Request for a Certificate of Exemption from Payment of 1% Withholding Tax on the Joint Venture Formed by Golden City Engineering & Construction and Consuelo Builders Corporation for the Construction of the Proposed Sumulong Drainage Outfall Project, Package 2 of Phase I

May 20, 1996 BIR RULING NO. 057-96 24 (a) 000-00 057-96 Consuelo Builders Corporation and Golden City Engineering and Construction Joint Venture 97 Visayas Avenue Project 6, Quezon City Attention: Aurelio J . Lagman, Jr . Managing Officer Gentlemen : This refers to your letter dated December 5, 1995 requesting for the issuance of a certificate of exemption from the payment of 1% withholding tax on the joint venture formed by Golden City Engineering & Construction and Consuelo Builders Corporation for the construction of the proposed Sumulong Drainage Outfall Project, Package 2 of Phase I, from Sta 2+005 to Sta. 1+645, Sumulong Highway, Marikina, Metro Manila. casia It is represented that the joint venture between Consuelo Builders Corporation & Golden City Engineering & Construction (sole proprietorship) was formed on July 25, 1994 for the purpose of jointly preparing and submitting a bid for the above-mentioned project and in case of award of the contract, of jointly performing the relevant works; that a Special License Certificate was granted by the Philippine Contractors Accreditation Board under Special Contractor's License No. JV-94-018, to bid for and undertake the construction of the project, Sumulong Drainage Outfall Project, Package 2 of Phase 1, from Sta 2+005 to Sta 1+645, Sumulong Highway, Marikina which is being implemented by the Department of Public Works and Highways (DPWH); that the said joint venture was adjudged as the winning bidder, and consequently, it undertook the execution of the project by virtue of a contract agreement with the Government of the Philippines through the DPWH-NCR as represented by its Regional Director, Mr. Vicente D. Lopez. Base on the foregoing representations, you now request for a certificate of exemption from the payment of the 1% creditable expanded withholding tax. 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 participation), associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal, and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. Such being the case, the joint venture of Consuelo Builders Corporation and Golden City Engineering & Construction (sole proprietorship) is not subject to the corporate income tax under Section 24 of the TAX Code. Consequently, gross payments received by said joint venture is not subject to the 1% expanded withholding tax prescribed by Section 50 (b) of the Tax Code, as amended and implemented by Revenue Regulations No. 6-85, as amended. However, the co-ventures Consuelo Builders Corporation and the Golden City Engineering and Construction (sole proprietorship) are separately subject to the 35% corporate income tax imposed under Section 24 (a) of the Tax Code, as amended, and to income tax at the rates prescribed under Section 21 (f) of the Tax Code, as amended on their taxable income during each taxable year, respectively derived by them from the aforesaid project. (BIR Ruling No. 274-92 dated September 30, 1992) Moreover, as contractor, the joint venture shall be subject to the 10% value-added tax under Section 102 (a) of the Tax Code, as amended by R.A. No. 7716, otherwise known as the Expanded value-added Tax Law. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue