REVENUE MEMORANDUM CIRCULAR (RMC) NO. 21-2025
This RMC addresses the tax treatment of joint ventures or consortiums in construction projects that are not classified as corporations under the Tax Code of 1997. Issued on March 24, 2025, by the BIR, this RMC clarifies the tax obligations and administrative requirements for these entities as outlined in Section 22 (B) and Section 236 of the Tax Code of 1997.
| References | Requirement/Definition | Scope | Exception/Exemption |
| Section 236 of the Tax Code | All Joint Ventures or Consortiums must register with the BIR | Taxable or not, Incorporated or not and regardless of purpose | None – All must register |
| Presidential Decree (PD) No. 929 (dated May 4,1976) | Provides tax exemption for certain construction-related Joint Ventures | Formed to assist local contractors in big construction projects | Encourages competitiveness vs foreign contractors by pooling resources |
| Section 22(B) of the Tax Code | Defines Corporation to include Joint Ventures and other entities | One Person Corporation (OPC), partnerships, no matter how they are created or organized, joint stock companies, joint accounts (cuentas en participacion), associations, or insurance companies | general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. |
A joint venture or consortium formed exclusively for construction projects is not considered a corporation (and therefore not subject to corporate income tax) if the following conditions are all met:
- The Joint Venture is formed for a construction project;
- Members are licensed local contractors by the Philippine Contractors Accreditation Board (PCAB) under the DTI;
- These contractors are engaged in the construction business; and
- The Joint Venture itself is licensed as such by the PCAB.
Joint ventures involving foreign contractors may also be treated as a non-taxable corporation only if the member foreign contractor is covered by a special license as contractor by the PCAB of the 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 Contractor’s License Law.
Absent any one of the aforesaid requirements, the joint venture or consortium formed for the purpose of undertaking construction projects shall be considered as taxable corporation.
Disqualified Entities for Tax-Exempt Joint Ventures/Consortiums:
- Suppliers of goods, services, or capital;
- Real estate developers (e.g. condominium projects);
- Real estate developers and landowners;
- Real estate developers and LGUs (e.g. city/township development projects, reclamation projects);
- Real estate developers and GOCCs;
- Non-contractors (among themselves); and
- Contractors and non-contractors.
A Joint Venture (JV) or Consortium is subject to the following tax:
- 12% Value-Added Tax (VAT) on gross payments. Additionally, income payments made by the JV/Consortium—whether the entity is taxable or not—to local or resident suppliers of goods and services (excluding those covered by other withholding tax rates) are subject to Creditable Withholding VAT;
- The withholding tax rates are 1% for payments to suppliers of goods; and
- 2% for payments to suppliers of services.
Co-venturer/Member of a Joint Venture Not Taxable as Corporation Subject to the following:
- Income tax on their respective distributive share; and
- 15% Creditable Withholding tax on the share of each Co-venturer/Member from the net income of Joint Venture/Consortium
All co-venturers are mandatorily required to file an Annual Income Tax Return (AITR), which must be accompanied by Audited Financial Statements (AFS). If the construction undertaking exceeds 12 months, the co-venturer must also enroll in the BIR’s Electronic Filing and Payment System (eFPS).
Mandatory Deregistration with the BIR
All JVs and Consortiums must deregister with the BIR after completing their construction project. This requires submitting all necessary documents and settling any tax liabilities.
If a JV or Consortium’s registration is canceled due to retirement or business cessation within two years, they can apply for a cash refund of any unused input tax under Section 112(B) of the NIRC of 1997, as amended.
Any conflicting revenue issuances and BIR rulings are considered amended or revoked. This Circular takes effect immediately.