BIR Ruling No. 080-13

February 20, 2013 BIR RULING NO. 080-13 RA 7279; RMC 30-2009; 000-00 V.C. Mamalateo & Associates Unit 6C, 20 Lansbergh Place 170 T. Morato Avenue Quezon City Attention: Atty. Victorino C. Mamalateo Managing Partner Gentlemen : This refers to your letters dated July 7, 2010 and March 29, 2012 requesting, on behalf of Duraville Realty & Development Corporation (Duraville), for confirmation of your opinion that beginning January 1, 2009, all the socialized housing units of the Mary Cris Complex located at General Trias, Cavite which were previously registered with the HLURB and are covered by BIR Ruling S-20-100-2000 dated October 25, 2000 are still exempt from income tax, the corresponding expanded withholding tax and value added tax pursuant to Section 20 of Republic Act (RA) No. 7279 or the "Urban Development and Housing Act of 1992" even if the selling prices thereof are to be increased to the maximum selling price of P400,000.00. HSTCcD It is represented that Duraville Realty & Development Corporation (Duraville), is a corporation organized and existing under the laws of the Philippines; that it is organized primarily to acquire by purchase, lease, donation or otherwise, and to own, use, improve, develop, subdivide, sell, mortgage, exchange, lease, develop and hold for investment or otherwise, real estate of all kinds, whether improve, manage or otherwise dispose of buildings, houses, apartments and other structures of whatever kind, together with their appurtenances; that on May 22, 2000, Durawood Construction Lumber Supply, Inc. filed a request for tax exemption from BIR on behalf of Duraville and on October 25, 2000, the BIR issued BIR Ruling S-20-100-2000 confirming the income tax and creditable withholding tax exemption on the sale of socialized house and lot units pursuant to RA 7279 which shall not exceed P150,000.00 or P180,000.00, as the case may be, in accordance with Revenue Regulations No. 9-93, as amended by Revenue Regulations No. 11-97 implementing RA 7279. On February 24, 2009, Duraville requested HLURB for the upgrading of the maximum price of unsold saleable lots at Mary Cris Complex, Phases 1 to 4, which are covered by BIR Ruling No. S-20-100-2000 dated October 25, 2000, from P150,000.00 and P180,000.00 to P400,000.00 per house and lot package; that on March 17, 2009, HLURB granted the request of Duraville to upgrade the selling price of unsold lots/units of socialized housing from P150,000.00 and P180,000.00 to P400,000.00 per house and lot package subject to the following conditions; 1. That the price/loan ceiling shall apply to unsold lots/units and unconstructed by developers with existing License to Sell prior to the effectivity/issuance of HUDCC Resolution, and 2. That the new loan ceiling shall apply to subsequent sales of lots previously subject of a contract of sale, provided that the rescission of contract thereon was done in accordance with the provisions of Republic Act 5662, "Realty Installment Buyer Protection Act." Based on the foregoing representations, you now raise the following issues: 1. Whether or not BIR Ruling No. S-20-100-2000 dated October 25, 2000 may be amended to incorporate the latest price ceiling set 2. Whether or not the socialized housing units, originally pegged at P150,000.00 and 180,000.00 as confirmed by BIR Ruling No. S-20-100-2000, continue to be exempt from project related income tax, creditable withholding tax and other taxes even if the selling prices thereof increased to the maximum selling price of P400,000.00 In reply thereto, please be informed that: 1. Pursuant to HUDCC Resolution No. 1, Series of 2008, dated December 11, 2008, and as circularized by Revenue Memorandum Circular No. 30-2009, pertinent portion of which reads: "THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED that the adjustment of the Low Cost Level 1-A socialized housing loan ceiling from P300,000.00 to P400,000.00 be APPROVED, as the same is hereby APPROVED." the newly adjusted price ceiling of P400,000.00 for socialized housing shall apply to sale of real properties utilized for socialized housing, as defined under R.A. No. 7279 otherwise known as "Urban Development and Housing Act", and other related laws such as R.A. No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994" and R.A. No. 8763 otherwise known as the "Home Guaranty Act of 2000", beginning January 1, 2009. Moreover, Section 2 of Revenue Regulations No. 17-2001 provides; Section 2. Definition of Terms . As used in these Regulations, the following terms shall have the following meaning: xxx xxx xxx "A socialized housing unit shall not exceed P150,000.00 (now P400,000.00) for a house and lot package, subject to periodic adjustment or increase as the Housing and Land Use Regulatory Board (HLURB) may effect from time to time. In the case of sale of homelots only, the price shall not exceed forty percent (40%) of the maximum limit prescribed for the house and lot package ." (Emphasis supplied) ESDHCa Accordingly, the newly adjusted price ceiling of P400,000.00 for house and lot packages and P160,000.00 for lot only for socialized housing project. 2. Pursuant to Section 20 of Republic Act (RA) No. 7279, pertinent portions of which read: ''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) Capital gains tax on raw lands used for the project; (3) Value-added tax for the project contractor concerned;" xxx xxx xxx the sale of socialized housing units shall be exempt from income taxes, and consequently, from creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98, as amended. Your request for exemption from creditable withholding tax, despite the increase in selling price from P150,000.00 and P180,000.00 to P400,000.00 for house and lot packages of your socialized housing project referred to as Mary Cris Complex, Phases 1 to 4 is hereby granted, however, any sale made by Duraville to parties other than the principal target beneficiaries as provided under Section 3 (t) of R.A. No. 7279, shall not be entitled to the said exemption. Moreover, it shall be understood that the exemption covers only the aforementioned lots approved by HLURB for upgrading of selling price, which are marked as Annex "A" attached to the letter dated 17 March 2009 of Director Antonio B. Decatoria, Sr., HLURB, Region 4-A. The upgrading of the selling price from P150,000.00 and P180,000.00 to P400,000.00 per house and lot package is subject to the following conditions: (1) The price/loan ceiling shall apply to unsold lots/units and unconstructed by developers with existing License to Sell prior to the effectivity/issuance of HUDCC Resolution; and (2) The new loan ceiling shall apply to subsequent sales of lots previously subject of a contract of sale, provided that the rescission of contract thereon was done in accordance with the provisions of Republic Act No. 5662 or the ''Realty Installment Buyer Protection Act." This amends BIR Ruling No. S-20-100-2000 dated October 25, 2000 insofar as the selling price package is concerned. All other conditions remain the same. 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. aIHCSA Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue