BIR Ruling No. 276-2016

BUREAU OFINTERNALREVENUE REPUBLICOFTHE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

E.O.226

Secs.57(B;106(A(1)a196 NIR

BIR Ruling No.412-13 2762016

622-2016

PROPERTY COMPANY OF FRIENDS.INC

PROFRIENDS CENTER.55 Tinio St Brgy. Addition Hills, Mandaluyong City

Attention: Marilyn T. Santos-Oblena

VP-Financial Control Group

Gentlemen:

This refers to your letter dated May 25, 2015 requesting on behalf of Property Company of Friends, Inc. (Pro-Friends"), certificate of tax exemption from income

and expanded withholding taxes on its income derived from the economic and low-cost

housing project, Bellefort Estates Phase 2- Brgy. Molino IV, Bacoor, Cavite, duly

registered with the Board of Investments (BOI) under Executive Order No. 226.

otherwise known as the "Omnibus Investments Code of 1987"

Documents submitted show that Pro-Friends, with Tax Identification No.

(TIN) is a domestic corporation duly organized under the Philippine

laws; that it is registered with the Securities and Exchange Commission (SEC with

Developer of Economic and Low-Cost Housing Project (Horizontal). Bellefort Estates SEC Certificate of Registration No. that Pro-Friends, as an Expanding

Phase 2- Brgy. Molino IV, Bacoor, Cavite, is duly registered with the Board of

period of three (3) years beginning from May 2015 or actual start of commercial operations/selling, whichever is earlier, but in no case earlier than the date of Investments (BOI) under the Omnibus Investments Code of 1987 (E.O. 226), under Pro-Friends shall be entitled to income tax holiday (ITH) for the above project for a BOI Certificate of Registration No. that pursuant to said BOI Registration.

registration; that the project is duly registered with the Housing and Land Use

Regulatory Board (HLURB) under Certificate of Registration No. and License

shall be limited only to the revenue generated from the registered housing project. to Sell No. pursuant to Batas Pambansa 220; and that the ITH of the Corporation

Bellefort Estates Phase 2- Brgy. Molino IV, Bacoor, Cavite.

of its BOI Registration for the project, Bellefort Estates Phase 2- Brgy. Molino IV Bacoor, Cavite, is obligated to construct and sell One Hundred Sixty Seven (167) low- It is further shown that Pro-Friends, under the Specific Terms and Conditions

cost mass housing units based on the following sales revenues:

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Property Company of Friends, Inc./BOI ITH Page 2 of' 6

Year 2 Volume (No.of Units 50 17 Value (Php)

Total 3 167 50

(B) of the Tax Code of 1997, as amended, the withholding tax prescribed in the said the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code Regulations shall not apply to income payments to persons enjoying exemption from of 1987. (BIR Ruling No. 412-2013 dated November 11, 2013) Regulations (RR) No. 2-98, as amended by RR No. 6-2001 implementing Section 57 In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue

Bacoor, Cavite, is duly registered with the BOI under the Omnibus Investments Code of 1987, this Office is of the opinion as it hereby holds, that the income payments received by Pro-Friends directly in connection with the aforementioned housing registration of the housing project with the BOI. project, consisting of One Hundred Sixty Seven (167) units, are exempt from the creditable withholding tax imposed under RR No. 2-98. as amended by RR No. 6-2001 operations/selling. whichever is earlier, but in no case earlier than the date of for a period of three (3) years beginning from May 2015 or actual start of commercial Accordingly, since Pro-Friends- Bellefort Estates Phase 2- Brgy. Molino IV

creditable withholding tax covers only income directly attributable to the revenues IV, Bacoor, Cavite, consisting of One Hundred Sixty Seven (167) units. Furthermore. generated from the project, Pro-Friends- Bellefort Estates Phase 2- Brgy. Molino It must be emphasized, however, that the aforesaid exemption from the

such exemption shall not cover revenues from units with selling price exceeding Three Million Pesos (Php3,000,000.00). (BIR Ruling No. 412-2013 dated November 11. 2013)

In the computation of ITH, interest income from in-house financing shall not be considered as part of the revenues generated from the registered housing project.

Moreover, Pro-Friends- Bellefort Estates Phase 2- Brgy. Molino IV, Bacoor, Cavite's entitlement to ITH for its BOI-registered housing project is not automatic as

it has still to comply with the provisions of the Specific Terms and Conditions of its

BOI Registration, viz:

1) The firm shall submit proof of verified compliance with the 20% socialized

housing requirement for its existing projects prior to availment of ITH:

2 The firm shall submit a Notarized Affidavit executed by the licensed

engineer or architect indicating the area or the number of lots and actual

units built and the construction costs on the development of the compliance

project for its BOI registered housing projects prior to availment of ITH.

While the number of units covered by HLURB License to Sell is I the BOI Registration of the

project covers only 167 units. Thus, the tax exemption shall only be limited to the 167 units covered by

the BOI Registration.

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Property Company of Friends. Inc.BOI ITH Page 3 of 6

The following documents relevant to the compliance project shall be attached to the Affidavit

b Project Development Plan a License to Sell cDevelopment Permit;and d Verified Survey Return

(3) In the grant of incentives, the extent of the project's ITH entitlement shall (3) multiplier effect, and (4) measured capacity. The Board may reduce the ITH if the project does not realize the extent of economic benefits shall comply with the following representations: be based on the project's ability to contribute to the economy's development based on the following parameters:(1 net value added,(2)job generation. represented by the proponent at the time of its application. The enterprise

a Net Value Added should be at least 25%

NVA(%) Year 97% Year 2 9% Year 3 97%

b.Job Generation

Number of Employees Year I 128 Year 2 128 Year 3 128

C. Investments and Timetable

Activity Month/Year) Schedule Expense/s Related Cost (Php)

Land Acquisition Secure license/permit/ necessary I July May 2008 October 2013 2012- Pre-Operating Land Cost Expenses registration from the government/training costs Site Preparation andOctober 2013- Land/Site Development January 2017 Development

Building April2014- Building Cost

Start of CommercialMay 2015 Construction Operations March 2017 Construction Capital Working

Total Project Cost

d Sales Revenues

Year Volume (No.of Units) Value(Php)

Total 2 3 1 167 50 6 50

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Net income qualified for ITH availment shall not be a result of gross firm in its application. revenues exceeding 10% of the projected gross revenue represented by the

In cases where the project's actual revenues exceed the projections in its application due to, e.g. new markets/orders, additional employment/shifts filed before the filing of application for ITH; additional investments. the Board may increase the project's ITH availment proportionately. Request/s for adjustments of projected revenue must be

(4) The enterprise should endeavor to undertake meaningful and sustainable Corporate Social Responsibility (CSR) activities in the locality where the project is implemented:

(5) Only income directly attributable to revenue generated from the registered for commercial purposes such as leasing, retail stores, offices, etc. shall be qualified for ITH; project (Bellefort Estates Phase 2-Brgy.Molino IV,Bacoor,Cavite and its housing units used solely for family home or dwelling purposes and not

(6) Secure from the Housing and Land Use Regulatory Board (HLURB) an endorsement that it has faithfully complied with the approved development plan and a "certificate of good housekeeping":

(7) File an application with the BOI Incentives Administration Service within the Social Security System (SSS) that the enterprise is in good standing in the remittance of SSS contributions of its employees: Bureau of Internal Revenue (BIR) in order to validate the claim for income tax exemption. The application shall be accompanied by a certification from one (1) month from the filing of the final Income Tax Return (ITR) with the

(8) Secure a Certificate of ITH Entitlement (CoE from the BOI Legal and Compliance Service prior to filing of ITR with the BIR;otherwise,ITH for that particular taxable year without CoE shall be forfeited;

(9) In the event the enterprise fails to maintain the 75:25 debt-to-equity ratio to refund any capital equipment incentives availed of; been completed and delivered to buyers prior to availment of ITH Otherwise, the enterprise shall not be entitled to ITH and shall be required requirement, it shall show proof that the construction of housing units have

10)The enterprise shall submit proof of compliance that, at least twenty

percent (20%) of the total subdivision area (estimated at 10,329 sq. m.) or total subdivision project cost (estimated at has been developed and allocated for socialized housing within one year from date of

registration or prior to availment of ITH, whichever is earlier

11The enterprise shall submit to the BOI Legal and Compliance Service

on a semestral basis within fifteen (15 days from the end of each semester

a report on actual investments, employment, sales, production costs, actual ITH availed of for each year, and other information that the Board may

require at any given time with respect to the registered project; and

12) The enterprise must commit to the tenets of Good Corporate

Governance.

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Stamp Tax (DST) on its sales of housing units pursuant to Sections 106 (A)(1)(a) and Hundred Sixty Seven (167) units, but such terms and conditions do not provide for any exemption from other taxes that the Corporation may be subject to on its business transactions. Thus, Pro-Friends- Bellefort Estates Phase 2- Brgy. Molino IV, Bacoor, Cavite will remain subject to Value-Added Tax (VAT) and Documentary other than those granted under E.O. 226. In this regard, under the terms and conditions of its BOI registration, Pro-friends was clearly granted a 3-year ITH for its project, Bellefort Estates Phase 2- Brgy. Molino IV,Bacoor, Cavite, consisting of One 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 412-2013 dated November 11.2013) Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges

Sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500) and below, or house and lot and other residential dwellings (P3,199,200) and below, is VAT-exempt.2 Thus, only the sales by Pro-Friends- Bellefort Estates Phase 2- Brgy. Molino IV, Bacoor, Cavite of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos VAT. In relation thereto, Section 109(1)(P) of the Tax Code of 1997 provides, that the

may be provided under E.O.226, within thirty (30) days from the deadline for filing of tax returns and payment of taxes. as provided under the 1997 Tax Code,as amended,using the electronic system for BOI a complete annual tax incentives report of its income-based tax incentives, VAT and duty exemptions, deductions, credits or exclusions from the tax base, as required to file its tax returns and pay its tax liabilities, on or before the deadline filing and payment of taxes of the BIR.Furthermore,Pro-Friends shall file with Pursuant to Section 4 of Republic Act (RA) No. 107083, Pro-Friends is

to individuals or corporations subject to the withholding taxes as source as rcquired under Chapter XI11 and Section 57 of the Tax Code of 1997, as amended and implemented by Revenue Regulations (RR) No. 2-98, as amended. agent for the government if it acts as employer and any of its employees received compensation income subject to compensation withholding tax, or if it makes payments It should be understood that Pro-Friends shall be constituted as a withholding

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An Act Enhancing Transparency in the Management and Accounting of Tax Incentives Administered pursuant to Revenue Regulations No.16-2011 dated October 27, 2011. services covered by Section 109(P), (Q) and (V) of the 1997 Tax Code took effect on January 1, 2012, 2 The increase in the threshold amounts for the sale or lease of goods or properties or the performance of

by Investment Promotion Agencies.

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month following the close of its accounting period of a Profit and Loss Statement and Balance Sheet with the Annual information Return under oath, stating its gross income and expenses incurred during the taxable year. Likewise,Pro-Friends is required to file on or before the 15th day of the fourth

Finally,Pro-Friends' books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the

been granted tax exemption or tax incentives and its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. purpose of ascertaining whether it is complying with the conditions under which it has

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

Very truly yours.

Commissioner of Internal Revenue KIM S. JACINTO-HENARES

K-1-JHB 042134 JUN 17 2016