Taxation of unincorporated Joint ventures

JV CONSTRUCTION
• INCOME TAX

– Unregistered JV engaged in construction is treated as a

“pass through” entity:
• It is not a taxable legal entity subject to corporate income tax.
• It shall not register as an income taxpayer for income tax purposes, but
must register as a withholding agent with the BIR.
• It is not required to keep books of accounts and issue invoices and
receipts.
• It shall not file any corporate income tax return.
• It must withhold income taxes on payments prescribed by law.
– Joint Venture Partners are the ones liable to income tax and
each partner shall report its share in the JV profit during
the year.
BIR Ruling

• BIR Ruling No. 475-2014 dated November 26, 2014

A JV for construction is not taxable as a
corporation if it complies with the conditions
prescribed under RR No. 10-2012
Rulings prior to RR No. 10-2012

JVs are not taxable as corporations as long as it is formed for the purpose of
undertaking construction projects, regardless if one party (venturer) functions
only as the provider of capital.

It is only the members (co-venturers) who are subject to tax in their individual
capacities upon their sale of their share in the developed properties.

Upon effectivity of RR No. 10-2012 (dated June 1, 2012)

and subsequent BIR Rulings

JVs or consortia formed for the purpose of undertaking construction projects will
not be considered as taxable corporations, provided ALL conditions
enumerated in the RR are present/complied with.
 BIR Ruling

Not Qualified for Tax Exemption

(BIR Ruling No. 263-13)
 Mere suppliers of goods, services or capital to a
construction project.
 JV wherein only land was contributed by one of the co-
venturers shall not qualify for exemption
 BIR compliance requirements of taxable JVs

Upon effectivity of RR No. 10-2012

 The JV is required to register with the BIR and secure its own TIN (Section
236 of the Tax Code of 1997)
 The JV is constituted as withholding agent of the BIR (Sec 2.57 of RR No. 2-
98 as amended)
 The JV is required to maintain separate books of accounts (Section 232 of the
Tax Code of 1997 and Sec. 3 of RR No. V-1)
 The JV is required to issue its own official receipts/invoices for the sale of real
properties (Section 237 of the Tax Code of 1997 and BIR Ruling DA-(JV-039)
379-08)
 The JV is required to file its own tax returns (Sections 52 and 114 of the Tax
Code of 1997)
 Taxation of JVs Upon Effectivity of RR No. 10-2012

Requisites for non-taxable JVs under RR No. 10-2012 (dated June 1, 2012):
1.For the undertaking of a construction project;

2.Should involve joining or pooling of resources by licensed local contractors; that is,
licensed as general contractor by the Philippine Contractors Accreditation Board
(PCAB) of the Department of Trade and Industry (DTI);

3.The 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 (PCAB) of the Department of Trade and Industry
(DTI).

Note: Absent any one of the foregoing requirements, the JV or consortium formed for
the purpose of undertaking construction projects shall be considered as a taxable
corporation.
Alfalfa Construction/Lucky A Construction-JV

Facts:
1.The Co-venturers:

1.Alfalfa Construction 2.Lucky A Construction Corporation

-Sole Proprietor -Licensed Local Contractor
-Licensed Local Contractor -Engaged in Construction business
-Engaged in Construction business -Bidder
-Bidder

2.The JV is for the undertaking a construction project

DPWH-CAR ROAD UPGRADING PROJECT(UBAO-TAANG ROAD, IFUGAO)

3.The Joint Venture itself is duly licensed by the Philippine Contractors Accreditation
Board (PCAB)
4.The JV has secured its own TIN.

5. BIR-IFUGAO refuse to enroll the JV for EFPS.

Queries: