BIR Ruling No. 708-2019

REPUELIE OF THE PHILIPPINES

DEPAR*" :ENT OF FINANCE BUREAU OF HNTERNAL REVENUE

:ezon City

Section 22 (B) of the National Regulations No: 10-2012 BIR Ruling No. 148-2018 Internal Revenue 1997, as amended; Revenue 0708-2039 Code of

COCO TECHNOLOGIES CORPORATION Grace Park East, Caloocan City 140c C.B.GARAY PHILWIDE BULOFRS/ G.G. UY CONSTRUCTION/ JOINT VENTURE 102 Ligaya Street, 7th Avenue, Brgy. 122 Zone 11, NOV 2 9 2O}9

Atiention: ErGR.GAUDENCIO G UY A:thorized Managing Officer Gertlemen:

Projeet"). is exempt from the iwo (2/c) percent creditable withholding tax (CWT) pursuant to Revenue Regulations (RR) No. 14-2602 verture between C.B. Garay Phiiwide Euiiders, G.G. Uy Construction, and Coco Technologies Corporation for the purpose of undertaking the "Raising of Polder Dike Including Slope Protecrion at Brgy. Dampalit (Phase 3, Malabon, PDK Sia. 0+780 to PDK Sia. 2+260) " ("JV This refers to your letter dated Oetcber 28, 2016, requesting for a ruling that the joint

Public Works and Highways (DP WH) for the construction and comnlerinn nf the afore- Was first issued on July 23, 2015'by the Philippine Contractors Accreditation Board (PCAB) is comiposed of the fotlowing: Construetion, and Coco Technologies Corporation Joint Venture ("JV"), with Taxpayers undertake the construction of the JV Froject; that the JV entered into a contract dated November 02, 2015 with the Government of the Republic of the Philippines through the Department of mentioned JV Project; that the JV, with Special Contractor's License No. Identification Number (TIN) Documents submitted disciosed that C.B. Garay Philwide Builders, G.G. Uy is an unincorporated joint venture formed to which

I C.B. Garay Philwide Bullaers, a sole proprietorship with TIN Department of Traae ard IHaustry (DTI), and PCAB Contractor's License Form No. , Certificate of Business Registration No. wh.ch v'as first issued on December 15, 1980; issued by the

G.G. Uy Construction, a st:le proprietorship with TiN Certificate of Business Registration No. ( PCAB Contractor's License Forri No. August 25, 2006: and 0 which was first issued on 56 issued by the U11, and 1

3. Coco Technoiogies Corr:o atic:, a domestic cornoration with TIN : ana EXchange Commission (SEC), and PCAB Contractor's License Form No. Company Registration No. which was f'rst issued on December 12. 2011. ssued by the Securities

JV Project and further bind themselves al ali times during the existence of the JV to extend to ard that the herein co-venturers have mutuaily agreed to contribute to the JV as fotlcws: 36% for C.B. Garay Philwide Builders, 34% for G.G. Uy Construction, and 30% for Coco Technoiogies Corporation, and the resources for the proper execurion or implementation of the

NN 29 2019 C.B. GARAY PHILWIDE BUILDERS, G G. L T CONETRUCTION, AND COCO TECHNOLOGIES CORPORATION JOLNT VENTURE

each other their respective fuilest cooperation and best efforts towards profitabie construction of the JV Project in accordance winn approved plans and specifications and to complete the sarre within the approved work schedule:

In reply, please be informed that pursuant to Section 22 (B) of the National Internal Revenue Code 'of 1997, as amendei, 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 forned for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortiun. agreement under a service contract with the Governnient.

Likewise, Section 4 (B) (5) of Revenue Regulations (RR) No. 14-2002 dated September 9, 2002, provides that the withholding of CWT shall not apply to income payments made to joint ventures or construction formed tor the purpose of undertaking construction projects or engaging in petroleum, coal, geotheimal & other energy operations pursuant to an operating or consortium agreement under a service contract with the government.

Moreover, Section 3 of RR No. !0-2012 dated June T, 2012, implementing. Section 22 (B) of the National Internal Revenue Code of 1997, states that:

"SEC. 3. Joint Ventu"s Not Taxab!e as Corporations. -- - A ioint venture or consortium formed for tne purpose of undertaking construction projects which is not considered as corporation under Section 22 of the NIRC of 1997 as amended, should be:

(l) for the undertaking of a construction project; and

{2} should imvolve jeinirs or pooling of resources by licensed locai contractors thu is, licensed as general contractor by

the Philippine Contructors Accreditation Board (PCAB) of the Department of Trade and Industry (DTD);

(3) the local conitractors are engaged in construction business;

and

(4) the Joint Venture itself must likewise be duly licensed as

such by the Philiopine Contractors Accreditation Board (PCAB) of the Deparinent of Trade and Industry (DTI)

XX XXX XXX

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

The members to a Joivit Ventire not taxable as corporation shall each be responsibie in reporting ard paying appropriate income taxes on their respective share to the joint veritures profit.

Such being the case, C.B. Garay Philwide Builders, G.G. Uy Construction, and Coco Technclogies Corporation Joint Venture formed for the purpose of undertaking the "Raising of Polder Dike Including Slope Protection at Brgy. Dampalit (Phase 3, Maiabon, PDK Sta. 0+780 to PDK Sta. 2+260) with the DPWH is considered as a joint venture not taxabie as a corporation for complying with the eonditions provided in RR'No. 10-2012, i.e., (1) the JV is

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N g 2ti9

C.B. GARAY PHILWIDE BUILDERS, G.G. !!Y CONSTRUCTION, AND COCO TECHNOLOGIES CORPORATION

JOINT VENTURE

for the undertaking of construction project: (2) the JV involves joining or pooling of resources

by licensed local"contractors (licensed as general contractor by the PCAB);"(3) the local

contractors are engaged in construction business: and (4) the JV itseif is duly licensed by

PCAB: and therefore not subject to the corporate income tax under Section 27 (A) of the

National Intermal Revenue Code of 1997, as amended.

Moreover, the gross paymeir's to the JV on the JV Project are likewise not subject to

the 2% CWT prescribed under Section 5? (B) of the same Code, as implemented by RR No. 2-

98. as amended by RR No. 14-20021. Alsc, the herein JV being exempt from corporate income

tax, is not required to file quarterly and final adjustment returns.

However, the co-venturers are separately subject to the regular corporate income tax

imposed under Section 27 (A) of the National Internal Revenue Code of 1997, as amended, on

their taxabie income during each taxabie year respectively derived by them from the aforesaid

construetion project?.

It shouid be emphasized that the respective net income of the co-venturers derived from

the JV Project is subject to the CWT imposed under Section 57 of the National Internal

Revenue Code of 1997, as amended, as implemented hy RR No. 2-98, as amended. Thusj

before C.B. Garay Philwide Builders. G.G. Uy Construction, and Coco Technologies

Corporation Joint Venture distribures tie ne: ir.come of the co-venturers, pursuant to their agreed profits/income sharing, it shail withhoid the tax based on the net income of its co-

venturers.

Finally. the co-venturers are reuuired to enroll themselves to the Bureau of intermal Revenue's Electronic Filing and Paymert System (EFPS). The enrollment should be done at the Revenue District Office (RDO) where they are registered as taxpayers.3

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

Very truly yours.

&O CAESAR R. DULAY Commissioner of Internal Revenue

FK-I-LMET 030667

2 BIR Raling No. 148-2018 dated February 13. 2018. Section 4 (B) (5) of RR No. 14-2002 dated Se Section 4 of RR No. 10-2012. er 9, 2002.

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