Tax notes: Criteria for tax-exempt joint venture

TO QUALIFY as a joint venture (JV) or consortium formed for the purpose of undertaking construction projects exempt from tax as a corporation under Section 22 (B) of the Tax Code, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 10-2012, which requires that the JV satisfy the following conditions:

a) The JV should be for the undertaking of construction project.

b) The JV should involve joining or pooling of resources by licensed local contracts, i.e., licensed as general contractor by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI).

c) The local contractors are engaged in construction business.

d) The JV itself must likewise be duly licensed as such by the PCAB of the DTI.

e) Joint ventures involving foreign contractors may also be treated as non-taxable corporations provided that the member foreign contractor is covered by a PCAB special license. Further, the construction project must be certified by the appropriate tendering agency as a foreign-financed or internationally funded project, and international bidding must be allowed under the bilateral agreement between the government and the foreign financial institution.

In case of failure to satisfy any of the above requirements, the JV or consortium formed for the purpose of undertaking construction projects shall be considered a taxable corporation.

All licensed local contractors are required to enroll with the Electronic Filing and Payment System (eFPS) at the Revenue District Office (RDO) where the local contractors are registered as taxpayers.

(Source: Punongbayan & Araullo)