JOINT VENTURE TAX EXEMPTIONS

Who may file?

I. Joint ventures for the purpose of undertaking construction projects1, provided it

complies with the requirements set forth in RR No. 10-2012. The following are
that:

a) The joint venture was formed for the purpose of undertaking a

construction project;

b) It should involve joining/pooling of resources by licensed local contracts;

that is, licensed as general contactor the Philippine Contractors
Accreditation Board (PCAB) of the Department of Trade and Industry
(DTI);

c) The local contractors are engaged in construction business; and

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

II. Pursuant to the above, Joint ventures involving foreign contractors may also be
treated as a non-taxable corporation provided that:

a) The member foreign contractor is covered by a special license as

contractor by the PCAB; and

b) 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.

c) International bidding is allowed under the Bilateral Agreement entered

into by and between the Philippine Government and the foreign/
international financing institution

1 Sec. 22(B) of the Tax Code - The term 'corporation' shall include partnerships, no matter how created or
organized, joint-stock companies, joint accounts, association, or insurance companies, but does not
include xxx 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
consortium agreement under a service contract with the Government.
 Under the exemptions stated above, it is imperative that the joint venture must
be between general contractors engaged in the construction business and not
merely between general contractors and capital contributors, such as
landowners.

If the said requirements are complied with, the joint venture will not be subject
to the corporate income tax under Section 27 (A) of the Tax Code and the gross
payments to the JV on the Project are also not subject to the 2% CWT prescribed
under Section 57 (B) of the Tax Code.

However, the co-venturers are separately subject to the regular corporate

income tax on the taxable income derived by them from the aforesaid
construction project. The respective net income of the co-venturers derived
from the joint venture project is also subject to CWT under Section 57 of the Tax
Code.

RR No. 10-2012 also mandates licensed local contractors to enroll themselves

with the BIR Electronic Filing and Payment System in the Revenue District Office
where they are registered as taxpayers.

Tax treatment of the co-venturer’s share in the joint venture profit:

Corporate Co-venturer Individual Co-venturer

Taxable Joint The respective share in the The respective share in the
Venture joint venture joint profit is joint venture profit is
considered as dividends considered as dividends
income received by a DC from income received by an
a DC. Hence, it shall be individual taxpayer from a DC.
treated as inter-corporate Consequently, it shall be
dividend which is tax exempt. subject to 10% final
withholding tax.

Non-Taxable The respective share in the The respective share in the

Joint Venture joint venture profit shall be
included in the computation
of the corporate venturer’s
taxable income subject to
normal corporate income tax
of 30%.
(Tabag, 2015)
joint venture profit shall be
subject to creditable
withholding tax. Consequently,
the same be included in the
computation of the individual
taxpayer’s taxable income.

III. Joint ventures engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating consortium agreement under a service
contract with the Government
 IV. Non-taxable joint ventures and enterprises duly registered with the Philippine
Economic Zone Authority (PEZA) under R.A. 7916

How to file
 Documentary Requirements
1. BIR Ceretificates of Registration of both entities
2. SEC Registration of the Joint Venture Agreement; and, the Articles of
Incorporation of both entities
3. PCAB Licenses of both entities

 Letter Request for Ruling

The application for tax exemption must be accompanied with a Letter Request
for Ruling following the requirements setforth in RMO 09-14.

Where to file
BIR National Office – Law division

Other notes
Upon submission of the requirements, call the BIR Law Division to ask who the action
lawyer is to appraise us of the additional requirements