BIR Ruling [UN-105-94]

March 28, 1994 BIR RULING [UN-105-94] EEI Corporation No. 12 Manggahan St. Bgy. Bagumbayan Libis, Quezon City Attention: Mr . Tomas S . Lindo Gentlemen : This refers to your letter dated March 3, 1994 in effect requesting for a ruling that a joint venture undertaking construction project for the Department of Transportation and Communications regarding Davao Fishing Port Complex is exempt from the 1% expanded withholding tax. It appears that Engineering Equipment, Inc. and J.E. Manalo & Co., Inc., both domestic corporations established under and by virtue of Philippine laws, with principal office address at No. 12 Manggahan St., Bgy. Bagumbayan, Libis, Quezon City, have entered into a joint venture agreement with the Department of Transportation and Communications on April 20, 1993 for the construction of the Davao Fishing Port Complex under the Fishing Port Development Project (II) (L/A No. PH-P126) after it was awarded the above-stated contract. In reply thereto, 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), associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium forged 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. In view thereof, it is our opinion that the joint venture of EEI Corporation and J.E. Manalo & Co. 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-venturers are separately subject to the 35% corporate income tax based on their taxable income from all sources pursuant to Section 24(a) of the Tax Code, as amended. Moreover, as contractor, the joint venture of EEI Corporation and J.E. Manalo & Co. shall be subject to the 10% value-added tax pursuant to Section 102(a) of the Tax Code, as amended by Executive Order No. 273. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the same could not be substantiated, then this ruling shall be considered null and void. (BIR Ruling No. 274-92 dated September 30, 1992). cdi Very truly yours, ALICIA P. CLEMENO Assistant Revenue Service Chief Officer-in-Charge (Legal Service)