March 12, 2010
by Elaine R. Alanguilan
[ manilastandardtoday.com ]
INTERNAL Revenue has revoked the tax breaks and incentives to so-called build-your-own real estate developers in a bid to collect P500 million more in revenue.
In a build-your-own project, the developer manages the construction of a condominium or property, while funds contributed by individual investors are treated as investments in a joint venture and pooled in a bank. Previously, such projects were considered non-taxable as the developed units were treated as transactions to return investors’ capital contributions.
But Internal Revenue Commissioner Joel Tan-Torres said this practice deprived the government of value-added and income taxes, saying that five or six such projects now being built could bring in as much as P500 million more into the national coffers.
He cited the joint venture transactions of Meridien East Realty & Development Corp. and Century Properties Inc.
The two companies are part of businessman Jose E.B. Antonio’s Century Properties Group, the largest privately-owned real estate company, with 40 projects in its portfolio, including Essensa East Forbes and South of Market in Fort Bonifacio.
“There are about five to six ongoing projects being developed under the same scheme,’’ Tan-Torres said.
“Under the previous [Internal Revenue] ruling, developers of these projects were only required to pay the document stamp tax and were exempted from paying VAT and income tax.”
The agency has since rectified its June 2005 ruling and now treats such projects as a form of pre-selling that is not tax-exempt.
Tan-Torres said the Housing and Land Use Regulatory Board also rejected the build-your-own scheme as being contrary to the policy behind a presidential decree that protects subdivision and condominium buyers.
“These build-your-own developers can also be seen as traditional developers and should be subject to taxes. So the tax breaks and incentives [previously granted to them] are now repealed,” Tan-Torres said.