BIR Ruling No. 317-2022

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNALREVENUE DEPARTMENT OF FINANCE

Quezon City

Sec.22B of the NIRC RR No. 10-2012. BIR Ruling No.013-2018 RR No.14-2002 J IUN_282027

Magallanes, Makati City TAISEI -DMCI JOINT VENTURE 3/F DMCI Annex Bldg.2278 Don Chino Roces Ave

Attention :Kazuhiro Nishimoto General Manager Gentlemen:

Stations and Depot for the North-South Commuter Railway Project ("JV Project"). your opinion on the taxation of the joint venture between Taisei Corporation and D.M. Consunji, Inc.for the purpose of constructing Packege 01: Elevated Structures, 6 This refers to your letter dated July 24,2019, requesting for a confirmation of

Bureau of Internal Revenue (BIR), and PCAB, namely : completion of the afore-mentioned JV Project; that he Joint Venture,with Special Contractor's License No. Philippines through the Department of Transportation (DOTr) for the construction and Philippine Contractors Accrecitation Board (PCAB, is composed of two 2 contractors duly registered with the Securities and Exchange Commission (SEC unincorporated joint venture formed for the purpose of andertaking the JV Project; that the Joint Venture entered into a contract with the Government of the Republic of the Documents submitted disclose that Taisei-DMCI Joint Venture, is an originally issued on June 13, 2019 by the

1. Taisei Corporation, with Taxpayers' Identification Number (TIN) PCAB Contractor's License No. June 6, 2019; and SEC Registratien No. originally issued on , and

2. D.M. Consunji, Inc., with TIN Registration No originally issued on January 30, 969. and PCAB Contractor's License No. SEC

and to extend to each other theit respective fullest cooperation and best effort towards the successful construction and completion of the JV Project in accordance with the other efforts and resources for th proper execution or ir plementation of the JV Project Project Contract. Venture in accordance with the following participation shares - Taisei Corporation - fifty one percent (51%,and D.M.Consunji, Inc.-forr/nine percent 49% share,for all the necessary capital, equipnient, technical personne, management, supervision, and The herein co-venturers have mutually bind each other to contribute to the Joint

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On April 25, 2019, Taisei-DMCI Joint Venture was registered with the BIR, as a regular taxable corporation liabie for corporate income tax, and was issued with TIN

.Hence, this request.

Internal Revenue Code of 1997(Tax Code, as amended, the term "corporation"shall In reply, please be inforrned that pursuant to Sction 22 (B) of the National

include partnerships, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction_projects or engaging in petroleum, coal. geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government.

Likewise, Section 2.57.5 (5) of RR No. 2-98, as amended, provides that:

withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following. "SECTION 2.57.5.Exemption fromWithholding. The

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(B) Persons enjoying exemption from payment of income taxes pursuant

limited to the following. to the provisions of any law, general or special, such as but not

XXX XXX XXX (5) Joint ventures or consortium formed for the purpose of corporation: consortium formed for the purpose of undertaking construction proiects shall comply with the following conditions to be considered as joint venture not taxable as a undertaking construction projects or engeging in petroleum, coal, geothermal and other energy operations pursuant to an with the government. Provided, howevei, joint ventures or operating or consortium agreement under a service contract

a) Should involve joining or pooling ofrescyrces by licensed local contracts; ihat is, licensed as general contractor by of the Department of Trade and Industr(DTD); the Philippine Contractors Accreditatior Board (PCAB)

b) These local contractors are engaged in construction business; and c) The Joint Venture itself must likewise be duly licensed as such by the PCAB of the DTI.(Emphasis and underscoring supplied)

Tax Code, as amended, states that: Moreover, Section 3 of RR No.10-2012, implementing Section 22 B of the

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

( for the undertaking of a construction project; and 2 contractor by the Philippine Conractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI); should iinvolve joining or pooling of resources by licensed local contractors that is, licensed as general

(3 the locai contractors are engaged in construction business; and (4 (PCAB) of the Department of Trade and Industry (DTD. the Joint Venture itself must likewise be duly licensed as such by the Philippine Contractors Accreditation Board

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include those who are mere suppliers of goods, services or capital to a construction project. or consortium formed for the purpose of undertaking construction projects shall be considered as taxable corpord ions. In addition, the tax-exempt joint venture or consortium as herzin defined shall not Absent any one of the aforesaid requirements, the joint venture

on their respective share to the joint ventures pro it." each be responsible in reporting and paying appropriate income taxes The members to a Joint Venture not taxable as corporation shall

involves joining or pooling of resources by licensed local contractors (licensed as general contractor by the PCAB); (3) the local contractors are engaged in construction business; and (4) the Joint Venture itself is duly licensed by PCAB; and therefore not subject to the corporate income tax under Section 27(A) of the Tax Code, as amended. South Commuter Railway Project is considered a joint venture not taxable as a corporation for complying with the conditions provided ir RR No.10-2012, i.e.1) the Joint Venture is for the undertaking of construction project; (2 the Joint Venture constructing Package 01: Elevuted Structures, 6 Stations and Depot for the North Such being the case, the Taisei-DMCI Joint Venthire formed for the purpose of

Section 57 (B) of the same Code, as implemented by RR No. 2-98, as amended. Project are likewise not subject to the 2% creditable withholding tax prescribed under Furthermore, the gross payments to the Taisei-DMCI Joint Venture on the JV

required to file quarterly and final adjustment returns. Taisei-DMCI Joint Venture, being exempt from corporate income tax, is not

income tax imposed under Section 27(A) of the Tax Cod.as amended,on their taxable However, the co-venturers are separately subject to the regular corporate

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income during each taxable year respectively derived by them from the aforesaid construction project.

derived from the JV Project is subject to the creditable withholding tax imposed under It should be emphasized that the respective ne: income of the co-venturers

Section 57 of the Tax Code,as amended, and implernented by RR No.2-98, as amended. Thus, before Taisei-DMCI Joint Venture distributes the net income to the co- venturers, pursuant to their agreed profits/income sharing, it shall withhold the tax based on the net income of its co-venturers and remit the same to the BIR. BIR Ruling No.1421-18 dated December 7,2018

through its executing agency, assume: Moreover, the Government of the Republic of the Philippines shall, by itself or

All fiscal levies and taxes imposed in the Republic of the contractors and/or consultants with respect to- the payment carried Philippines on the Japanese companies operating as suppliers

and/or services required for the implementation of the Project; and out for and the income accruing from the supply of products

2 All fiscal levies and taxes imposed in the Republic of the Project. contractors and/or consultants for the impiementation of the Philippines on the Japanese employees engaged in the implementation of the Project with respect to their personal income derived from Japanese companies operating as suppliers.

taxpayers.2 Internal Revenue's Electronic Filing and Payment System (eFPS). The enrollment should be done at the Revenue District Office (RDO where they are registered as Finally, the co-venturers are required to enroll themselves to the Bureau of

However, if 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.

Ve y truly yours,

10e

K-1-JAC Commissioner of Internal Revenue CAESAR R.DULAY 052118

1 Number 7 (c) and (d) of the "Exchanges of Notes" both dated November 19, 2015, by and between Secretary Albert F.Del Rosario of the Department ot Foreign Affairs, Republic of the Philippines and Kazuhide Ishikawa, 2 Section 4 of RR No. 10-2012. Ambassador Extraordinary and Plenipoteniary of Japan, which constitute an agreement between the two Governments