RR No. 10-2012 dated June 1, 2012 Joint venture or consortium

RR No. 10-2012 dated June 1, 201 Joint venture or consortium

(1)   for the undertaking of a construction project; and

(2)   should involve pining or pooling of resources by licensed local contracts; 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 Philippine Contractors Accreditation Board of the DTI.

Joint ventures involving foreign contractors may also be treated as a non-taxable corporation only if the member foreign contractor is covered by a special license as contractor by the PCAB of the DTI; and the construction project is certified by the appropriate Tendering Agency (government office) that the project is a foreign financed/ internationally funded project and that international bidding is allowed under the Bilateral Agreement entered into by and between the Philippine Government and the foreign/international financing institution.

>    The tax-exempt joint venture or consortium as herein defined shall not include
those who are mere suppliers of goods, services or capital to a construction
project.

Ruling:

No. The fiscal incentives provided under RA No. 7916 (PEZA Law) must be read in conjunction with its implementing rules. The implementing mles state that the availment of incentives shall continue for as long as the registrant remains in good standing and commits no violation of the PEZA Law or the terms and conditions of its registration agreement with PEZA. At the time of the sale of the property, B Co. was neither PEZA-registered nor entitled to be registered with PEZA. It has also not been issued a permit to locate in an Ecozone. Entering into a contract with B Co, was a violation of A Go.'s registration agreement, which states that it may only sell land to entities who are registered or are entitled to be registered with the PEZA, and who, in fact, subsequently register with the PEZA, or entities that are issued permits to locate by the PEZA, Moreover, since B Co, will utilize the area for commercial purposes, th e_sa !e_ofjh e_land_ msryjiptjjejjrajite dj] j^ areas in the Ecozone are intended to be used for industrial purposes only.

►  This RR is promulgated to properly implement exclusion to the definition of what is considered as a corporation pursuant to Section 22 (B) of the N IRC of 1997, in particular, those concerning joint venture undertakings involving construction projects.

►  Pursuant to Section 22 (B) of the NIRC of 1997, as amended, the term "corporation" shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentasen 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.

►  Section 3 of said RR provides that a joint venture or consortium formed for the purpose of undertaking construction projects not considered as corporation under Section 22 of the NIRC of 1997 as amended, should be:

►            All licensed local contractors are required to enroll to the Bureau of Internal
Revenue's Electronic Filing and Payment System (EFPS). Enrollment should
be done at the Revenue District Office (RDO) where the local contractors are
registered as taxpayers

RR No. 10-2012 dated June 1, 201 Joint venture or consortium