More on Failed Tax Scheme?

(original web post 09/25/12) (BIR Media Release)

http://www.mb.com.ph/node/249943/bir-revoke

BIR revokes ruling on build-your-own scheme

By CHINO S. LEYCO

March 28, 2010, 10:59am

The Bureau of Internal Revenue (BIR) has revoked its earlier ruling regarding the build-to-own (BTO), build-your-own (BYO) and similar schemes that resulted in non-payment of taxes due to government.

Under the revenue memorandum circular 20-2010, the country's tax collection agency has ordered the revocation of BIR ruling DA-245-2005.

The ruling was nullified upon the instance of RDO Gerry O. Dumayas and ARDO Christina C. Barroga of RDO 44-Taguig throught Makati Regional Director Alfredo Misajon based on their verification of the joint venture transactions between Meridien East Realty and Development Corporation (Meridien) and Century Properties, Inc. (CPI) last April 2009.

It was originally represented in the ruling that Meridien and CPI only manage the construction of the condominium project, and that the funds as contributed by the individual investors or co-developers are pooled in a bank with the developer, as project manager, receiving only a project management fee.

Moreover, the assignment and delivery of the developed units to a joint owner, is claimed non-taxable being merely a transaction to effect the return of capital contribution. This resulted in the non-payment of income taxes and value-added tax by Meridien and CPI on the gross project amount.

However, upon RDO 44’s investigation of the facts presented. They found out that Meridien and CPI misrepresented said transactions, which nullified the said ruling.

The scheme is contrary to the policy behind presidential decree 957, otherwise known as the "The Subdivision and Condominium Buyer’s Protective Decree," according to the House and Land Use Regulatory Board (HLURB).

Commissioner Joel Tan-Torres encouraged all the BIR offices concerned to report similar schemes for appropriate investigation and to prevent further erosion of tax collection running into hundreds of millions of pesos.