BIR Ruling No. 707-2019

REPUBLIC OF THE PHILIPPINES

DE PAP TMENT OF FINANCE BUREAU CF INTERNAL REVENUE

Qu:ZOn City

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

C.E. GARAY PHILWIDE BUILDERSA G.G. UY CONSTRUCTION/ COCO TECHNOLOGIES CORPORATION JOINT VENTURE 102 Ligaya Street, 7th Avenue, Brgy. 122 Zone 11. Grace Park East, Caloocan City 140o 4 n7072013 NOV 2 9 2019

AttentiOE: ENSK.GAUDENCIO G, UY Aurized Managing Officer

Gendemen:

Venture between C.B. Garay Phiiwiae Builders, G.G. Uy Construction, and Coco Technologies Corporation for the purpose of undertaking the "Raising/Strengthening of Polder Dike (Stope 0+052.28 to Sta. 0+625.11, Malab+y. Ciy : Sta. 0+000 to Sta. 0+780" ("JV Project"), is exempt frorn the two (2%) percent cred.tabie withholding tax pursuant to Revenue Regulations {RR} Ne. 14-2002. Prstection Works at Polder Dike Using Bio-Engineering: Phase 2), Navotas City : Sti This refers to your letter dated October 28, 2016, requesting for a ruling that the joint

Construction, and Coco Technn'a.:: Cornoration Joint Venture ("JV"), with Taxpayers nentioned JV Project: that the JY, witn Speciai Contractor's License No. Was first issued on July 23, 2015 by ire Fhilippine Contractors Accreditation Board (PCAB). is composed of the following: (dentirication Number (TIN) undertake the construction of the JV Project; that the JV entered into a contract dated January 27, 2016 with the Government of tr: Republic of the Philippines through the Department of Pubiic Works and Highways (DPWH) for the construction and comnletion of the afore- Documents submitted disciosed that C.B. Garay Philwide Builders, G.G. Uy is an unincorporated joint venture formed to. : which

1.. C.B. Garay Philwide Buiiders. sole proprietorship with TIN 1 Form No. Department of Trade and Iadustry (DTI), and PCAB Conuractor's License Certificate of Business i'egistration No. which wa:: first issued on December 15, 1980; issued by the

2.- G.G. Uy Construction, a sole proprietorshin with TIN Certificate of Business Recistration No. PCAB Contractor's License Form No. August 23. 2006: and I which was first issued on . issued by the DTI, and

3. - Coco Technologies Corptraion. a domestic corporation with TIN and Exchange Commission (SEC), and PCAB Contractor's License Form No. Company Registration No. ; which was f.at issued on December 12, 2011. I issued by the Securities

for C.B. Garay Philwide Buiiders, 34% for GG. Uy Construction, and 30% for Coco ard that the nerein co-venturers have mutua!ly agreed to contribute to the JV as follows: 36% Technoiogies Corporation, and the re sour'ees for the proper execution or implementation of the

NOV 2 9 2913

C.B. GARAY PHILWIDE BUILDERS, G.G. GY CON'STRUCTION, AND COCO TECHNOLOGIES CORPORATION JOTNT YENTURE

JV Project and further bind thernsel'es at all times during the existence of the JV to extend to

each other their respective fuliest cooperation and best efforts towards profitable construction Sf the JV Project in aceordance witn approved plans and specifications and to complete the same within the approved work schedtik.

In repiy, please be inrormec *r pursuant to Section 22 (B) of the National Internai

Revenue Code of 1997. as amended. Me term "corporation" shall include partnerships, no

matter how created or organized, jsint stock conipanies. joint accounts (cuentas en

participacion), association or insurancs cornpanies, but does not include general professional

partnerships and joint venture cr csircrium formed for the purpose of undertaking

construction projects or engaging in petroieum, coal, geothermal and other energy operations

pursuant to an" operating or corsoitiun agreement under a service contract with the

Government.

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

Moreover, Section 3 of RR No. 10-2012 dated June 1, 2012, implementing Section 22 (B) of the National Internal Revenu: Code of 1997, states that:

"SEC. 3. Joint Ventures Not Taxable as Corporations. -- A joint venture or consortium formed for ihe purnose of undertaking construction projects which is not considered as cor3oration under Section 22 of the NIRCof 1997 as amended, should be :

(1) for the undertaking cy i construction project; and

(2) should involve joining or pooling of resources by licensed local contractors th i: :. licensed as general contractor by the Departrnent of T-ase and Industry (DTD); the Philippine Conuuc:ors Acereditation Board (PCAB) of

(3) the local contractors are engaged in construction business; and

(4j the Joint Venture itreif must likewise be duly licensed as Such by the Philippite Contractors Accrediration Board (PCAB) of ihe Depar:ment of Trade and Industry (DTI)

XXX XXX

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

be responsible in reporting crd payirg appropriate income taxes on their respective share to the joint ventures profit. The members to a Jot: ve:ture not taxable as corporation shall each

Engineering: Phase 2), Navotas City : Sta. 0+052.28 to Sta. 0+625.11, Malabon City : Sta Technologies Corporation Joii Vertuie formed for the purpose of undertaking the "Raising/Strengthening of Poider Dike t!ope Protection Works at Polder Dike Using Bio- Sucn being tre case, C.B. Garay Prtiwide Builders, G.G. Uy Construction, and Coco

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Nov

C.E. GARAY PHILWIDE BUILDERS, G.G. U C:STRUC ION, AND COCO TECHNOLOGIES CORPORATION

JOINT VENTURE

0+000 to Sta. 0+780" with th:e DPWH is considered as a joint venture not taxable as a

corporation for complying with the conditions provided in RR'No. 10-2012, i.e., (1) the JV is

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

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

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

PCAB; and therefore not subject ro sre &orporate income tax under Section 27 (A) of the

National internal Revenue Code of 1997, as amended.

Moreover, the gross payments to the JV on the JV Project are likewise not subject to

the 2% CWT prescribed under Section 57 (B) of the same Code, as implemented by RR No. 2-

98, as amended by RR No. 14-2002i. Aiso, the herein JV being exempt from corporate income

tax. is not required to file quarterly alid final adjustment returns.

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

imposed under Section 27 (A) of the Narior:al Internai Revenue Code of 1997, as amended, on

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

construction project2.

It should be emphasized that the respeetive net income of the co-venturers derived from

the JV Project is subject to the CWT inposed under Section 57 of the National Internall Revenue Code of 1997, as amended, 1s iripiemented by RR No. 2-98, as amended. Thus, before C.B. Garay Philwide Buildets, GG. Uy Construction, and Coco Technologies

Corporation Joint Venture distributes the net income of the co-venturers, pursuant to their agreed profits/income sharing, it shall vrithhold the tax based on the net income of its co-

venturers

Finaliy, the co-ventrers are required to enroll themselves to the Bureau of internal Revenue's Eiectronic Filing and Paynient 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 cn the basis of the foregoing facts as represented. However. if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void.

Very truly yours.

OA

Cornmissioner of Internal Revenue CAESAR R. DULAY

030667 K-J-LMAT

3 BIR Ruing No. 148-2018 dated February 13, 2018. Section 4 (B) (5) of RR No. 14-2002 dated Sepiember 9, 2002.

Section 4 of RR No. 10-2012.

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