BIR Ruling [DA-455-06]

July 25, 2006 BIR RULING [DA-455-06] 20 (d) R.A. 7279; VAT Ruling No. 003-2003 Family Merchants Projects Development Corporation FMDC Bldg. II, Central Plaza, Brgy. Lag-On Daet, Camarines Norte Attention: Mr. Wilson P. Kho General Manager Gentlemen : This refers to your letter dated March 22, 2005 requesting for confirmation on whether private developers engaged in low-cost housing projects no longer need to secure VAT exemption certificates. In reply, please be informed that the pertinent portion of Section 20 of R.A. No. 7279, 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: (3) Value-added tax for the project contractor concerned;" Therefore, as a private developer, Family Merchants Projects Development Corporation is exempt from the payment of VAT on its gross receipts from the project. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. As to whether private developers are still required to secure a VAT exemption certificate, while you have attached a letter from the Subdivision and Housing Developers Association, Inc. dated March 21, 2005 stating that "developers engaged in socialized and low-cost housing developments in other regions and districts are not being requested by the BIR to further secure a VAT exemption", we opine that for developments pursuant to Republic Act No. 7279, private developers engaged in socialized and low-cost housing developments are still required to secure from the Bureau of Internal Revenue a confirmation that they are exempt from VAT. This ruling is 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 as null and void. cCSTHA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service