Tax rules for joint ventures in construction

Ask AI

PRESIDENTIAL DECREE NO. 929: Tax rules for joint ventures in construction

Getting related questions...
What do you want to know about the law?
Your conversations and searches stay on your device. We do not store or track your activity on our servers. To know more about our privacy commitment see jur.ph/privacy Ask AI provides quick answers grounded in full case texts to avoid mistakes. Always verify with the original text.

Ask AI

Title Supreme Court: Tax rules for joint ventures in construction

Law: Presidential Decree No. 929

Decision Date: May 4, 1976

Presidential Decree No. 929 amends the National Internal Revenue Code in the Philippines to include joint ventures for construction projects in the definition of "corporation" and exempts the portion of the contract price paid by a principal contractor to a sub-contractor from taxable gross receipts, aiming to address disadvantages faced by local contractors in competing with foreign contractors.

national internal revenue code

A

Taxation Concerns and Double Taxation Issue

Corporate income tax currently applies both on joint ventures and the individual entities within such ventures, creating a tax burden.
The imposition of a 3% contractor's tax on both principal and sub-contractors is based on the contract price received.
This results in double taxation of gross receipts for principal contractors and sub-contractors, thus reducing the competitiveness of local contractors.

Amendment to Definition of Corporation (Section 84, Subsection b)

The term "corporation" is expanded to include partnerships, joint stock companies, joint accounts (cuentas en participacion), associations, and insurance companies.
Explicitly excludes general professional partnerships and joint ventures formed solely for construction projects from being considered corporations.

Amendment to Definition of Gross Receipts (Section 191)

The term "gross receipts" excludes the portion of the total contract price that a principal contractor pays to sub-contractors under subcontract arrangements.
This ensures that the subcontractor's share is taxed only once as their gross receipt, eliminating duplication of taxation on the same income.

Effectivity Clause

The amendments took effect starting the calendar year 1976.

Important Legal Concepts and Objectives

The law aims to provide tax relief and competitive parity for local contractors against foreign competition.
Facilitates the formation of joint ventures without the penalty of additional corporate income tax layers.
Seeks to prevent double taxation on construction contract revenues between principal contractors and subcontractors, promoting fair taxation practices.

END