Taxability of the Joint Venture for a Construction Project

March 20, 1992 BIR RULING NO. 098-92 24 115-86 098-92 Pangasiwaan Ng Daungan Ng Pilipinas (Philippine Ports Authority) Marsman Building, South Harbor Port Area, Manila Attention: Rufino L . Tan Manager Gentlemen : This refers to your letter dated January 23, 1992 requesting for a ruling on whether or not Vicente T. Lao Construction/Liberty Construction and Development Corporation Joint Venture, the contractor for the construction of Gate House Complex, Pavement of Container Yard and Water Tank Project at the Port of Davao, Davao City, is subject to the one (1%) percent withholding tax. It is represented that the joint venture was formed on March 22, 1991 for the purpose of bidding for the said project; that it was granted by the Philippine Contractors Accreditation Board with Special Contractor's License No. JV-91-073; that during the bidding on July 16, 1991, the aforesaid joint venture was adjudged the winning bidder and consequently, it undertook the execution of the project; that in its first progress billing, the Authority deducted the one (1%) percent withholding tax in the amount of P34,380.63. In reply, I have the honor to inform you that the joint venture entered into by and between Vicente T. Lao Construction/Liberty Construction and Development Corporation for the purpose of undertaking a construction project of the Gate House Complex, Pavement of Container Yard and Water Tank is exempt from income tax pursuant to Sections 20(b) and 24, both of the Tax Code. Accordingly, your gross payment to said joint venture is not subject to the expanded withholding tax prescribed by Section 50 of the Tax Code, as amended by P.D. No. 1351 and its implementing regulations. However, the respective contractors which comprise the joint venture shall be subject to the value-added tax under Section 102 of the Tax Code. It is also understood that the contractors are respectively liable to the individual or corporate income tax on the income derived by it on the above construction project. This ruling is subject to verification and the same will be revoked if after verification, the facts are not as represented. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue