Aplaya Compound Z3R Resettlement Project

May 20, 2016 BIR RULING NO. 209-16 Section 20, RA 7279; BIR Ruling No. 063-2014 Vicente T. Lao Construction No. 6A Church Street Grace Village, Quezon City Attention: Mr. Vicente T. Lao General Manager RE : Aplaya Compound Z3R Resettlement Project Gentlemen : This refers to your letter dated April 6, 2015 requesting on behalf of Vicente T. Lao Construction for a certificate of exemption on the Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project located at Brgy. Rio Hondo, Zamboanga City, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Vicente T. Lao Construction (VTLC) , with Tax Identification Number (TIN) 104-006-074-000, is a sole proprietorship duly registered with the Department of Trade and Industry (DTI) under DTI Registration No. 01344015 dated March 10, 2011; that based on the Memorandum dated October 7, 2014 issued by the National Housing Authority (NHA), the Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project located at Brgy. Rio Hondo, Zamboanga City, is a socialized housing project of the NHA under its Emergency Housing Assistance Program (Calamity Fund) to provide immediate shelter to families who have lost their homes during the siege by the Moro National Liberation Front (MNLF) of some parts of Zamboanga City, including Brgy. Rio Hondo, last September 2013. The details of the Project are indicated below: Project Profile 1. Project Name Z3R Resettlement Project-Aplaya Compound 2. Location Rio Hondo, Zamboanga City 3. Land Owner City Government of Zamboanga 4. Program/Classification Emergency Housing Assistance Program (Calamity Fund) 5. Total Land Area 1.26 hectares 6. No. of units for 176 units construction Project Identification 1. Contract Name Land Development and Construction of 2 storey Housing Units at Aplaya Compound Z3R Resettlement Project-Brgy. Rio Hondo, Zamboanga City 2. Scope of works General Requirements, Earthworks, Road Works, Drainage Works, House Construction, Construction of Septic Vault and Survey Works 3. Contract Duration Two Hundred Forty (240) calendar days 4. Total Contract Cost P60,380,204.01 5. Unit cost per unit including P343,069.34 general requirements, Earthworks, Drainage Works and Survey Works It is further shown that per Notice of Award dated October 10, 2014 issued by the NHA, the Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project, Brgy. Rio Hondo, Zamboanga City, has been awarded to VTLC. The Contract Price for the Project is Sixty Million Three Hundred Eighty Thousand Two Hundred Four Pesos and 01/100 (P60,380,204.01). Pursuant to the Contract 1 dated November 11, 2014, the scope of works for the said project includes General Requirements, Earthworks, Road Works, Drainage Works, House Construction, Construction of Septic Vault and Survey Works. ETHIDa In reply, please be informed that pertinent portion of Section 20 of RA No. 7279 reads: "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" 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) Based on the foregoing, housing projects covering houses and lots or homelots only, including sites development for socialized housing projects, intended for the underprivileged and homeless citizens undertaken by the Government or the public sector, are entitled to exemption from income tax on revenues directly derived therefrom. Considering that VTLC is a project contractor whose services are engaged by NHA for the Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project, Brgy. Rio Hondo, Zamboanga City, which Project was duly certified by the NHA as a socialized housing project intended for families who have lost their homes during the siege by the Moro National Liberation Front (MNLF) last September 2013, the income directly realized by VTLC from the Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project, shall be exempt from project-related income taxes in so far as the 176 Housing Units, (including General Requirements, Earthworks, Road Works, Drainage Works, House Construction, Construction of Septic Vault and Survey Works) are concerned. (BIR Ruling No. 063-2014 dated February 19, 2014) Moreover, pursuant to Section 20 (d) (3) of RA 7279, the Land Development and Construction by VTLC of the 176 Housing Units, (including General Requirements, Earthworks, Road Works, Drainage Works, House Construction, Construction of Septic Vault and Survey Works), shall be exempt from VAT. However, its purchases of goods/articles 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. (BIR Ruling No. 063-2014 dated February 19, 2014) 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 Footnotes 1. Contract for Land Development and Construction of 2-Storey Housing Units at Aplaya Compound Z3R Resettlement Project.