BIR Ruling No. 172-15

June 8, 2015 BIR RULING NO. 172-15 Sec. 20, RA 7279; BIR Ruling No. 063-14 EagleRock Construction and Development Corporation 20/F Olympic Heights Eastwood Libis, Quezon City Attention: Rainier Z. Gerona President Gentlemen : This refers to the letter of Lorna M. Seraspe, Group Manager of Visayas Management Office, National Housing Authority (NHA) dated November 17, 2014, requesting for the issuance of Certificate of Tax Exemption for the land development and housing construction of Prime Town Housing Project 3 located at Brgy. Sacme, Tanauan, Leyte pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclosed that EagleRock Construction and Development Corporation (TIN 243-368-626-000), is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under Registration No. CS200601647; that the NHA has issued a Notice of Award dated October 10, 2014 to EagleRock Construction and Development Corporation for the land development and housing construction of Prime Town Housing Project 3 located in Brgy. Sacme, Tanauan, Leyte; that a contract for land development and housing construction of Prime Town Housing Project 3 located at Brgy. Sacme, Tanauan, Leyte was executed between NHA and EagleRock Construction and Development Corporation with a contract price of Ninety Nine Million Two Hundred Forty Six Thousand Three Hundred Thirty Six and 71/100 Pesos (P99,246,336.71); that according to the contract, the scope of work under the project are "Earthworks, Roadworks, Drainage Works, Water Works, Survey Works, Slope Protection Works and Miscellaneous Works with construction of housing units" ; that the NHA issued a certification dated November 17, 2014 stating that the land development and housing construction of Prime Town Housing Project 3 located at Brgy. Sacme, Tanauan, Leyte is a socialized housing project intended for Typhon Yolanda's victims and Value-Added Tax (VAT) is not included in computation of the unit cost for items of works under the contract. Per Memorandum for the Board of Directors of the NHA dated October 7, 2014, the project profile shows that Gawad Kalinga (with donation to the Municipality of Tanauan) is the land owner and the total generated by the project will be Three Hundred Ninety Three (393) serviced lots intended to cater to the victims of Typhoon Yolanda. In reply, please be informed that pertinent portions of Section 20 of R.A. No. 7279 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. DETACa xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; (2) . . .; (3) Value-added tax for the project contractor concerned;" xxx xxx xxx" Considering that EagleRock Construction and Development Corporation is a project contractor whose services are engaged by NHA to undertake land development and housing construction with its necessary construction components for 393 socialized lots in Prime Town Housing Project 3 located at Brgy. Sacme, Tanauan, Leyte which was certified by the NHA as a socialized housing project as resettlement site pursuant to R.A. 7279, the income directly realized by EagleRock Construction and Development Corporation from the land development and housing construction with its necessary construction components for the 393 socialized lots in Prime Town Housing Project 3 located of Brgy. Sacme, Tanauan, Leyte shall be exempt from project-related income taxes. (BIR Ruling No. 063-14 dated February 19, 2014) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the land development and housing construction with its necessary construction components for 393 socialized lots in Prime Town Housing Project 3 located at Brgy. Sacme, Tanauan, Leyte by EagleRock Construction and Development Corporation shall be exempt from VAT. However, the purchases of goods/articles by EagleRock 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. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue