Crown Asia Properties, Inc.

October 27, 2009 BIR RULING [DA-(IL-034) 624-09] EO 226; DA-456-2007; DA-630-2006; DA-048-97; DA-011-2007; DA(II-018)356-2009; DA-578-2006; DA-586-2007 Crown Asia Properties, Inc. G/F Las Pias Business Center Alabang-Zapote Road Talon, Las Pias City Attention: Ms. Leamor S. Harlea Chief Accountant Gentlemen : This refers to your letter dated October 23, 2009 requesting for confirmation of your opinion that CROWN ASIA PROPERTIES, INC. (the "Corporation") 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 "Mille Luce 2-Antipolo City", 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 three (3) years from the date of issuance of the Certificate of Registration or actual start of commercial operations, whichever is earlier, but in no case earlier than the date of registration. IcEACH On October 5, 2009, the Board of Investment ("BOI") issued in favor of the Corporation a Certificate of Registration as a Developer of Low-Cost Mass Housing Project for its subdivision project "Mille Luce 2-Antipolo City" located in Antipolo City, an expansion project of Mille Luce 1, in accordance with the Omnibus Investment Code of 1987. Pursuant thereto, the project has been granted an Income Tax Holiday for a period of three (3) years commencing from October 5, 2009, the date of approval of the BOI, and until October 4, 2012. The Corporation offers its buyers Bank and Installment financing schemes, with a loan term ranging from 5 to 15 years to pay. Accordingly, the Corporation will receive full payment for the house and lot 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 transactions 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. 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 Crown Asia Properties, 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 3 years, this Office confirms your opinion 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 for a period of three (3) years from the date of issuance of the Certificate of Registration or actual start of commercial operations, whichever is earlier, but in no case earlier than the date of registration, 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. DHacTC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service