BIR Ruling No. 370-2017

BUREAU OF INTERNAL REVENUE REPUBLICOF THE PHILIPPINES DEPARTMENT OF FINANCE

A

Quezon City

Sec.22B)NIRC RR 14-02;RR 10-12 BIR Ruling No.176-14

#370-2017 Pulsar Construction/Advanced Foundation Construction Systems Corporation- Joint Venture Pulsar Complex, Alimanao Hills Penablanca, Cagayan 892017

Attention: Joseph L. Lara Authorized Managing Officer Gentlemen:

Exemption for the Joint Venture formed between Pulsar Construction and Advanced Maintenance of Bridges along National Roads: Replacement of Permanent Weak Bridges Guiddam Bridge Foundation Construction Systems Corp. (the "Joint Venture for the purpose of undertaking the project: MFO 1- National Road Network Services: Construction and This refers to your letter dated August 26, 2015 requesting for a Certificate of Tax along Manila North Road (the "JV Project").

an unincorporated joint venture formed to undertake the pre-qualification and construction of the JV Project; that the Joint Venture has been duly registered with the Philippine entered into a Contract Agreement with the Government of the Republic of the Philippines committed to undertake the JV Project for a consideration of Contractors Accreditation Board (PCAB) under Special Contractor's License No. thru the Department of Public Works and Highways (DPWH wherein the Joint Venture proportionate share in the profits and losses of the Joint Venture shall be 51% for Advanced Construction (TIN: (TIN: License Nos. Foundation Construction Systems Corp. and Documents submitted disclosed that the Joint Venture (TIN: first issued on February 3, 2015: that the parties to the Joint Venture. Pulsar and that tne parties to the Joint Venture agreed that their respective are both local contractors duly registered with the PCAB under PCAB and respectively:that on March 27.2015.the Joint Venture ) and Advanced Foundation Construction Systems Corp for Pulsar Construction. Pesos and 90/100 ), is

1997, as amended. the term "corporation" shall include partnerships, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), association or insurance companies, but does not include general professional partnerships and 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 In reply, please be informed that pursuant to Section 22 (B) of the Tax Code of

operating or consortium agreement under a service contract with the Government.

September 9,2002 provides that the withholding of creditable withholding tax (CWT)shall not apply to income payments made to joint ventures or construction formed for the purpose Likewise, Section 4 (B(5 of Revenue Regulations (RR No. 14-2002 dated

#3702017

Pulsar Construction/ Advanced Foundation Construction Systems Corp.-Joint Venture Page 2 of 3 8C2O17

of undertaking construction projects or engaging in petroleum, coal, geothermal & other contract with the government. energy operations pursuant to an operating or consortium agreement under a service

Furthermore, Section 3 of RR No. 10-2012 dated June 1, 2012 provides, to wit:

Corporations. - the purpose of undertaking construction projects which is not considered as corporation under Section 22 of the NIRC of 1997 as amended, should be: "SEC. 3. -- A joint venture or consortium formed for JointVenturesNotTaxable as

( for the undertaking of a construction project; and

(2 should involve joining or pooling of resources by licensed local contractors; that is, licensed as general contractor by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI);

3 the local contractors are engaged in construction business; and

(4 Accreditation Board (PCAB) of the Departmeni the Joint Venture itself must likewise be duly licensed as such by the Philippine Contractors of Trade and Industry (DTD.

also be treated as a non-taxable corporation only if the contractor by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry appropriate Tendering Agency (government office) that the project is a foreign financed/internationally-funded project Agreement entered into by and between the Philippine Government and the foreign/international financing institution pursuant to the " implementing rules and regulations of Republic Act No. 4566 otherwise known as member foreign contractor is covered by a special license as (DTD; and the construction project is certified by the and that international bidding is allowed under the Bilateral Joint ventures involving foreign contractors may

Contractor's License Law.

joint venture or consortium formed for the purpose of undertaking construction projects shall be considered as those who are mere suppliers of goods, services or capital to taxable corporations. In addition, the tax-exempt joint venture or consortium as herein defined shall not include Absent any one of the aforesaid requirements, the

a construction project.

corporation shall each be responsible in reporting and paying appropriate income taxes on their respective share The members to a Joint Venture not taxable as

to the joint ventures profit. "

Pulsar Construction/ Advanced Foundation Construction Systems Corp.-Joint Venture Page 3 of 3 #370m203.7 8-9-2017

Foundation Construction Systems Corp. for the purpose of undertaking the project: MFO 1- National Road Network Services: Construction and Maintenance of Bridges along National Roads: Replacement of Permanent Weak Bridges-Guiddam Bridge ( along Manila North Road is considered a joint venture not taxable as a corporation for Such being the case, the Joint Venture formed by Pulsar Construction and Advanced

having complied with the conditions provided under RR No.10-2012,i.e..(1) the JV is fo by licensed local contractors (licensed as general contractor by the (PCAB):(3 the local PCAB; and therefore not subject to the corporate income tax under Section 27 (A) of the Tax Code of 1997, as amended. (BIR Ruling No. 176-14 dated June 9, 2014) the undertaking of construction project:(2) the JV involves joining or pooling of resources contractors are engaged in construction business; and (4) the JV itself is duly licensed by

subject to the 2% creditable withholding tax prescribed under Section 57 (B) of the same Code, as implemented by RR 2-98, as amended by RR No. 14-2002. (Section 4 (B) (5) of Furthermore, the gross corporate payments to the Joint Venture are not likewise

RR No. 14-2002 dated September 9, 2002)

to file quarterly and final adjustment returns. The herein Joint Venture being exempt from corporate income tax is not required

However, Pulsar Construction and Advanced Foundation Construction Systems Corp., as parties to the Joint Venture, are separately subject to the regular corporate income aforesaid construction project (BIR Ruling No. 176-14 dated June 9, 2014). tax imposed under Sections 24(A) and 27(A) of the Tax Code of 1997, as amended, on their taxable income during each taxable year respectively derived by them from the

from the JV Project is subject to the creditable withholding tax imposed under Section 57 Foundation Construction Systems Corp., pursuant to their agreed profits/income sharing, it shall withhold the tax based on the net income of its co-venturers. (BIR Ruling No. 176-14 dated June 9, 2014) before the Joint Venture distributes the net income to Pulsar Construction and Advanced of the Tax Code of 1997. as amended, and implemented by RR 2-98, as amended. Thus It should be emphasized that the respective net income of the co-venturers derived

are required to enroll themselves to the Bureau of Internal Revenue's Electronic Filing and Payment System (EFPS). The enrollment should be done at the Revenue District Office Finally, Pulsar Construction and Advanced Foundation Construction Systems Corp.

(RDO) where they are registered as taxpayers.(Section 4 of RR No.10-2012).

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void.

Very truly yours. aann

CAESAR R.DULA Commissioner of Internal Revenue

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