Communities Davao, Inc.

February 23, 2010 BIR RULING [DA-(IL-004) 035-10] EO 226; [DA(IL-035)651-2009]; [DA(IL-006)194-2009]; DA-456-007; DA-630-2006; DA-048-97 Communities Davao, Inc. Mezzanine Floor, Starmall Complex, EDSA cor. Shaw Blvd., Mandaluyong City Attention: Atty. Cecilia A. Ramilo Tax Department Head Gentlemen : This refers to your letter dated January 15, 2010 requesting for confirmation of your opinion that COMMUNITIES DAVAO, INC. is exempted from the withholding tax on the sale of house and lot units with contract price not exceeding Three Million Pesos (P3,000,000.00) per unit, for its subdivision project "Camella Northpoint Building 1", pursuant to the Income Tax Holiday (ITH) granted 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 the date of approval or start of commercial operations, whichever comes earlier. It is represented that on January 14, 2010, the Board of Investments ("BOI") issued in favor of COMMUNITIES DAVAO, INC. (the "Corporation") a Certificate of Registration as a New Developer of Low-Cost Mass Housing Project for its subdivision project "Camella Northpoint Building 1" located in J.P. Laurel Ave. cor. Dakudao Road, Davao City in accordance with the Omnibus Investment Code of 1987. Pursuant thereto, the project has been granted an Income Tax Holiday for a period of four (4) years commencing from January 14, 2010, the date of approval of the BOI, and until January 13, 2014. The Corporation offers to its buyers Bank financing and installment payment scheme, with a loan term ranging from 5 to 15 years to pay. Accordingly, the Corporation will receive full payment for the condominium units from the financing institutions upon submission of complete documentary requirements which necessarily includes the Contract to Sell and the Deed of Absolute Sale. On the other hand, for the sale of units under the installment scheme, the Contract to Sell will be executed by the parties upon contracting while the Deed of Absolute Sale in favor of the buyer will be executed only upon the buyer's full payment of the installment price, which may be after 5 to 15 years. HTAIcD 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 Communities Davao, Inc. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group