BIR Ruling No. 077-13

February 18, 2013 BIR RULING NO. 077-13 E.O. 226; RR 2-98; BIR Ruling No. 334-2011 dated September 7, 2011 Mirobeni Property Holdings, Inc. 1795 A. Mabini Street, Malate, Manila Attention: Ramon O. Yabut President Gentlemen : This refers to your letter dated 4 July 2012 requesting for a ruling granting Income Tax Holiday (ITH) to companies registered with the Board of Investments (BOI) under the terms and conditions issued by the Board of Investments. DcSTaC Documents submitted show that MIROBENI PROPERTY HOLDINGS, INC. (MPHI), with Tax Identification Number (TIN) 007-086-887-000, is a Domestic Corporation engaged in real estate business and registered with the Securities and Exchange Commission under Registration No. CS200811669 dated 25 July 2008; that MPHI is the owner of "Birch Tower 1622 Jorge Bacobo Street, Ermita, Manila"; that MPHI is registered with the Board of Investments (BOI) as a New Developer of Low-Cost Mass Housing Project on a Non-Pioneer status per BOI Registration No. 2011-096 dated 25 May 2011; that MPHI shall construct and sell Seven Hundred Thirty (730) units of low cost mass housing based on the following schedule: House & Lot Package No. of Units Selling Price (Php) (Floor Area) Studio Type 74 P1,308,965 to (19.07 sq.m.) P1,594,249 Studio Type 74 P1,429,771 to (20.83 sq.m.) P1,741,388 Studio Type 144 P1,563,787 to (21.43 sq.m.) P1,884,080 Studio Type 438 P1,667,952 to (24.30 sq.m.) P2,031,481 Total 730 ==== that the firm shall be entitled to Income Tax Holiday (ITH) for three (3) years from March 2013 or actual start of commercial operations/selling, whichever is earlier but in no case earlier than the date of registration; that the ITH shall be limited only to the revenues generated from this registered project Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila ; that revenues from units with selling price exceeding P3,000,000 shall not be covered by ITH. In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98, as amended, by Revenue Regulations No. 6-2001 implementing Section 57 (B) of the Tax Code of 1997, as amended, the withholding tax prescribed in the said Regulation shall not apply to income payment to persons enjoying exemption from the income tax provided by the Omnibus Investment Code of 1987. Accordingly, since Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila is a BOI registered project, this Office is of the opinion as it hereby holds, that income payments received by MPHI in connection with the aforementioned housing project, are exempt from the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, for a period of three (3) years starting from March 2013 or actual start of commercial operations/selling, whichever is earlier but in no case earlier than the date of registration. It must be emphasized, however, that the exemption from the creditable withholding tax covers only revenues generated from the registered activity. Furthermore, such exemption shall not cover revenues from units with selling price exceeding Three Million Pesos (P3,000,000.00) (BIR Ruling No. 334-2011 dated September 7, 2011). Interest income from in-house financing shall not be considered in the computation of ITH as revenues generated from the registered activity. The enterprise shall submit the list of cost items common to all its projects/activities (whether BOI-registered or not BOI-registered) and the methodology adopted in allocating the common costs. aICcHA Moreover, Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project's entitlement to ITH is not automatic as it has still to comply with Section 9 (a) of the Specific Terms and Conditions of the BOI Registration, viz. : (1) Secure endorsement/certification from the HLURB that it has faithfully complied with the approved development plan and a "certificate of Good Housekeeping"; (2) File an application with the BOI Incentives Department within one (1) month from the filing of the final ITR with BIR in order to validate the claim for income tax exemption. The application shall be accompanied by a certification by SSS that the firm is in good standing in the remittance of SSS contributions of its employees; and (3) Secure a Certificate of ITH Entitlement (CoE) from the Supervision and Monitoring Department (SMD) of BOI prior to filing the Income Tax Return with the BIR, otherwise ITH for that particular taxable year without CoE shall be forfeited. Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under E.O. 266. In this regard, under the terms and conditions of its BOI REGISTRATION, Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project was clearly granted a 3-year ITH but such terms and conditions do not provide for any exemption for other taxes that it may be subject to on its business transactions. Thus Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project will remain subject to Value-Added Tax (VAT) and Documentary Stamp Tax (DST) on its sales of housing units pursuant to Sections 106 (A) (1) (a) and 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 334-2011 dated September 7, 2011) In relation thereto, Section 109 (1) (P) of the Tax Code of 1997 provides, that the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00) and below or house and lot, and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos (P3,199,200.00) and below is VAT-exempt. Thus, only the sale by Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from VAT. TAaCED It should be understood that Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project shall be constituted as a withholding agent for the government if it acts as employer and any of its employees receive compensation income subject to compensation withholding tax, or if it makes payments to individuals or corporations subject to the withholding taxes at source as required under Chapter XIII and Section 57 of the Tax Code of 1997, as amended and implemented by Revenue Regulations No. 2-98, as amended. Likewise, Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project is required to file on or before the 15th day of the fourth month following the close of its accounting period a Profit and Loss Statement and Balance Sheet with Annual Information Return under oath, stating its gross income and expenses incurred during the taxable year. Finally, Mirobeni Property Holdings, Inc. Birch Tower, 1622 Jorge Bacobo St., Ermita, Manila Project's books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether it has been complying with the conditions under which it has been granted tax exemption or tax incentives and your tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts as represented are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue