QuestionsQuestions (PRESIDENTIAL DECREE NO. 929)
The main purpose of Presidential Decree No. 929 is to amend specific provisions of the National Internal Revenue Code to assist local contractors in becoming competitive against foreign contractors by eliminating double taxation on joint ventures and sub-contracting arrangements.
It amends Sub-paragraph (b) of Section 84 and Section 191 of the National Internal Revenue Code.
The decree expands the term 'corporation' to include partnerships, joint stock companies, joint accounts, associations or insurance companies but explicitly excludes general professional partnerships and joint ventures formed solely for construction projects.
To help local contractors pool their limited resources and compete effectively, joint ventures formed for construction projects are exempted from being taxed separately as an additional income tax tier.
The amendment clarifies that the 'gross receipts' subject to contractor's tax exclude the portion of the contract price paid by a principal contractor to a sub-contractor. This portion is instead considered the taxable gross receipts of the sub-contractor, thus avoiding double taxation on the same income.
It seeks to address the problem of double taxation of income in joint ventures and sub-contracting arrangements, which diminishes the competitive capability of local contractors against foreign competitors.
The decree took effect beginning with the calendar year 1976.
The decree prevents the double imposition of the 3% contractor's tax on both the principal contractor and the sub-contractor by excluding the sub-contractor's portion from the principal contractor's taxable gross receipts.
President Ferdinand E. Marcos signed the decree.
The rationale is to prevent joint ventures from being taxed twice, as separate entities and as part of their constituent contractors, thereby enabling them to pool resources and compete against foreign contractors more effectively.