BIR Ruling No. 278-2016

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNALREVENUE DEPARTMENT OF FINANCE

Quezon City

E.O. 226 Secs.57(B)106A(1)a196 NIRC

PROFRIENDS CENTER,55 Tinio St. Brgy.Addition Hills, Mandaluyong City PROPERTY COMPANY OF FRIENDS,INC. BIR Ruling No.412-13 #278-2016 6-222016

Attention: Marilyn T. Santos-Oblena VP-Financial Control Group

Gentlemen:

the "Omnibus Investments Code of 1987" Kensington Phase 27- Brgy. Navarro, General Trias, Cavite, duly registered with the Board of Investments (BOI) under Executive Order No. 226, otherwise known as and expanded withholding taxes on its income derived from the mass housing project. Company of Friends, Inc.Pro-Friends), certificate of tax exemption from income This refers to your letter dated May 25, 2015 requesting on behalf of Property

Pambansa 220; and that the ITH of the Corporation shall be limited only to the revenue generated from the registered housing project, Kensington Phase 27- Brgy. Navarro, General Trias, Cavite. (3) years beginning from March 2015 or actual start of commercial operations/selling. is duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. shall be entitled to income tax holiday (ITH) for the above project for a period of three (BOI) under the Omnibus Investments Code of 1987 (E.O. 226), under BOI Certificate whichever is earlier, but in no case earlier than the date of registration; that the project Navarro, General Trias, Cavite. is duly registered with the Board of Investments of Registration No. SEC Certificate of Registration No. Developer of a Mass Housing Project (Horizontal), Kensington Phase 27-Brgy. (TIN) laws; that it is registered with the Securities and Exchange Commission (SEC) with Documents submitted show that Pro-Friends, with Tax Identification No. is a domestic corporation duly organized under the Philippine that pursuant to said BOI Registration, Pro-Friends and License to Sell No. that Pro-Friends,as an Expanding pursuant to Batas

It is further shown that Pro-Friends, under the Specific Terms and Conditions of its BOI Registration for the project,Kensington Phase 27-Brgy.Navarro,General

housing units based on the following sales revenues: Trias, Cavite, is obligated to construct and sell Six Hundred Thirty One (631) mass

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Type Unit Year Volume Value(PhP)

Catherine House Model 3 2 Typical Inner Units 228 169 119 Typical Corner Units 20 25 20 Total Units] 253 1 89 1 89 Inner Units Typical Typical Corner Units Total

Total 566 65 631

(B) of the Tax Code of 1997, as amended, the withholding tax prescribed in the said the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987.(BIR Ruling No.412-2013 dated November 11,2013) Regulations (RR) No. 2-98, as amended by RR No. 6-2001 implementing Section 57 Regulations shall not apply to income payments to persons enjoying exemption from In reply, please be informed that under Section 2.57.5 (B)(2) of Revenue

registration of the housing project with the BOI. received by Pro-Friends directly in connection with the aforementioned housing project, consisting of Six Hundred Thirty One (631) units, are exempt from the creditable withholding tax imposed under RR No. 2-98, as amended by RR No. 6-2001, for a period of three (3)years beginning from March 2015 or actual start of commercial operations/selling. whichever is earlier, but in no case earlier than the date of General Trias, Cavite, is duly registered with the BOI under the Omnibus Investments Code of 1987, this Office is of the opinion as it hereby holds, that the income payments Accordingly, since Pro-Friends- Kensington Phase 27- Brgy. Navarro,

exceeding One Million Two Hundred Fifty Pesos (Php1,250,000.00). (BIR Ruling No. 412-2013 dated November 11, 2013 creditable withholding tax covers only income directly attributable to the revenues generated from the project, Pro-Friends- Kensington Phase 27- Brgy. Navarro, General Trias, Cavite, consisting of Six Hundred Thirty One 631) units. Furthermore, such exemption shall not cover revenues from units with selling price It must be emphasized, however, that the aforesaid exemption from the

considered as part of the revenues generated from the registered housing project. In the computation of ITH, interest income from in-house financing shall not be

Trias, Cavite's entitlement to ITH for its BOI-registered housing project is not automatic as it has still to comply with the provisions of the Specific Terms and Moreover, Pro-Friends- Kensington Phase 27- Brgy. Navarro, General

Conditions of its BOI Registration, viz

(1) The firm shall submit proof of verified compliance with the 20% socialized

housing requirement for its existing projects registered before 201 1 prior to

availment of ITH:

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Per HLURB License to Sell issued for the Project, the maximum selling price shall be P1,250,000.00.

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2 The firm shall submit a Notarized Affidavit executed by the licensed project for its BOI registered housing projects prior to availment of ITH. attached to the Affidavit: engineer or architect indicating the area or the number of lots and actual units built and the construction costs on the development of the compliance The following documents relevant to the compliance project shall be

b Project Development Plan c Development Permit;and d) Verified Survey Return a) License to Sell

(3) In the grant of incentives, the extent of the project's ITH entitlement shall be based on the project's ability to contribute to the economy's development ITH if the project does not realize the extent of economic benefits shall comply with the following representations: based on the following parameters: (1) net value added, (2) job generation. represented by the proponent at the time of its application. The enterprise (3) multiplier effect, and (4) measured capacity. The Board may reduce the

a. Net Value Added should be at least 25%

NVA%) Year I 97% Year 2 9% Year 3 97% b.Job Generation

Employees Number of Pre-Op 38 Year I 128 Year 2 128 Year 3 128

C Investments and Timetable

Total Project Cost Operations Construction Start of CommercialMarch 2015 Site Preparation andOctober 2013- government/training Development Building Land Acquisition license/permit/ registration from the costs Secure Activity necessary 1July March 2014-Building January 2017 February 20171 Month/Year October 2013 April 201l Schedule 2012- Land/Site Construction Capital Development Cost Working Land Cost Pre-Operating Expenses Expense/s Related Cost (Php)

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d.Sales Revenues

Catherine House Model Unit Type Ycar 3 2 Typical Inner Units 228 169 169 Volume Typical Corner Units 20 25 20 Units 253 18 Total 189 Inner Units Typical Value (PhP) Typical Corner Inits Total

Total 566 65 631

revenues exceeding 10% of the projected gross revenue represented by the Net income qualified for ITH availment shall not be a result of gross firm in its application.

additional investments, the Board may increase the project's ITH availment filed before the filing of application for ITH; In cases where the project's actual revenues exceed the projections in its application due to, e.g., new markets/orders. additional employment/shifts proportionately. Request/s for adjustments of projected revenue must be

(4) The enterprise should endeavor to undertake meaningful and sustainable Corporate Social Responsibility (CSR) activities in the locality where the project is implemented:

(5) Only income directly attributable to revenue generated from the registered be qualified for ITH: project (Kensington Phase 27- Brgy. Navarro,General Trias, Cavite and its housing units used solely for family home or dwelling purposes and not for commercial purposes such as leasing, retail stores. offices, etc. shall

(6) Secure from the Housing and Land Use Regulatory Board (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 Administration Service within the Social Security System (SSS) that the enterprise is in good standing in the remittance of SsS contributions of its employees: Bureau of Internal Revenue (BIR) in order to validate the claim for income tax exemption. The application shall be accompanied by a certification from one ()month from the filing of the final Income Tax Return (ITR) with the

(8) Secure a Certificate of ITH Entitlement (CoE) from the BOI Legal and that particular taxable year without CoE shall be forfeited; Compliance Service prior to filing of ITR with the BIRotherwiseITH for

(9) In the event the enterprise fails to maintain the 75:25 debt-to-equity ratio Otherwise, the enterprise shall not be entitled to ITH and shall be required to refund any capital equipment incentives availed of: requirement, it shall show proof that the construction of housing units have been completed and delivered to buyers prior to availment of ITH

(10)The enterprise shall submit proof of compliance that, at least twenty percent (20%) of the total subdivision area (estimated at 10 563 sq. m.) or total subdivision project cost (estimated at Php M) has been

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developed and allocated for socialized housing within one year from date of registration or prior to availment of ITH.whichcver is earlier

l1The enterprise shall submit to the BOI Legal and Compliance Service require at any given time with respect to the registered project: and on a semestral basis within fifteen(15 days from the end of each semester. a report on actual investments. employment,sales.production costs.actual ITH availed of for each year,and other information that the Board may

12 The enterprise must commit to the tenets of Good Corporate Governance.

the Tax Code of 1997, as amended. (BIR Ruling No. 412-2013 dated November 11. other than those granted under E.O. 226. In this regard, under the terms and conditions Hundred Thirty One (631) units, but such terms and conditions do not provide for any exemption from other taxes that the Corporation may be subject to on its business Trias, Cavite will remain subject to Value-Added Tax (VAT) and Documentary Stamp 2013) of its BOI registration, Pro-friends was clearly granted a 3-year ITH for its project. Kensington Phase 27- Brgy. Navarro, General Trias, Cavite, consisting of Six transactions. Thus, Pro-Friends- Kensington Phase 27- Brgy. Navarro, General Tax (DST) on its sales of housing units pursuant to Sections 106 (A)(1)(a) and 196 of Furthermore. BOl-registered enterprises enjoy no tax exemption/privileges

selling price of not more than the aforementioned price ceiling shall be exempt from Kensington Phase 27- Brgy. Navarro, General Trias, Cavite of housing units with VAT. Hundred Pesos (P1,919,500 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 and below, is VAT-exempt.2 Thus, only the sales by Pro-Friends- sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five In relation thereto, Section 1091)(P) of the Tax Code of 1997 provides, that the

as provided under the 1997 Tax Code, as amended, using the electronic system for may be provided under E.O. 226, within thirty (30) days from the deadline for filing and payment of taxes of the BIR. Furthermore, Pro-Friends shall file with BOI a complete annual tax incentives report of its income-based tax incentives. VAT and duty exemptions,deductions,credits or exclusions from the tax base,as filing of tax returns and payment of taxes. required to file its tax returns and pay its tax liabilities,on or before the deadline Pursuant to Section 4 of Republic Act (RA) No. 107083, Pro-Friends is

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

compensation income subject to compensation withholding tax,or if it makes payments

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

pursuant to Reveme Regulations No.16-2011 dated October 27,2011. An Act Enhancing Transparency in the Management and Accounting of Tax Incentives Administered

by Investment Promotion Agencies.

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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 (RR No.2-98,as amended.

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. Likewise, Pro-Friends is required to file on or before the 15th day of the fourth

Subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether it is 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. Finally, Pro-Friends' books of accounts and other pertinent records shall be

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.

Very truly yours.

Commissioner of Internal Revenue KIM S. JACINTO-HENARES

K-1-JHB 042203 JUN 2 0 2016