BIR Ruling No. 302-2016

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNALREVENUE DEPARTMENT OF FINANCE

Quezon City

3

E.O.226:RR 16-2011 Secs.57B106A1)a:196NIR

BIR Ruling No. 334-1 #302-2016

6-28-2016 HOUSEHOLD DEVELOPMENT CORPORATION

Philamlife Village,PamplonaLas Pifias City 3r Level Starmall Bldg.CV Starr Avenue

Attention: Atty.Cecilia A.Ramilo

Tax Department Head

Gentlemen:

This refers to your letter dated June 04, 2012 stating that Household Development Corporation (Household Development for brevity with Tax Identification No. is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) Expanding Developer of Low-Cost Mass Housing Project (Lessandra Bacoor Phase 5 - Brgv. under Company Reg. No. Salinas Bacoor,Cavite on a Non-Pioneer status under Certificate of Registration No. It is registered with the Board of Investments (BOI as an

dated June 01,2012.Household Devclopment has been granted Income Tax Holiday (ITH by the BOI for a period of three (3 years from June 2012 or actual start of commercial operations/selling, whichever is earlier but in no case earlier than the date of registration.

Household's Lessandra Bacoor Phase 5-Brgy.Salinas,Bacoor,Cavite Project is registered with Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No.

Conditions of its BOI Registration, Household Development shall construct and sell four : and holds HLURB License to Sell No. 1; and that under the Specific Terms and

Brgy. Salinas, Bacoor, Cavite Project based on the following schedule: hundred ninety three (493) units of low-cost mass housing for Lessandra Bacoor Phase 5

Year Volume(No.of Units

Total I 3 2 210 493 122 16

the said ITH granted by BOI.Specifically,if Household Development,being a BOI-registered Revenue Regulations No.2-98 on income payments received during the aforementioned period with respect to its registered activity. enterprise is exempt from the payment of the creditable withholding tax (CWT) imposed under On the basis of the foregoing. you now request for an opinion on the tax consequences of

and Lot Package 493 units of House and Lot package and provides for maxinum selling price of Php HLURB License to Sell No issued to Household Developmem fer Lessandra Bacoor Phase 5 covers per House

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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

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 Household's Lessandra Bacoor Phase 5-Brgy.Salinas,Bacoor,

Cavite Project is a BOI registered project,this Office is of the opinion as it hereby holds, that

income payments received by Household Development in connection with its housing project.

Lessandra Bacoor Phase 5Brgy.Salinas, Bacoor, Cavite (on the 493 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 June 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.

Household's Lessandra Bacoor Phase 5 -Brgy.Salinas, Bacoor, Cavite Project involving 493 low-cost mass housing units. Furthermore. such exemption shall not cover revenues from units with selling price exceeding . In the

computation of ITH, interest income from in-house financing shall not be considered as revenues

generated from the registered activity.

Moreover. the entitlemcnt to ITH of Household's Lessandra Bacoor Phase 5-Brgy

Salinas, Bacoor, Cavite 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.In the grant of incentives, the extent of the project's ITH entitlement shall be based in the

project's ability to contribute to the economy's development based on the following parameters:1net value added.2job generation.3multiplier effect,and4measured

capacity. In the event that the registered enterprise fails to implement the project as represented in its project application. The Board may reduce the project's ITH entitlement proportionate to the actual performance of the enterprise.The project's entitlement to incentives shall be based on the following:

a.Net Value Added (NVAshould be at least 25%

Year Construction Raw Mat. NVA

Cost 716,502.00 416,338.00 532.913.00 99% 99 9

b. Employment Generation

Indirect Labor Direct Labor Year I 108 2 Year 2 180 2 Year 3 12 2 Administrative/Sales Total 13 3 5 C 1 3

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projecd inoome represactad hy the enterprse n s anplicron god the pnt'

acal invements and eploymnt mh th ento's prtenoons n

applicatio l cees were the ar's aal nem d e in application by me chan IO the Bord my inrea e pry' ITH nm propowtionly for rens sch as bt ax limited to a aditional menkb nen

marksorde( additial mplo nent and or ineree in nomr f no ng sh

Request's for adjustnent of prejeed inome may he suminad e the Bourd w hin the

TH entitlement period

2.The enterprise shall submit a list of common cost items and t r

methodolog for its oher prjitiewhether BOI-gistd r hongi

3 Sccure from the HLURB an cndorement thar it hes fathfally oomphed with the anov development plan and a ertificate or Good Housckping

File an appliation with the BOI Incentivs Deparment within one monh rm Mng

of the final Incone Tax Rerurn ITRwith the Bureau of Internal RevenBIR an or

to validatc the claim for inoome tax eemption.The arphcation shall acoomwnied

a certification from the Social Security System SS that the entorpise is tn gd

standing in the remittance of SSS contributions of its emplove

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Secure a Certificate of ITH Entitlement CoE from the BOI Supervision and Monitoring Departnent prior to filing of ITR with the BIR; otherwise. ITH for that particular year

without CoE shall be forfeited.

6. In the event the enterprise fails to maintain the 75:25 debt-equity ratio requirement. it shall

show proof that the construction of housing units have been completed and delivered to

buyers 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.

7.The enterprise shall submit proof of compliance that at least twenty percent (20% of the

total subdivision area (estimated at 10,232 sq.m or total subdivision project cost

estimated at Php 57.219 million has been developed and allocated for socialized

housing within one year from date of registration or prior to availment of ITH, whichever

is earlier.This may be done through any of the following modes: The investment scheme

may be complied with through any of the following modes:(1) New Settlement:(2 Slum

Upgrading; and (3 Joint Venture Projects. Otherwise, the ITH for that particular year shall be deemed forfeited.

8.The enterprise must abide by the principles of Good Corporate Governance.

those granted under E.O.226.In this regard,under the terms and conditions of its BOI registration Household's Lessandra Bacoor Phase 5Brgy.Salinas,Bacoor,Cavite Project Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than

was clearly granted a 3-year ITH but such terms and conditions do not provide for any exemption from other taxes that Household Development may be subject to on its business transactions.Thus. Household's Lessandra Bacoor Phase 5-Brgy.Salinas,Bacoor,Cavite Project will remain subject to Value-Added Tax(VAT)and Documentary Stamp Tax(DSTon its sales of house and lot units pursuant to Sections 106(A1aand 196 of the Tax Code of

1997, as amended. (BIR Ruling No.334-11 dated September 7.2011)

In relation thereto, Section 1091(P of the Tax Code of 1997 provides. that the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five 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 (P3.199.200.00 and below is VAT-exempt2.Thus,only the sales by Household's Lessandra Bacoor Phase 5-Brgy.Salinas,Bacoor,Cavite Project housing units with selling price of not more than the aforementioned price ceilings shall be exempt from VAT.

Pursuant to Section 4 of Republic Act (RA No.10708.Household is required to file its tax returns and pay its tax liabilities,on or before the deadline as provided under the 1997 Tax

Furthermore. Household shall file with BOI a complete annual tax incentives report of its income-based 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. Code. as amended. using the electronic system for filing and payment of taxes of the BIR

Bacoor,Cavite Project shall be constituted as a withholding agent for the government if it acts It should be understood that Household's Lessandra Bacoor Phase 5 - Brgy.Salinas

2 The increase in the threshold amount for the sale or lease of goods or properties or the perforinance of services covered by Section 109(P.Q and (V of the 1997 Tax Code took effect on January 1.2012.pursuant to Revenue Regulations No.16-2011 dated October 27.2011.

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withholding tax, or if it makes payments to individuals or corporations subject to the withholding as employer and any of its employees received compensation income subject to compensation 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.

Likewise,Household's Lessandra Bacoor Phase 5-Brgy.Salinas, Bacoor,Cavite Project is required to file on or before the 15th day of the fourth month following the close of its accounting period of a Profit and Loss Statement and Balance Sheet with the Annual information Return under oath, stating its gross income and expenses incurred during the taxable year.

FinallyHousehold's Lessandra Bacoor Phase 5 -Brgy.Salinas, Bacoor,Cavite Project'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 ascertaining whether it has

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

KIM S.JACINTO-HENARES Commissioner of Internal Revenue 04236 E

K-1-GPS JON 2 8016