, Ortigas Center, Pasig City. has entered into a Joint Venture Agreement dated March 30, 2000 for the purpose of constructing the Proposed Commonwealth Avenue Batasan Road Interchange (Depressed Section) Quezon City. 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 J.H. Pajara Construction Corporation/Person Construction 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, J.H. Pajara Construction Corporation and Persan Construction are separately subject to the 32% corporate income tax imposed under Section 27(A) of the Tax Code of 1997 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 and consequently to the 8.5% withholding VAT, its project being a "public works" contract with the government. 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 shall be considered null and void. cDSAEI Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group