BIR Ruling [DA-473-04]

September 8, 2004 BIR RULING [DA-473-04] The Regional Director Revenue Region No. 14 Tacloban City M a d a m : This has reference to the 3rd Indorsement dated July 13, 2003 of Director Alfredo V. Misajon, then Regional Director of Revenue Region No. 14, Tacloban City, relative to the case of Dillingham-Kanlaon a Joint Venture of Marasbaras Tacloban City. This Office has been asked to resolve the issue as to whether the Presumptive Input Tax granted to public works contractors with respect to government infrastructure projects is limited to 1.5% under Section 111 (B) 2 of the Tax Code. Section 111(B)2 of the Tax Code of 1997 provides: "Section 111. Transitional/Presumptive Input Tax Credits . xxx xxx xxx (B) Presumptive Input Tax Credits . xxx xxx xxx (2) Public works contractors shall be allowed a presumptive input tax equivalent to one and one-half percent (1 1/2%) of the contract price with respect to government contracts only in lieu of actual input taxes therefrom ." Emphasis supplied The foregoing provision limits the input tax that may be claimed by public works contractors to 1 1/2% only based on the contract price of the government projects. It was noted by this Office, however, that part of the project was financed by the Japan Bank for International Cooperation (JBIC). As a contractor of the Arterial Road Link Development Project, Phase I (South Samar Coastal Road Development Scheme) which is a government project, Dillingham-Kanlaon Construction (Joint Venture), can only claim a presumptive input tax equivalent to 1 1/2% based on the total contract rice. AaEDcS Public works contractors (such as Dillingham/Kanlaon Construction (Joint Venture) shall be allowed a presumptive input tax equivalent to one and one-half percent (1 1/2%) of the contract price with respect to government contracts only in lieu of actual input taxes therefrom pursuant to Section 111 (B)(2)(2) of the Tax Code of 1997, as implemented by Section 4.105-1(b)(2) of Revenue Regulations No. 7-95, as amended by Revenue Regulations No. 6-97. ( VAT Ruling No. 024-2002 dated April 24, 2002 ) For your information and guidance. (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group