Joint Ventures NOT Taxable as Corporations

In general, Joint Ventures are subject to tax (taxable joint ventures) as taxable corporations. Joint
venture refers to commercial undertaking by two or more persons, differing from a partnership in
that it relates to the disposition of a single lot of goods or the completion of a single project.
Exception to general rule, under the NIRC of 1997 stated the Joint Ventures NOT Taxable as
Corporations such as:
1. A joint venture or consortium formed for the purpose of undertaking
construction projects.
2. A joint or consortium for engaging in petroleum, coal, geothermal and
other energy operations pursuant to an operating consortium agreement
under a service contract with the government.
Section 3 of RR 20-2012 which took effect on June 2012, states that a joint
venture or consortium formed for the purpose of undertaking construction
projects NOT as considered as corporation under Section 22 of the National
Internal Revenue Code (NIRC) of 1997 as amended should be:
1.
For the undertaking of a construction project; and
2.
Should involve joining or pooling of resources by licensed local
contracts; that is, licensed as general contractor by the Philippine
Contractors Accreditation Board (PCAB) of the Department of Trade and
Industry (DTI).
3.
These 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)
In addition, Joint ventures involving foreign contractors may also be treated as NOT taxable
corporation only if the member foreign contractor is covered by a special license as contractor by
the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry
(DTI); and 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 pursuant to the implementing
rules and regulations of Republic Act No. 4566 otherwise known as Contractors License Law.
If the stated requirements is not complete (all of the requirements should be present), the joint
venture consortium formed for the purpose of undertaking construction projects shall be
considered as taxable
corporations.

Besides, mere supplier of goods, services or capital to a construction project are NOT considered
as tax-exempt joint venture or consortium.
The member to a Joint Venture NOT taxable as corporation shall each be responsible in reporting
and paying appropriate income taxes on their respective share to the joint ventures profit.
For Joint Ventures NOT taxable as corporations or exempt joint ventures, the share in a taxable
joint venture's net income is treated as inter-corporate dividend which is generally exempt from
income tax. In case of individual venturer, it is subject to 10% final tax. The share in a nontaxable joint venture's net income is subject to corporate income tax or Section 24A, in case of
individual co-venturer.
All licensed local contactors are mandated or required to enroll themselves to the Bureau of
Internal Revenues Electronic Filing and Payment System (EFPS). The enrollment should be
done at the Revenue District Office (RDO) where the local contractors are registered as
taxpayers.
References: Section 22(B) of National Internal Revenue Code (NIRC) of 1997; Revenue
Regulations No. 10-2012