Request for VAT Exemption of New San Jose Builders, Inc. Pursuant to Urban Development and Housing Act of 1992

October 14, 1996 BIR RULING NO. 104-96 R.A. 7279 103 (q) 000-00 104-96 Bases Conversion and Development Authority 2nd Floor, Rufino Center, Ayala Avenue corner Herrera St., Makati City Attention: Rogelio L . Singson Vice Chairman Gentlemen : This refers to your letter dated January 13, 1995 stating that the Bases Conversion and Development Authority (Basecon) engaged the services of a developer, New San Jose Builders, Inc. (NSJBI) to develop its 7.3 hectare land covered by TCT No. 23528 issued by the Registry of Deeds of Pasig City located along C-5 Circumferential Road in Fort Bonifacio and to construct 17 medium rise socialized condominium buildings for the personnel of the Armed Forces of the Philippines ad well as civilians that will be affected by the development of Fort Bonifacio; that Basecon intends to sell the smallest unit at a price not exceeding P150,000.00 to make it affordable to the lowest rank of the military personnel which constitutes the bulk of the actual occupants of Basecon properties in Fort Bonifacio. cdta Based on the foregoing representations, you are requesting for the exemption of NSJBI from payment of the value added tax pursuant to Republic Act No. 7279, otherwise knows as the Urban Development and Housing Act of 1992. In reply, please be informed that after an investigation conducted by our Revenue District Office No. 39, Quezon City and a verification of your construction agreement dated March 22, 1995, it has been established that Basecon is a government corporation participating in socialized housing and/or community mortgage program. On the other hand, a private sector/project contractor is defined by Revenue Regulations No. 9-93, implementing Republic Act No. 7279 as referring to persons, natural or juridical, participating in socialized housing and/or community mortgage program as provided for in the Act; or are engaging in the services of developing sites, slums improvement or resettlement areas, and/or construction and sale of socialized housing units. Applying the foregoing definition, NSJBI will qualify as a private sector/project contractor. Accordingly, pursuant to Section 20 of R.A.. 7279, stating "Section 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce the cost housing units for the benefit of underprivileged and homeless, the following incentives shall be extended to the private sector: (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" NSJBI is exempt from VAT pursuant to Section 103(q) of the Tax Code, as amended by R.A.. 7716, hence it shall only issue Non-VAT invoice on the service fee paid to it. However, purchases of goods/articles by the project contractor shall be subject to VAT even if it is to be used for socialized housing project. (Section 5(E), Revenue Regulations No. 9-93). In view thereof, New San Jose Builders, Inc., a project contractor whose services are engaged by the Bases Conversion and Development Authority for the development and construction of the latters socialized housing project, is exempted from the payment of the value added tax pursuant to R.A.. 7279 and its implementing regulations, Revenue Regulations No. 9-93, in relation to Section 103(q) of the Tax Code, as amended. cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue