BIR Ruling No. 188-15

June 8, 2015 BIR RULING NO. 188-15 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 issuance of Certificate of Tax Exemption for the construction of 22 square meter loftable rowhouse at Brgy. Pago, 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 construction of 22 square meter loftable rowhouse located in Brgy. Pago, Tanauan, Leyte; that a contract for construction of 22 square meter loftable rowhouse at Prime Town Housing Project 1 located at Brgy. Pago, Tanauan, Leyte was executed between NHA and Eaglerock Construction and Development Corporation with a contract price of Seventy Four Million Eight Hundred Ninety Five Thousand Six Hundred Forty Eight and 50/100 pesos (P74,895,648.50); that according to the contract, the scope of work under the project are "Earthworks, Concrete and Structural Works, Formworks, Roofing Works, Doors and Jambs, Windows, Plumbing, Toilet, Bath and Kitchen Counter, Electrical Works and Architectural Finish"; that the NHA issued a certification dated November 17, 2014 stating that the construction of 22 square meter loftable rowhouse at Prime Town Housing Project 1 located at Brgy. Pago, Tanauan, Leyte is a socialized housing project intended for Typhoon 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 Eighty One (381) 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. 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 construction of 22 square meter loftable rowhouse with its necessary construction components for 381 socialized lots in Prime Town Housing Project 1 located at Brgy. Pago, Tanauan, Leyte 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 Eaglerock Construction and Development Corporation from the land development and housing construction with its necessary construction components for 381 socialized lots comprising of 22 square meter loftable rowhouse in Prime Town Housing Project 1 located at Brgy. Pago, 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 381 socialized lots in Prime Town Housing Project 1 located at Brgy. Pago, 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. CAIHTE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue