RFN Construction and Development Corporation

May 6, 2016 BIR RULING NO. 168-16 RA 7279; BIR Ruling No. 003-16 RFN Construction and Development Corporation Rm. 210 Tia Maria Bldg. C.V. Starr Avenue, Pamplona, Las Pias City Attention: Rafael A. Ilagan President Gentlemen : This refers to your letter dated January 11, 2016, requesting issuance of Certificate of Tax Exemption for socialized housing project, the "Fully Developed & Completed Housing Units" under NHA's Yolanda Permanent Housing Program located at Brgy. Mabini, Cadiz City pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that the National Housing Authority (NHA) (TIN: 000-916-384-012), is the registered owner of a parcel of land with an area of Thirty Nine Thousand Two Hundred Seventy Two square meters (39,272 sq.m.), identified as Lot No. 1-A of the subdivision plan Psd-06-086526, being a portion of Lot 1, (LRC) Pcs-10349 situated at Brgy. Mabini, Cadiz City, and covered by Transfer Certificate of Title (TCT) No. T-26259 issued by the Registry of Deeds for the Cadiz City. The above described property has been identified and certified for development into a residential project under the Yolanda Permanent Housing Program intended for the families affected by Typhoon Yolanda and qualified for housing assistance under R.A. No. 7279. The NHA has issued Notice of Award dated September 15, 2015 to RFN Construction and Development Corporation for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Brgy. Mabini, Cadiz City, Negros Occidental-500 Housing Units" with a contract price of One Hundred Forty Four Million Eight Hundred Seventy Thousand Pesos (P144,870,000.00). To give effect to the Notice of Award, Contract for the Procurement of House and Lot Packages at Apollo Village, Brgy. Mabini, Cadiz City was executed on November 10, 2015 between NHA and RFN Construction and Development Corporation, whereby the latter is committed to deliver Five Hundred (500) units (House and Lot Package) for a price of P144,870,000.00; and that according to the contract, the scope of work under this project are "survey works, earthworks, road works, drainage works, water system, electrical power lines, miscellaneous works and housing construction. In reply, please be informed that pursuant to Section 20 of Republic Act (RA) No. 7279, pertinent portions of which state 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 sector: CAIHTE 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 Considering that RFN Construction and Development Corporation is a project contractor whose services are engaged by NHA to undertake construction of 500 Housing Units with its necessary construction components in Apollo Village, Brgy. Mabini, Cadiz City and which was certified by the NHA as a socialized housing project as resettlement site pursuant to R.A. 7279, the income directly realized by RFN Construction and Development Corporation from the land development and housing construction with its necessary construction components for 500 Housing Units in Apollo Village, Brgy. Mabini, Cadiz City shall be exempt from project-related income taxes. (BIR Ruling No. 003-2016 dated January 6, 2016) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the housing construction with its necessary construction components for 500 Housing Units in Apollo Village, Brgy. Mabini, Cadiz City by RFN Construction and Development Corporation shall be exempt from VAT. However, the purchases of goods/articles by RFN Construction and Development Corporation 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. It shall be understood that RFN Construction and Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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