BIR Ruling No. 153-12

February 28, 2012 BIR RULING NO. 153-12 Section 20 of RA No. 7279; BIR Ruling No. 218-2011 Linear Construction Corporation 142 Katipunan Road, Saint Ignatius Village Quezon City Attention: Rosemarie Salvio Leonida Auditor Gentlemen : This refers to your letter dated July 14, 2011 requesting on behalf LINEAR CONSTRUCTION CORPORATION for exemption from payment of Income Tax and Value-Added Tax (VAT). It is represented that the National Housing Authority ("NHA") is a government-owned and controlled corporation organized and existing pursuant to Presidential Decree No. 757, as amended; that NHA has acquired part of the Southville Housing Project in Brgy. Caingin, Sta. Rosa City, Laguna as a resettlement of the families affected by the rehabilitation and modernization of the railway system along Taguig, Manila and Sta. Rosa Segments and for families affected by typhoons "Ondoy" and "Pepeng" from Marikina City and within Sta. Rosa flooded barangays ; that in its desire to fulfill its commitment to provide classrooms for the children of displaced families and to implement the construction of school building, NHA gave a Notice of Award dated March 25, 2010 to LINEAR CONSTRUCTION CORPORATION to undertake the contract works of the project named "Construction of One (1) Unit Three-Storey (15 Classroom) School Building at Southville 4 Housing Project, Brgy. Caingin, Sta. Rosa City, Laguna". In reply, please be informed that your request for the exemption of LINEAR CONSTRUCTION CORPORATION from payment of Income Tax and Value-Added Tax relative to the construction of One (1) Unit Three-Storey (15 Classroom) School Building at Southville 4 Housing Project, Brgy. Caingin, Sta. Rosa City, Laguna, cannot be granted for lack of legal basis. Section 20 of Republic Act (RA) No. 7279 limits the grant of VAT exemption to project contractors on the construction of housing units only, pertinent portion of which states that: "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 sectors: (d) Exemption from the payment of the following: (1) Project-related income taxes; xxx xxx xxx (2) Value-added tax for the project contractor concerned; xxx xxx xxx" Laws and statutes granting tax exemptions are construed strictissimi juris against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable doubt. 1 In Mactan Cebu International Airport Authority v. Marcos, 2 it was held therein that: "Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting the exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. " Applying the foregoing, although the school building is part of the socialized housing project of the National Housing Authority, nevertheless, the law relied upon by LINEAR CONSTRUCTION CORPORATION, in this case the provisions of Section 20 of RA 7279, is explicit that the entitlement to the exemption from payment of Value-Added Tax shall be limited to the construction of housing units. (BIR Ruling No. 218-2011 dated July 6, 2011) 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005). 2. G.R. No. 120082, 11 September 1996, 261 SCRA 667.