BIR Ruling [UN-137-95]

April 3, 1995 BIR RULING [UN-137-95] C. M. Pancho Const., Inc./Dimson (Mla.), Inc./ William Uy Const., Inc. Joint Venture 71-A Scout Borromeo St. Diliman, Quezon City Attention: Mr . Cornelio M . Pancho Authorized Managing Officer Gentlemen : This refers to your letter dated January 12, 1995 in effect requesting for a ruling that your joint venture undertaking construction project for Pampanga Delta Project be exempt from 1% expanded withholding tax. It appears that C. M. Pancho Construction, Inc., Dimson (Mla.), Inc. and William Uy Construction, Inc., all domestic corporations established under Philippine laws, with principal office address at 71-A Scout Borromeo St., Diliman, Quezon City, have entered into a joint venture agreement on May 31, 1993 for the purpose of constructing civil works (Phase I) of the Pampanga Delta Development Project (flood control component) contract Package No. 4 after it was awarded the above-stated contract for submitting the lowest bid. In reply, please be informed that pursuant to Section 20(b) of the Tax Code, the term "corporation" includes companies, joint accounts (cuentas en participacion), 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. In view thereof, it is the opinion of this Office that the joint venture of C. M. Pancho Construction, Inc., Dimson (Mla.), Inc. and William Uy Construction, Inc. 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 as 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 a contractor, the joint venture of C. M. Pancho Construction, Inc., Dimson (Mla.), Inc. and William Uy Construction, Inc. shall be subject to the 10% value added tax (VAT) 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). Finally, your request for refund or tax credit in the amount of EIGHT THOUSAND FIVE HUNDRED FIFTY TWO PESOS AND NINETY-EIGHT CENTAVOS (P8,552.98) which was allegedly withheld from your first billing could not be granted for lack of necessary proofs to that effect. cdi Very truly yours, ALICIA P. CLEMENO Assistant Commissioner By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant