Property Company of Friends, Inc.

August 21, 2007 BIR RULING [DA-456-07] E.O. 226 DA-630-2006; DA-048-97 Property Company of Friends, Inc . Pro Friends Center, 55 Tinio St. Brgy. Addition Hills Mandaluyong City Attention: Mr. Victoriano C. Martinez, Jr. Assistant Vice President Gentlemen : This refers to your letter dated April 10, 2007 requesting for a ruling on the tax consequences of the Income Tax Holiday (ITH) granted to Property Company of Friends, Inc. ("Pro-Friends") by the Board of Investments (BOI) under Executive Order (EO) No. 226 otherwise known as the Omnibus Investments Code of 1987, for a period of four (4) years from start of commercial operations/selling. From the documents submitted, it appears that Pro-Friends is registered with the BOI as a New Developer of Mass Housing Projects on a Non-Pioneer status; that it is the developer of the following mass housing projects located in the Province of Cavite, namely: Project Name Location BOI Reg. No. West Executive Estates Imus, Cavite 2005-136 dated Sept. 23, 2005 Chesapeake Village Imus, Cavite 2005-174 dated Nov. 8, 2005 Villa de Alyssa Imus, Cavite 2005-175 dated Nov. 8, 2005 that the above-mentioned projects have been granted an Income Tax Holiday for a period of four (4) years commencing from the approval of the BOI; that Pro-Friends offers to its buyers a financing package through PAG-IBIG, GSIS, Banks and other Financial Institutions with a loan term ranging from 5 to 15 years to pay; that during the 4-year period, Pro-Friends will receive full payment of the lot and housing units from the financing institutions upon completion of the documentary requirement including the contract to sell; and that since Pro-Friends was paid in full, the said sale must be recognized in its books to avail of the tax holiday granted by the BOI although the Deed of Absolute Sale in favor of the buyer will be executed only upon the buyer's full payment of the loan to the financing institution, which is maybe after 5 to 15 years or more. SDTIaE In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987. (BIR Ruling No. DA-630-2006 dated October 23, 2006) Accordingly, since Pro-Friends is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of 4 years, this Office is of the opinion, as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, on income payments received by it during the aforementioned period with respect to its registered activity, subject however to the condition that both the BOI General and Specific Terms and Conditions for the grant of ITH are met during the said period. 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 as null and void. DSacAE Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group