Development Agreement Executed by the Owners and Fil-Estate for the Construction and Development of an Entire Consolidated Complex (Consisting of a Residential Subdivision, a Golf Course and a Commercial Center), and the Allocation of their Respective Participating Interests in the Project Does Not Create a Taxable Joint Venture; Allocation between and among the Parties of Developed Lots as Participating Interest in the Project Not a Taxable Event and Not Subject to Income/Expanded Withholding Tax

January 23, 1996 BIR RULING NO. 010-96 24 000-00 010-96 Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: Atty . M . F . A . Balili Gentlemen : This refers to your letter dated August 18, 1995, requesting in effect for a ruling on the tax implementation of a "Development Agreement" which your clients entered into for the construction and development of one entire consolidated complex (consisting of a residential subdivision, a golf course and a commercial center), hereafter referred to as the PROJECT. prcd It is represented that your, clients, Greenfield Development Corporation, Fil-Estate Management, Inc., La Paz Housing & Development Corporation, Carmona Realty Development Corporation, Grandview Realty Corporation, Southern Heights Land Development Corporation, Jose Campos, Alberto Gotuaco, Ernesto Abalos and eight other individuals, hereafter collectively referred to as OWNERS, each own several parcels of land duly registered with the Register of Deeds of Carmona, Cavite, Bian, Laguna ("PROPERTIES"); that taken together, the Properties total 4,150,519 sq. m. in area, more or less; that the OWNERS entered into a Development Agreement with Fil-Estate Golf and Development Inc., ("Fil-Estate") as developer for the development and construction of the Project; that the Development Agreement essentially stipulated as follows: a. The OWNERS shall contribute and pool together their respective PROPERTIES to form part of the entire area of the entire consolidated PROJECT. The total area comprised of the different PROPERTIES belonging to the different OWNERS shall be considered as one indivisible whole, with each OWNER acquiring an interest ("Participating Interest") in the developed PROJECT corresponding to the proportion that the aggregate area of its Property, regardless of location, bears to the total land area of the entire consolidated PROJECT; b. As its contribution to the PROJECT, Fil-Estate will perform the development and construction work for the entire PROJECT at its own expense. Fil-Estate will thereby provide the cash for the development and construction of the PROJECT, which will be done in phases; c. In consideration of, and in return for, the respective contributions of the OWNERS and Fil-Estate, shall be allocated and receive 55% of all the component portions of the entire consolidated PROJECT (consisting of the residential subdivision, the golf course and the commercial center), while the OWNERS shall together be allocated and receive 45% thereof. The 45% OWNER'S share shall be further divided among the different OWNERS in accordance with their respective Participating Interest in the PROJECT; and d. Since the OWNERS will each own their respective share or Participating Interest in the completed and developed phases of the PROJECT, each OWNER will be free to sell his share or Participating Interest in the PROJECT, However, Fil-Estate shall be appointed as the marketing, management and collection agent of the OWNERS for each of the latter's allocation in the residential subdivision. For these services, Fil-Estate shall be paid each of the OWNERS a fee corresponding to a certain percentage of the total selling price of the residential lots sold for and on behalf of the OWNERS. cdpr that simultaneous with the execution of the Development Agreement, the OWNERS also entered into an Agreement to Consolidate Titles, where it was agreed as follows: a. Titles covering the PROPERTIES shall be consolidated into one or two mother titles solely for the purpose of the preparation by Fil-Estate of the Master Plan for the development and construction of the PROJECT; and b. The Participating Interest of each OWNER in the PROJECT shall be based on the area of land which they contributed. In reply, please be informed that pursuant to Section 20 (b) of the Tax Code, as amended, the term corporation includes partnerships, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), association or insurance companies, but does not includes general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction project or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. Thus, it is our opinion that the joint venture of Fil-Estate and the OWNERS is not subject to the corporate income tax under Section 24 of the Tax Code, as amended. However, the co-venturers are separately subject to the regular corporate income tax on their taxable income during each taxable year respectively derived by them from the aforesaid construction project. Considering the foregoing, your opinion that the Development Agreement executed by the OWNERS and Fil-Estate for the construction and development of the entire consolidated complex (consisting of a residential subdivision, a golf course and a commercial center), and the allocation of their respective Participating Interests in the PROJECT will not create a taxable joint venture within the meaning of Section 20 (b), in relation to Section 24 (a), of the Tax Code, as amended, and that the allocation between and among the parties of the developed lots as their Participating Interest in the PROJECT, as stipulated in the Development Agreement and the Agreement to Consolidate Titles, is not a taxable event and is not subject to income/expanded withholding tax, is hereby confirmed. However, when the parties subsequently sell or dispose of the developed lots which they received or will receive (as in the case of pre-selling) as their respective shares or Participating Interests in the PROJECT to third parties, the gain that may be realized by Fil-Estate and/or the OWNERS from such sale will be subject to the regular 35% corporate income tax under Section 24 of the Tax Code, as amended, or to the tax imposed under Section 21 (f) in the case of individual owners and to the creditable/expanded withholding tax under Revenue Regulations No. 6-85, as amended. LLjur This ruling is being issued on the basis of the foregoing facts represented. However, if upon investigation, it will be disclosed that facts are different, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue