In order to be a tax-exempt joint
venture (JV) under Section 22(B) of the Tax Code, a JV or consortium formed for
the purpose of undertaking a construction project must meet the following
conditions:
a. the JV should be for the undertaking
of a construction project
b. the parties in the JV must be licensed
as general contractors by the Philippine Contractors Accreditation Board (PCAB)
c. local contractors are engaged
in construction business
d. the JV itself must be duly
licensed by the PCAB.
The BIR held that a JV project
for the construction of a condominium where one of the parties contributes the
land and the other party provides construction funding and/or development is
not covered by Section 3 of Revenue Regulations No. 10-2012, and, as such, is
taxable as a corporation.
As regards the share in the JV of
the co-venturers, the BIR held that the transfer of condominium units from the
JV to the co-venturers shall be subject to ordinary income tax based on the
current fair market value of the condominium units less the fair market value
of the property contributed to the JV in case of the co-venturer contributing the
land, and costs actually, directly and exclusively incurred for the construction
of the project on the part of the developer as co-venturer.
The subsequent sale by the
coventurers - directly or indirectly (by trust or agency) - of the condominium
units received shall be subject to ordinary income tax, creditable withholding
tax, VAT, and documentary stamp tax.
(BIR
Ruling No. 263-2013, July 12, 2013)
Tax
Brief – August 2013
Punongbayan
and Araullo
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