RMC No. 21-2025 — Clarifying the proper tax treatment of joint ventures/consortiums formed for the purpose of undertaking construction projects under Section 22 ( B ) of the NIRC of 1997, as amended, in relation to RR Nos. 10-2012 and 14-2023, and the administrative requirements for all joint ventures/consortiums pursuant to Section 236 of the same Code

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES ."DEPARTMENT OF FINANCE

Bringing In Revenues for Nation-Building MAR 2 1 2025 PILIPINAS BAGONG

REVENUE MEMORANDUM CIRCULAR NO. 0 2 1 - 2 0 2 5

SUBJECT Amended, in Relation to Revenue Regulations Nos. 10-2012 and 14- 2023,andtheAdministrative VenturesConsortiums pursuant to Section 236 of the same Code Clarifying the Proper Tax Treatment of Joint Ventures/Consortiums Formed for the Purpose of Undertaking Construction Projects Under Section 22 (B) of the National Internal Revenue Code of 1997, as Requirements for All Joint

TO All Internal Revenue Officers and Others Concerned

BACKGROUND AND SCOPE

incorporated or not, and regardless of their purpose, are required to register with the BIR. amended, all Joint Ventures or Consortiums, whether considered taxable corporation or not. Under Section 236 of the National Internal Revenue Code (Tax Code) of 1997, as

construction projects was pursuant to Presidential Decree (PD) No. 929 (dated 4 May 1976) their resources in undertaking big construction projects, thus, alleviating disadvantages of local contractors in competitive bidding with foreign contractors in view of limited capital to assist local contractors in achieving competitiveness with foreign contractors by pooling On the other hand, the} tax exemption of joint ventures formed for the purpose of

and financial resources.

W* kx or organized, joint-stock companies, joint accounts (cuenias en participacion), associations, or insurance companies, but does not include general professional partnerships and a joint engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. term "corporation' shall include one person corporation, partnerships, no matter how created venture or consortium formed: for the purpose of undertaking construction projects or Accordingly, Section 22 (B) of the Tax Code of 1997, as amended, provides that the

Section 22 (B) of the Tax Code of 1997, as amended, including the imposable taxes of co- venturers/members of a Joint Venture/Consortium not taxable as corporation pursuant to Revenue Regulations (RR) Nos. 10-2012 and 14-2023 and the administrative compliance required of all Joint Ventures/Consortiums under Section 236 of the Tax Code of 1997: as amended. Ventures/Consortiums formed for the purpose of undertaking construction projects under This Circular is beirig issued to clarify the proper tax treatment of Joint BUREAL DINTEALEveNug

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BiR National Office B!dg., Senator Miriam Defensor-Santiago Avenue, Dilman, Quezon City Trunkline: 8981-7000 ; 8929-7676 Website: www.bir.gov.ph AnaiUsT- Y A 2

JOINT VENTURE NOT TAXABLE AS A CORPORATION

A joint venture or consortium formed for the purpose of undertaking construction projects not considered{as corporation under Section 22 of the Tax Code of 1997 as amended, should be:

(1) for the undertakingjof a construction project: (2) should involve joining or pooling of resources by licensed local contractors; that is, licensed as general contractor by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI): (3) these local contractors are engaged in construction business: and. (4) the Joint Venture itself must likewise be duly licensed as such by the PCAB of the DTI

Joint ventures involving foreign contractors may aiso be treated as a non-taxable

and the foreign/international financing institution pursuant to the implementing rules and regulations of Republic Act No.. 4566 otherwise known as Contractor's License Law. contractor by the PCAB of the DTI; and the_construction project is certified by the under the Bilateral Agreement entered into by and between the Philippine Government corporation only_if the member foreign contractor is covered by a special license as appropriate Tendering Agency (government office) that the project is a foreign financed/internationallv-funded nroiect_and that international bidding. is_allowed

for the purpose of undertaking construction projects shall be considered as taxable Absent any one of the aforesaid requirements, the joint venture or consortium formed

corporations.

I. PERSONS/ENTITIES!DISQUALIFIED TO BE CONSIDERED AS A JOINT VENTURE/CONSORTIUM NOT TAXABLE AS A CORPORATION.

undertaking construction projects, as herein defined, shall not include those who are mere suppliers of goods. services or capital to such project. The joint venture or con'sortium not taxable as a corporation formed for the purpose of

following persons/entities are disqualified to be considered as tax-exempt Joint Venture/Consortium: or Consortium should be engaged in construction business. all agreements formed by the Moreover, pursuant to Item I (3) hereof, which requires that parties to the Joint Venture

a b. Between/amongst Real Estate Developer/s and Land Owner/s (e.g. condominium Between/amongst Real Estate Developer/s (e.g. condominium projects)

C. Between/amongst Real Estate Developer/s and Local Government Unit/s (e.g. projects)

d Between/amongst Real Estate Developer/s and Government Owned and Controlled city/township development projects, reclamation projects)

e. Corporation/s (e.g. township development projects, condominium projects) Between/amongst Non-Contractors and Non-Contractors E Between/amongst Contractors and Non-Contractors

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III. MANDATORY REGISTRATION WITH THE BUREAU OF INTERNAL REVENUE (BIR).

A. Registration F to Section 236 of the Tax Code of 1997, as amended. A JV shall be issued a separate incorporated or not, regardless of purpose, are required to register with the BIR pursuant TIN per JV agreement. All Joint Ventures or Consortiums formed as a taxable corporation or not,

I Registration jof Joint Ventures or Consortiums on a per Joint Venture

Agreement (JVA) basis and branch coding on a per project basis.

which different party/ies is/are involved. Joint Ventures or Consortiums formed for the purpose of undertaking construction jprojects, whether taxable or not, incorporated or not, shall be registered with the BIR and be issued a Taxpayer Identification Number (TIN) as Head office separate from the parties or co-venturers respective TIN at the Revenue District Office having jurisdiction over the place designated as head office of the JV. This shall apply for each and every agreement entered into by any (parties or co-ventureres to a Joint Venture or Consortium of

the Joint Ventures or Consortiums at the Revenue District Office having jurisdiction o'ver the location of the project. Accordingly,{ a corresponding branch TIN shall be issued for each project of

2. Joint Ventures or Consortiums formed other than for the purpose of be registered as Branch. In case a Joint Venture or Consortium change its undertaking construction projects, with the same co-venturers or parties, shall aiso be required to register as Head Office. However, each project shall not

be issued a riew TIN as Head Office. In case a new undertaking or project is but the composition or co-venturers are the same, said undertaking or project shall be registered as a branch. considered as a new Joint Venture or Consortium, hence, should register and formed that is different from the Joint Venture/Consortium's original purpose, composition, such as, adding new co-venturers/parties, or if existing co- venturers/parties dissolve their involvement or retire, the same shall be

B. Registration of Tax Types

I. Joint Ventures or Consortiums shall register the following tax types as may be applicable to Head Office or Branch: a Income Tax (Annual and Quarterly):

f. Documentary Stamp Tax, if applicable; and d g. b. e. C Withholding Tax: Creditable Withholding Tax on certain income payments; Excise Tax, if applicable. Percentage Tax; Value-Added Tax (VAT).

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IV. TAX TREATMENT OF A JOINT VENTURE/CONSORTIUM NOT TAXABLE AS A CORPORATION

not subject to the two percent (2%) creditable withholding tax prescribed under Section Law as implemented by Section 4-1 14-2(a) of RR No. 13-2018. which states that: 57(B) of the Tax Code of 1997, as amended. as implemented by RR No. 2-98, as amended. However, it is subject to twelve percent (12%) Value-added tax (VAT) pursuant to Section 108 of the Tax Code of 1997. as amended, and consequently to the Creditable Withholding VAT pursuant to Section 114 of the Tax Reform for Acceleration and Inclusion (TRAIN) The gross payments td the Joint Venture/Consortium not taxable as a corporation is

account of each purchase of goods and services which are subject to the value- its political subdivisions, instrumentalities or ugencies, including government- owned or -controlled corporations (GOCC's) shall, before making payment on "(a) Withholding of Creditable Value-added Tax. - The Government or any of

considered as the withholding agent. " (Emphasis and underscoring supplied) further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to twelve percent (12%) withholding tax at the time of payment: Provided, finally, That payments for purchasess of goods to the final withholding tax system as imposed in this Subsection. For purposes of this Section, the payor or person in control of the puyment shall be thereof: Provided, That beginning January 1, 2021, the VAT withholding system under this Subsection] shall shifi from final to a creditable system: Provided, and services arising from projects funded by Official Development Assistance (ODA) as defined under Republic Act No. 8182. otherwise known as the final value-added tax at the rate of five percent (5%) of the gross payment added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a 'Official Development Assistance Act of 1996', as amended, shall not be subject

V INCOME TAX LIABILITY OF CO-VENTURER/MEMBER OF A JOINT

VENTURE/CONSORTIUM NOT TAXABLE AS A CORPORATION.

shall each be responsible in reporting and paying appropriate income taxes on their the Annual Income Tax Return filed by the Joint Venture/Consortium, and not on the actual distributive share, actually or:constructively received, based on the Net Income as declared in distribution of the Net Income to the co-venturer/members of a Joint Venture/Consortium. The co-venturer/member of a Joint Venture or Consortium not taxable as a corporation

Consortium not taxable as a corporation, the net income of the Joint Venture or Consortium shall be computed in the same manner as a corporation. For purposes of computing the distributive share of the members of a Joint Venture or

of 1997, as amended. Provided, however, That if the Joint Venture/Consortium project, the "Official Development Assistance Act of 1996, as amended, by the Japanese Government as per Exchange of Notes executed by the Japanese Government and the Philippine Government wherein the Government of the Republic of the Philippines shall, by itself constructively distributed by a Joint Venture/Consortium not taxable as corporation is subject to fifteen percent (15%) creditable withholding tax imposed under Section 57 of the Tax Code Development Assistance (ODA) as defined under Republic Act No. 8 1 82, otherwise known as undertaken by a Joint Venture/Consortium not taxable as corporation is funded by Official The distributive share of the co-venturer/member on the Net Income, actually or

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the Philippines on the Japanese companies operating as suppliers, contractors and/or consultants with respect to the payment carried out. for and the income accruing from the the co-venturer/member is not subject to the creditable withholding tax system as imposed in Item VI hereof. through its executing agency assume, all fiscal levies and taxes imposed in the Republic of supply of products and/or serivices required for the implementation of the Project, and the co- venturer/member to the said funded project is a Japanese Contractor, the distributive share of

Operating Loss as declared iri its Annual Income Tax Return (AITR), the co-venturer/member Operating Loss from its individual gross income when filing its individual/respective AITR. of the Joint Venture or Consortium shall be entitled to deduct its respective share in the Net In case the Joint Venture or Consortium not taxable as corporation sustains a Net

V CREDITABLE WITHHOLDING TAXES IMPOSED ON SPECIFIC PAYMENTS

OF JOINT VENTURES/CONSORTIUMS.

Venture/Consortium not taxable as corporation is subject to fifteen percent (15%) creditable withholding tax on the share of each co-venturer/member from the Net Income of the Joint the Tax Code of 1997, as amended. (RR No. 14-2023) Venture/Consortium prior tolactual or constructive distribution imposed under Section 57 of The distributive share of co-venturer/member on the Net Income of a Joint

incorporated or not, taxable or non-taxable, to their local/resident supplier of goods and services other than those coveried by other rates of withholding tax, shall be subject to the following withholding tax rates: (RR No. 14-2023) In addition, income payments made by the Joint Ventures or Consortiums, whether

Supplier of Goods -- One percent (1%) Supplier pf Services -- Two percent (2%)

VII. MANDATORY ENROLLMENT TO THE BIR'S ELECTRONIC FILING AND PAYMENT SYSTEM (EFPS).

Venture/Consortium not taxable as corporation with a specific subject or undertaking done at the Revenue District Office (RDO) where the licensed contractor is registered as a taxpayer. exceeding 12-months are required to enroll to the BIR's eFPS. The enrollment shall be All licensed contractors who are co-venturers/members of a Joint

VH. MANDATORY FILING OF AN AITR AND SUBMISSION OF AN AUDITED

FINANCIAL STATEMENTS.

using either BIR Form No. 1702-RT or 1702-MX, whichever is applicable. However, for Joint Ventures and Consortiums considered not taxable as corporations, they should file their with Audited Financial Statements (AFS). AITR using BIR Form No. 1702-EX. The Income Tax Return fiied shall be accompanied Joint Ventures/Consortiums considered as taxable corporations shall file their AITR

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IX. MANDATORY DEREGISTRATION WITH THE BIR.

documentary requirements and full settlement of tax liabilities. if any. completion of the undertaking construction project, through submission of the complete All Joint Ventures/Consortiums are required to deregister with the BIR after

cessation of business within? two (2) years from date of cancellation may apply for a cash refund for any unused input tax pursuant to Section I 12(B) of the NIRC of 1997. as amended. A JV or Consortium whose registration has been cancelled due to retirement from or

amended, modified or revoked accordingly. All revenue issuances and BIR rulings inconsistent herewith are hereby considered

this Circular the widest dissemination and publicity as possible. All internal revenue officers, employees and others concerned are enjoined to give

This Circular shall take effect immediately.

UMAGUI,JR Hissioner of Internal Revenue

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