BIR Ruling No. 155-12

March 2, 2012 BIR RULING NO. 155-12 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Lorna M. Seraspe Officer-in-Charge Visayas Management Office Gentlemen : This refers to your letter dated July 1, 2010 requesting on behalf T. M. ABAD CONSTRUCTION for exemption from payment of Value-Added Tax (VAT) relative to the Land Development of Talibon Resettlement Project Phase 1 located at Bgy. San Carlos, Talibon, Bohol. It is represented that the National Housing Authority ("NHA"), a government-owned and controlled corporation organized and existing pursuant to Presidential Decree No. 757, as amended, awarded T. M. ABAD CONSTRUCTION the undertaking of the Land Development of Talibon Resettlement Project Phase 1 located at Bgy. San Carlos, Talibon, Bohol, a socialized housing project of the NHA, wherein the scope of the work are the Preliminary Works, Survey Works, General Roadworks, Drainage Works, Sewerage Works and Miscellaneous in the amount of Php4,767,091.96 Based on the foregoing, you now request that T. M. ABAD CONSTRUCTION be exempted from payment of VAT. In reply, please be informed that your request for the exemption of T. M. ABAD CONSTRUCTION from payment of Value-Added Tax relative to the contract for the Land Development of Talibon Resettlement Project Phase 1 located at Bgy. San Carlos, Talibon, Rizal cannot be granted for lack of legal basis. IcDHaT 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: CHDAaS "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 land development shall be conducted on a socialized housing project of the National Housing Authority, nevertheless, the law relied upon by T. M. ABAD CONSTRUCTION, 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. 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.