BIR Ruling No. 300-2016

REPUBLICOF THE PHILIPPINES

W BUREAU OFINTERNAL REVENUE DEPARTMENT OF FINANCE

W Quezon City

E.O.226;RR 16-2011 Secs.57B:106(A1)a:196 NIRC

BIR Ruling No.334-1 6-28-2016 3002016

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

Attention: Chief Financial Officer Robin Sarmiento

Gentlemen:

for brevity) with Tax Identification No. This refers to your letter dated April 07, 2016 stating that Aboitiz Land, Inc. (ALand is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under Company Reg. No. Cost Mass Housing Project (Ajoya Residences Phase 3-Brgv.Gabi,Cordova,Cebu) on a has been granted Income Tax Holiday (ITH) by the BOI for a period of three (3) years from January 2013 or actual start of commercial operations/selling, whichever is earlier but in no case Cordova, Cebu Project is registered with Housing and Land Use Regulatory Board (HLURB) Non-Pioneer status under Certificate of Registration No. earlier than the date of registration. ALand's Ajoya Residences Phase 3 - Brgy. Gabi, It is registered with the Board of Investments (BOI) as an Expanding Developer of Low- ated May 25.2011.ALand

Region VIl Office, particularly described as follows:

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

No.

Ajoya Residences Phase 3 Brgy. Gabi, Cordova, Cebu 148 units

Under the Specific Terms and Conditions of its BOI Registration, the ITH of ALand shall cover only one hundred forty (148) units of low-cost mass housing for ALand's Ajoya Residences Phase 3 -- Brgy. Gabi, Cordova, Cebu Project.

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

respect to its registered activity.

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

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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.

Project is a BOI registered project. this Office is of the opinion as it hereby holds, that income commercial operations/selling. whichever is earlier but in no case earlier than the date of housing units. Furthermore, such exemption shall not cover revenues from units with selling payments received by ALand in connection with its housing project,Ajoya Residences Phase 3 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 2013 or actual start of Residences Phase 3 Brgy. Gabi, Cordova, Cebu Project involving 148 low-cost mass Brgy.Gabi,Cordova,Cebu Project (on the148 low-cost mass housing units as mentioned in 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 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. Accordinglysince ALand's Ajoya Residences Phase 3-Brgy.Gabi,Cordova,Cebu

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: Moreover, the entitlement to ITH of ALand's Ajoya Residences Phase 3 -- Brgy. Gabi,

1. The enterprise shall construct and sell 148 units of low-cost mass housing based on the following schedule:

Year Volume (No. of Units) SalesPhP000

3 1 2 52 52 44 Total 148

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

Duplex Model Type Floor Area (in sq.m.) 44 No. of Units 34 Selling Price (P'000)

2-storey single detached 2-storey single detached 2-storey single detached 2-storey townhouse 1-storey single detached 60 60 80 40 10 2 33 20 36 3

3.The cnterprise shall observe the following project timetable:

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Activity month,year Schedule Date Expenses Related CostP000

Site acquisition Completed 2,977 has. RawLand

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

Site Preparation and Development On-going and walkway facilities.surveying works, site Building temporary preparation, road preparation.

drainage system. rip-rap. electricity water supply

House Construction March 2011

Operation Start of Commercial January 2013 (3 mos.) Working capital

TOTAL PROJECT COST

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

S 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 (l) month from filing of the final Income Tax Return (ITR) with the Bureau of Internal 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. Revenue (BIR) in order to validate the claim for income tax exemption. The

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 of the total subdivision area or total subdivision project cost (estimated at Php has been developed and allocated for socialized housing within one

year from date of registration or prior to availment of ITH. whichever is earlier.

Slum Upgrading: and (3) Joint-Venture Projects. Otherwise, the ITH for that This may be done through any of the following modes: (1 New Settlement; (2)

particular taxable year shall be deemed forfeited.

those granted under E.O. 226.In this regard. under the terms and conditions of its BOI Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than

registration, ALand's Ajoya Residences Phase 3 -Brgy.Gabi, Cordova,Cebu Project was

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

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)

sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five (P3,199.200.00 and below is VAT-exempt. Thus, only the sales by ALand's Ajoya Residences Phase 3 - Brgy. Gabi, Cordova, Cebu Project of housing units with selling price of'not more than the aforementioned price ceilings shall be exempt from VAT. 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 In relation thereto, Section 109(1(P) of the Tax Code of 1997 provides, that the

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 incentives, value-added tax (VAT) and duty exemptions, deductions, credits or exclusions from as amended, using the electronic system for filing and payment of taxes of the BIR. Furthermore ALand shall file with BOI a complete annual tax incentives report of its income-based tax filing of tax returns and payment of taxes. Pursuant to Section 4 of Republic Act (RA) No. 10708, ALand is required to file its tax

subject to the withholding taxes as source as required under Chapter XIII and Section 57 of the government if it acts as employer and any of its employees received compensation income Tax Code of 1997,as amended and implemented by Revenue Regulations No.2-98, as amended. subject to compensation withholding tax, or if it makes payments to individuals or corporations It should be understood that ALand shall be constituted as a withholding agent for the

Revenue Regulations No. 16-2011 dated October 27, 2011. + The increase in the threshold amount for the sale or lease of goods or properties or the performance of services covered by Section 109(P).(Q) and (V) of the 1997 Tax Code took effect on January 1.2012, pursuant to

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Likewise, ALand 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.

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

Code of 1997,as amended.

This ruling is being issued on 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.

KIM S. JACINTO-HENARES Commissioner of Internal Revenue

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