BIR Ruling No. 219-12

March 29, 2012 BIR RULING NO. 219-12 Section 20, R.A. 7279; BIR Ruling No. 347-2011 National Housing Authority Quezon Memorial Elliptical Road, Diliman, Quezon City Attention: Mr. Felicisimo F. Lazarte, Jr. Group Manager Northern and Central Luzon Gentlemen : This refers to your letter dated November 17, 2011 requesting, on behalf of BNA Construction and Supply, exemption from payment of Value-Added Tax (VAT) relative to its participation as contractor in a socialized housing project known as "Construction of Two-Storey Six-Classroom School Building" pursuant to 4.B.1 of Revenue Regulations No. 9-93 dated March 4, 1993. It is represented that National Housing Authority (NHA), with Taxpayer Identification No. 000-916-384-000, has a project contract for the construction of a Two-Storey Six-Classroom School Building in Northville 5 Resettlement Site, Brgy. Batia, Bocaue, Bulacan; that BNA Construction and Supply is the contractor for such project; that as the implementing arm in the National Shelter Program, it is requesting exemption from payment of VAT by said contractor; and that on November 17, 2011, the NHA, through Mr. Felicisimo F. Lazarte, Jr., Group Manager of Northern and Central Luzon, issued a Certification that "the site for the Construction of a Two-Storey Six-Classroom School Building, Brgy. Batia, Bocaue, Bulacan, is a socialized housing project intended for the underprivileged and homeless families who are affected by the Northrail Relocation Program". In reply, please be informed that your request for the exemption of the contractor, BNA Construction and Supply, from payment of VAT relative to the NHA's "Contract for Two-Storey Six-Classroom School Building, Brgy. Batia, Bocaue, Bulacan" cannot be granted for lack of legal basis. IATHaS 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, BNA Construction and Supply is engaged in the construction of a Two-Storey Six-Classroom School Building in Northville 5 Resettlement Site located in Brgy. Batia, Bocaue, Bulacan, 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. ( BIR Ruling No. 347-2011 dated September 28, 2011 ) 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: TcEaDS "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 BNA Construction & Supply, relative to its participation as contractor in the project "Two-Storey Six-Classroom School Building" located in Northville 5 Resettlement Site, Brgy. Batia, Bocaue, Bulacan", is hereby denied for lack of legal basis. 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.