BIR Ruling [DA-364-99]

June 23, 1999 BIR RULING [DA-364-99] Isabela La Fortuna Village Paddad, Alicia, Isabela Attention: Ms . Virginia Dumlao Tan Owner & Developer Gentlemen : This refers to your letter dated June 7, 1999 requesting on behalf of P.L.P. Construction Corporation, for exemption from the payment of project related income taxes and the value added tax as the Project Contractor for the construction of the socialized housing units of the Isabela La Fortuna Village Project located at Isabela La Fortuna Village, Paddad, Alicia, Isabela. Documents submitted to this Office disclosed that Ms. Virginia D. Tan, owner/developer of the 150 housing units of Isabela La Fortuna Village Project, contracted the services of PLP Construction Corporation to continue the construction of the 107 unfinished units, subject to the following terms/conditions: 1. The CONTRACTOR, shall shoulder all expenses of construction in accordance with plan and specifications as approved for the units to be constructed; 2. Once constructed, or prior thereto to market, or find buyer applicants of the same, and enter into contracts with said prospective buyers, assessing from them the required initial payments necessary to pursue as approved by rules and regulations, including documentation thereof until titles shall be delivered to them; 3. That the units shall be sold at the approved unit price of P180,000.00 which price shall be collected from the Home Development Mutual Fund, Regional Office, Tuguegarao, Cagayan, the sale proceeds or take out price of P180,000.00 per unit, shall be shared; 70% thereof shall go the contractor, while 30% to be shared by the Landowner, its disposition is left to the HDMF, as she has outstanding obligation therein obtained for the development of the project; 4. The prospective buyer or applicant initial payment of about P15,000.00 which answers for processing fee and documentation shall be collected by the Contractor to be used said purpose and administration expenses." In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, otherwise known as the "Urban Development and Housing Art of 1992", pertinent portion of which reads: "SEC. 20. Incentives for Private Sector Participating in Socialized Housing. To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector. xxx xxx xxx "(d) Exemption from the payment of the following: "(1) Project-related income taxes; "(2) . . . "(3) Value-added tax for the project contractor concerned: xxx xxx xxx P.L.P. Construction Corporation is exempt from the payment of the project-related income taxes and the value-added tax as the project contractor engaged by Isabela La Fortuna Village Project for the development and construction of the socialized housing packages in the Isabela La Fortuna Village, Paddad, Alicia, Isabela. However, your purchases of goods articles shall be subject to VAT even if the said purchases are to be used for the socialized housing projects since VAT is an indirect tax which can be passed on to you by the seller of the goods/articles. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Ruling No. S-20-082-99 dated May 28, 1999) LexLib Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group