BIR Ruling [DA-415-05]

October 4, 2005 BIR RULING [DA-415-05] Sec. 22 (B); DA-355-2004 Vicente T. Lao Construction No. 17, P. Tuazon Street Quezon City Attention: Ms. Ma. Victoria L. Sunglao Accountant Gentlemen : This refers to your letter dated August 24, 2005 stating that PT Adhi Karya and Vicente T. Lao Construction had entered into a joint venture agreement for the construction of the Sixth Road Project Bridge Component Contract Package 1A, a government project located in Mindanao. Relative thereto, you are requesting a ruling that the joint venture is exempt from the withholding tax imposed under Revenue Regulations (Rev. Regs.) No. 2-98, as amended. In reply, please be informed that pursuant to Section 22(B) of the Tax Code of 1997, as amended, 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 project 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 formed as a result of the Joint Venture Agreement by and between PT Adhi Karya and Vicente T. Lao Construction, for the purpose of undertaking a construction project of the government, is not subject to the corporate income tax under Section 27(A) of the Tax Code of 1997, as amended. Consequently, gross payment to the said joint venture is not subject to the withholding tax prescribed under Section 57(B) of the same Code, as implemented by Rev. Regs. No. 2-98, as amended by Rev. Regs. Nos. 6-2001 and 12-2001. Likewise, the joint venture being exempt from corporate income tax is not required to file quarterly and final or adjusted income tax returns. (BIR Ruling No. DA-35-2004 dated June 25, 2004) 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. TICAcD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service