BIR Ruling No. 298-2016

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OFINTERNAL REVENUE

Quezon City

E.0.226;RR16-2011

Secs.57(B106Aa196 NIRC

BIR Ruling No.334-1 298-2016

6282016

21/F NAC Tower 32nd St. Bonifacio Global City 1634 Taguig,Metro Manila AboitizLand,Inc.

Attention: Chief Financial Officer Robin Sarmiento

Gentlemen:

This refers to your letter dated April 07, 2016 stating that Aboitiz Land, Inc. (ALand

for brevity) with Tax Identification No. is a domestic corporation duly

registered with the Securities and Exchange Commission (SEC) under Company Reg. No.

It is registered with the Board of Investments (BOI) as a New Developer of Low-Cost

Mass Housing Project (Ajoya Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu) on a Non-

Pioneer status under Certificate of Registration No. dated October 18.2010.ALand

has been granted Income Tax Holiday (ITH) by the BOI for a period of four (4) years from

January 201 1 or actual start of commercial operations/selling, whichever is earlier but in no case

earlier than the date of registration. ALand's Ajoya Residences Phase 1 - Brgy. Gabi

Cordova, Cebu Project is registered with Housing and Land Use Regulatory Board (HLURB)

Region VII Office, particularly described as follows:

Certificate of Registration License to Sell No. Name of Project/Location No.of Saleable Lots Maximum Selling Price

No.

Ajoya Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu 148 units

Under the Specific Terms and Conditions of its BOI Registration, the ITH of ALand

shall cover only one hundred forty (148) units of low-cost mass housing for ALand's Ajoya

Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu Project.

On the basis of the foregoing, you now request for an opinion on the tax consequences of

the said ITH granted by BOI. Specifically,if ALand. being a BOI-registered enterprise is

exempt from the payment of the creditable withholding tax (CWT) imposed under Revenue

Regulations No. 2-98 on income payments received during the aforementioned period with

respect to its registered activity.

In reply, please be informed that under Section 2.57.5 (B)(2) of Revenue Regulations

(RR) No. 2-98, as amended by RR No. 6-2001 implementing Section 57 (B) of the Tax Code of

1997. as amended. the withholding tax prescribed in the said Regulations shall not apply to

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income payments to persons enjoying exemption from the income tax provided by Republic Act

No.7916 and the Omnibus Investments Code of 1987.

Accordingly,since ALand's Ajoya Residences Phase 1 Brgy. Gabi, Cordova, Cebu Project is a BOI registered project, this Office is of the opinion as it hereby holds, that income payments received by ALand in connection with its housing project, Ajoya Residences Phase 1

Brgy.Gabi,Cordova,Cebu Project on the 148 low-cost mass housing units as mentioned in the Specific Terms and Conditions of its BOI Registration), is exempt from CWT under RR No. 2-98, as amended by RR No. 6-2001, for a period of 4 years from January 2011 or actual start of commercial operations/selling, whichever is earlier but in no case earlier than the date of

registration. It must be emphasized, however, that the above exemption from CWT covers only income directly attributable to revenues generated from the registered activity, ALand's Ajoya Residences Phase 1 - Brgy. Gabi, Cordova, Cebu Project involving 148 low-cost mass housing units. Furthermore, such exemption shall not cover revenues from units with selling price exceeding Three Million Pesos (P3.000,000.00). In the computation of ITH, interest

income from in-house financing shall not be considered as revenues generated from the

registered activity.

Moreover, the entitlement to ITH of ALand's Ajoya Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu Project is not automatic as it still has to comply with the following provisions

of the Specific Terms and Conditions of their BOI Registration. viz

1. The enterprise shall construct and sell 148 units of low-cost mass housing based

on the following schedule:

Year Volume(No.of Units Value (P'000)

Yp 3 2 4 ( 3 37 3 Total 148

2.The enterprise shall adhere to the following selling prices as represented:

Model Type Floor Area (in sq.m.) Selling Price (P'000)

2-storey single detached 2-storey townhouse 2-storey single detached 2-storey single detached Duplex 1-storey single detached 102 44 16 40 80 6

3.The enterprise shall observe the following project timetable:

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Activity Schedule Date Expenses Related CostP000

monthyear

Site/ and acquisition Completed Raw Land

from the government Obtain appropriate license/agreement/permit On-going HLURB DENR.EMB,DAR. DA.

Site Preparation and Development On-going Building temporary

facilities. surveying works, site preparation, road and walkway preparation.

rip-rap,electricity drainage system,

water supply

House Construction On-going

Start of Commercial Operation January 2011 Working capital (3 mos.)

TOTAL PROJECT COST

4. The enterprise shall maintain a separate book of accounts for this mass housing

project.

5. Secure from the HLURB an endorsement that it has faithfully complied with the

approved development plan and a "Certificate of Good Housekeeping"

6. File an application with the BOI Incentives Department within one (1) month

from filing of the final Income Tax Return (ITR) with the Bureau of Internal

application shall be accompanied by a certification from the Social Security Revenue (BIR) in order to validate the claim for income tax exemption. The

System (SSS) that the enterprise is in good standing in the remittance of SSS

contributions of its employees.

Secure a Certificate of ITH Entitlement (CoE) from the BOI Supervision and

Monitoring Department prior to filing of ITR with the BIR: otherwise, ITH for

that particular year without CoE shall be forfeited.

8.The enterprise shall maintain the 75:25 debt-equity requirement prior to availment

of ITH. Otherwise, the enterprise shall not be entitled to ITH and shall be required

to refund any capital equipment incentives availed of.

9.Prior to availment of ITH and subject to HLURB certification, the enterprise shall

submit proof of compliance that at least twenty (20%) percent of the total

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subdivision area or total subdivision project cost. at the option of the developer has been developed and allocated for socialized housing whether within or outside the same city or municipality. This may be done through any of the following

Otherwise,the ITH for that particular taxable year shall be deemed forfeited. modes:1 New Settlement;(2Slum Upgrading;and(3 Joint-Venture Projects.

those granted under E.O. 226.In this regard, under the terms and conditions of its BOI registration. ALand's Ajoya Residences Phase 1 - Brgy. Gabi, Cordova, Cebu Project was clearly granted a 4-year ITH but such terms and conditions do not provide for any exemption from other taxes that ALand may be subject to on its business transactions. Thus, ALand's Added Tax (VAT) and Documentary Stamp Tax (DST) on its sales of house and lot units Ajoya Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu Project will remain subject to Value- pursuant to Sections 106 (A)(1)(a) and 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 334-11 dated September 7, 2011) Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than

sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five (P3,199,200.00) and below is VAT-exempt'. Thus, only the sales by ALand's Ajoya Residences Phase 1 -- Brgy. Gabi, Cordova, Cebu Project of housing units with selling price of not more than the aforementioned price ceilings shall be exempt from VAT. Hundred Pesos (P1.919,500.00) and below, or house and lot and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos In relation thereto, Section 109 (1) (P) of the Tax Code of 1997 provides, that the

as amended. using the electronic system for filing and payment of taxes of the BIR. Furthermore, returns and pay its tax liabilities, on or before the deadline as provided under the 1997 Tax Code. ALand shall file with BOI a complete annual tax incentives report of its income-based tax Pursuant to Section 4 of Republic Act (RA) No. 10708, ALand is required to file its tax

incentives, value-added tax (VAT) and duty exemptions, deductions, credits or exclusions from the tax base, as may be provided under E. O. 226, within thirty (30) days from the deadline for filing of tax returns and payment of taxes.

It should be understood that ALand shall be constituted as a withholding agent for the

subject to the withholding taxes as source as required under Chapter XIII 'and Section 57 of the subject to compensation withholding tax, or if it makes payments to individuals or corporations Tax Code of 1997, as amended and implemented by Revenue Regulations No. 2-98, as amended. government if it acts as employer and any of its employees received compensation income

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

during the taxable year.

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

+ The increase in the threshold amount for the sale or lease of goods or properties or the performance of services

covered by Section 109(P),(Q) and (V) of the 1997 Tax Code took effect on January 1,2012.pursuant to

Revemue Regulations No16-2011 dated October 27, 2011.

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

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. However, if

Very tru ly yours,

Commissioner of Internal Revenue KIM S.JACINTO-HENARES

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