Household Development Corp.

September 9, 2008 BIR RULING [DA-(IL-021) 204-08] E.O. 226; DA-456-2007; DA-630-2006; DA-048-97 Household Development Corp. Las Pias Business Center, Alabang-Zapote Road Talon, Las Pias City Attention: Atty. Cecilia A. Ramilo Tax Department Head Gentlemen : This refers to your letter dated September 5, 2008 requesting for a ruling on the tax consequences of the Income Tax Holiday (ITH) granted to HOUSEHOLD DEVELOPMENT CORPORATION by the Board of Investments (BOI) under Executive Order (E.O.) No. 226 otherwise known as the Omnibus Investments Code of 1987, for a period of four (4) years from start of commercial operations/selling of its condominium project "Laureano de Trevi Tower 3". From the documents submitted, it appears on August 11, 2008, the Board of Investment ("BOI") issued in favor HOUSEHOLD DEVELOPMENT CORPORATION (the "Corporation") a Certificate of Registration as a New Developer of Mass Housing Project for its condominium project "Laureano de Trevi Tower 3" located in Don Chino Roces Ave., Makati 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 August 11, 2008, the date of approval of the BOI, and until August 10, 2012. 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. In either of the cases mentioned above, the sale transaction shall be recognized in the books of the Corporation and the corresponding income therefrom shall be reported in its income tax return in the taxable year when the sale was recorded, in order to avail of the tax holiday granted by the BOI. HcaDTE 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 Household Development Corporation 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service