BIR Ruling No. 178-12

March 14, 2012 BIR RULING NO. 178-12 Sec. 20, RA 7279 National Housing Authority Quezon Memorial Elliptical Road, Diliman, Quezon City Attention: Arch. Virginia R. Domingo Manager Southern Luzon and Bicol Region Gentlemen : This refers to the letter of National Housing Authority (NHA) dated April 28, 2010 requesting, on behalf of Triumph Builders & Steel, Inc., exemption from payment of Value Added Tax (VAT) relative to its participation as contractor in a socialized housing project known as "Construction of One (1) Unit Three-Storey Fifteen (15) Classroom School Building". Documents submitted by Triumph Builders & Steel, Inc. on May 5 and July 13, 2010 disclosed that it is a domestic corporation engaged in the business of general construction and registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 131545 dated March 13, 1986; that is also registered with the BIR with Taxpayer Identification No. 000-298-175-000; that NHA, with Taxpayer Identification No. 000-916-384-000, is the procuring entity of a "Construction of One (1) Unit Three-Storey Fifteen (15) Classroom School Building at Southville 7 Housing Project, Site 1, Brgy. Dayap, Calauan, Laguna"; that on April 20, 2010, the NHA and Triumph Builders & Steel, Inc. executed the contract for the aforesaid project; and that on April 27, 2010, the NHA, through Arch. Virginia R. Domingo, Manager of Southern Luzon and Bicol Region, issued a Certification affirming that the said project is one of the basic needs for socialized housing and that the Contract is being undertaken by Triumph Builders & Steel, Inc. In reply, please be informed that your request for the exemption of Triumph Builders & Steel, Inc. from payment of Value-Added Tax relative to the "Construction of One (1) Unit Three-Storey Fifteen (15) Classroom School Building at Southville 7 Housing Project, Site 1, Brgy. Dayap, Calauan, Laguna" cannot be granted for lack of legal basis. EHSADa Section 20 of R.A. No. 7279, states that: Sec. 20. Incentives for the 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: xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; . . . xxx xxx xxx (3) Value-added tax for the project contractor concerned;" Section 3 (r) of R.A. 7279 defines "socialized housing" as follows: "(r) "Socialized housing" refers to housing programs and projects covering houses and lots or homelots only undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberalized terms on interest payments, and such other benefits in accordance with the provisions of this Act;" (Underscoring supplied) In this case, Triumph Builders & Steel, Inc. is engaged in the construction of One (1) Unit Three-Storey Fifteen (15) Classroom School Building at Southville 7 Housing Project, Site 1, Brgy. Dayap, Calauan, Laguna, although certified by the NHA as a socialized housing project, is nevertheless outside the definition of a "socialized housing" in relation to the tax incentives for the private sector under Section 20 of R.A. 7279. It is apparent that the tax incentive provision, granting exemption from project related taxes and VAT, is limited to project contractors on the construction and development of houses and lots or homelots only with a view to reduce the cost of housing units for the benefit of the underprivileged and homeless. It should be remembered that laws and statutes granting tax exemptions are strictly construed 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 the case of Mactan Cebu International Airport Authority v. Marcos, 2 the Supreme Court held: "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." In view of the foregoing, the request for exemption from payment of VAT and project related taxes of Triumph Builders & Steel, Inc., relative to its participation as contractor in the project "Construction of One (1) Unit Three-Storey Fifteen (15) Classroom School Building at Southville 7 Housing Project, Site 1, Brgy. Dayap, Calauan, Laguna", is hereby denied for lack of legal basis. DCAEcS 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.