BIR Ruling No. 299-2016

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

E.O.226;RR 16-2011 Secs.57B)106A1)a:196 NIR BIR Ruling No.334-11 6-28-2016 299-2016

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

Gentlemen: Attention: Chief Financial Officer Robin Sarmiento

earlier than the date of registration. ALand's Ajoya Residences Phase 2 - Brgy. Gabi Region VIl Office, particularly described as follows: registered with the Securities and Exchange Commission (SEC) under Company Reg. No. Cost Mass Housing Project (Ajoya Residences Phase 2 -- Brgv. Gabi, Cordova, Cebu) on a Cordova,Cebu Project is registered with Housing and Land Use Regulatory Board (HLURB) Non-Pioneer status under Certificate of Registration No. has been granted Income Tax Holiday (ITH) by the BOI for a period of three (3) years from January 2012 or actual start of commercial operations/selling, whichever is earlier but in no case for brevity with Tax Identification No. It is registered with the Board of Investments (BOI) as an Expanding Developer of Low- This refers to your letter dated April 07, 2016 stating that Aboitiz Land, Inc. (ALand is a domestic corporation duly dated May 25.2011.ALand

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

Ajoya Residences Phase 2 --Brgy. Gabi, Cordova Cebu 148 units

shall cover only one hundred forty (148) units of low-cost mass housing for ALand's Ajoya Residences Phase 2 -- Brgy. Gabi, Cordova, Cebu Project. Under the Specific Terms and Conditions of its BOI Registration, the ITH of ALand

Regulations No. 2-98 on income payments received during the aforementioned period with respect to its registered activity. 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 On the basis of the foregoing. you now request for an opinion on the tax consequences of

O42endee witng rerbedm duan sy RR No.2-98,as amended by RR No.6-2001 implementing Section 57(B of the Tax Code of In reply, please be informed that under Section 2.57.5 (B)(2) of Revenue Regulations

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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 ALands Ajoya Residences Phase 2 -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 2

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 3 years from January 2012 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 2 - 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 2 -- 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:

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

on the following schedule:

Year Volume(No.of Units) Sales(P000)

Total 2 1 3 148 52 52 44

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

2-storey single detached 2-storey townhouse 2-storey single detached 1-storey single detached 2-storey single detached Duplex House Type Floor Area (in sq.m.) 44 60 40 80 10 10 No. of Units 34 20 36 3 33 Selling Price (P'000)

3.The enterprise shall observe the following project timetable:

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Activity monthyear Schedule Date Expenses Related CostP000

Site acquisition Completed 2.977 has.) Raw Land

Obtain appropriate license/agreement/permit from the government Completed DENR.EMB,DAR. HLURB,etc. DA.

Development Site Preparation and On-going temporary Building facilities.

site preparation, surveying works, road and walkway

rip-rap, electricity preparation. drainage system.

water supply

House Construction March 2011

Start of Commercial Operation January 2012 Working capital (3 mos.)

TOTAL PROJECT COST

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

project.

5. The enterprise shall submit a list of common cost items common to all its

projects/activities (whether BOI-registered or non- BOI registered) and the methodology adopted in allocating the common costs.

6. Secure from the 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 Department within one (1) month

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

Revenue (BIR) in order to validate the claim for income tax exemption. The

application shall be accompanied by a certification from the Social Security

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

contributions of its employees.

8. 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.

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9. 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.

10.The enterprise shall submit proof of compliance that at least twenty(20%percent particular taxable year shall be deemed forfeited. of the total subdivision area or total subdivision project cost estimated at year from date of registration or prior to availment of ITH, whichever is earlier. This may be done through any of the following modes: (1) New Settlement: (2) Slum Upgrading and (3 Joint-Venture Projects. Otherwise, the ITH for that Php has been developed and allocated for socialized housing within one

those granted under E.O. 226.In this regard. under the terms and conditions of its BOI from other taxes that ALand may be subject to on its business transactions.Thus, ALand's registration, ALand's Ajoya Residences Phase 2 Brgy. Gabi, Cordova, Cebu Project was clearly granted a 3-year ITH but such terms and conditions do not provide for any exemption Ajoya Residences Phase 2 -- Brgy. Gabi, Cordova, Cebu Project will remain subject to Value- Added Tax (VAT) and Documentary Stamp Tax (DST) on its sales of house and lot units 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

Hundred Pesos (P1,919,500.00) and below, or house and lot and other residential dwellings Residences Phase 2 -Brgy.Gabi,Cordova, Cebu Project of housing units with selling price of not more than the aforementioned price ceilings shall be exempt from VAT. sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos P3.199.200.00 and below is VAT-exempt. Thus, only the sales by ALand's Ajoya In relation thereto. Section 109(1P) 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 incentives. value-added tax (VAT) and duty exemptions, deductions, credits or exclusions from filing of tax returns and payment of taxes. returns and pay its tax liabilities, on or before the deadline as provided under the 1997 Tax Code, the tax base, as may be provided under E. O.226, within thirty (30) days from the deadline for 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

government if it acts as employer and any of its employees received compensation income It should be understood that ALand shall be constituted as a withholding agent for the

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

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covered by Section 109(P),(Q and V of the 1997 Tax Code took effect on January 1.2012.pursuant to I The increase in the threshold amount for the sale or lease of goods or properties or the performance of services

Revemue Regulations No. 16-2011 dated October 27, 2011.

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Likewise, ALand is required to file on or before the 15th day of the fourth month

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

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

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

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

Very truly yours.

KIM S. JACINTO-HENARES Commissioner of Internal Revenue

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