BIR issued Revenue Memorandum Circular No. 20-2010 to circularize the revocation of BIR Ruling No. DA-245-2005 regarding build-to-own (BTO), build-your-own (BYO) and similar schemes which resulted in non-payment of taxes due to government.The ruling was nullified upon the instance of RDO Gerry O. Dumayas and ARDO Christina C. Barroga of RDO 44-Taguig thru Makati Regional Director Alfredo Misajon based on their verification of the joint venture transactions between Meridien East Realty & 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/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.
Said scheme is contrary to the policy behind Presidential Decree (P.D.) No. 957, otherwise known as the “The Subdivision and Condominium Buyer’s Protective Decree”(as amended by P.D. 1216), 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”.