Eaglerock Construction and Development Corporation

June 6, 2016 BIR RULING NO. 236-16 RA 7279; BIR Ruling No. 003-16 Eaglerock Construction and Development Corporation No. 47 20th Ave. cor. 19th Ave. Brgy. San Roque, Quezon City Attention: Rainier Z. Gerona President Gentlemen : This refers to your letter dated March 28, 2016 requesting issuance of Certificate of Tax Exemption for the socialized housing project under the Yolanda Housing Project located at Brgy. Cangmoya, Palompon, Leyte-Sites 1, 2 and 3 pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." Documents submitted show that the following collectively referred to as Landowners are the registered owners of three (3) lots covered by one (1) Original Certificate of Title (OCT), to wit: Landowners TCT Lot No. Area (sq. m.) Peter Mark D. Arevalo OC-24486 14113-N 29,859 Pedro M. Arevalo OC-24486 14113-O 29,993 Ma. Cecilia D. Arevalo OC-24486 14113-P 29,977 Total 89,829 ====== issued by the Registry of Deeds for the Province of Leyte. The following Deeds of Absolute of Sale conveying the abovementioned lots covered by OCT No. OC-24486 were executed by the respective landowners to the National Housing Authority (NHA) (TIN: 000-916-384-012), a government corporation organized and existing by virtue of Presidential Decree No. 757, as amended: Landowners Date of Deed of Lot No. Area (sq. m.) Consideration Absolute Sale (PhP) Peter Mark D. Arevalo 1 March 25, 2015 14113-N 29,859 500,000.00 Pedro M. Arevalo 2 July 24, 2015 14113-O 29,993 500,000.00 Ma. Cecilia D. Arevalo April 16, 2015 14113-P 29,977 500,000.00 The above described lots have been identified and certified for development into a residential project under the Yolanda Permanent Housing Program intended for the families affected by Typhoon Yolanda and qualified for housing assistance under R.A. No. 7279. TIADCc Site 1 The NHA has issued a Notice of Award dated December 19, 2014 to Eagle Rock Construction and Development Corporation (TIN 243-368-626-000) for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Site 1 Brgy. Cangmoya, Palompon, Leyte-343 Housing Units" with a contract price of Ninety Nine Million Four Hundred Thirty Five Thousand Nine Hundred Eighty Four and 17/100 Pesos (P99,435,984.17). To give effect to the Notice of Award, a Contract for the Procurement of House and Lot Packages at Mont. Eagle Ville IV Subdivision Site 1, Brgy. Cangmoya, Palompon, Leyte was executed on April 13, 2015 between NHA and Eagle Rock Construction and Development Corporation, whereby the latter is committed to deliver Three Hundred Forty Three (343) units (House and Lot Package) for a contract price of P99,435,984.17; and that according to the contract, the scope of work under this project are "Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction." Site 2 The NHA has issued a Notice of Award dated July 1, 2015 to Eagle Rock Construction and Development Corporation for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Site 2 Brgy. Cangmoya, Palompon, Leyte-343 Housing Units" with a contract price of Ninety Nine Million Four Hundred Thirty Two Thousand Sixty Seven and 36/100 Pesos (P99,432,067.36). To give effect to the Notice of Award, a Contract for the Procurement of House and Lot Packages at Mont. Eagle Ville IV Subdivision Site 2, Brgy. Cangmoya, Palompon, Leyte was executed on September 7, 2015 between NHA and Eagle Rock Construction and Development Corporation, whereby the latter is committed to deliver Three Hundred Forty Three (343) units (House and Lot Package) for a contract price of P99,432,067.36; and that according to the contract, the scope of work under this project are "Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction." Site 3 The NHA has issued a Notice of Award dated December 19, 2014 to Eagle Rock Construction and Development Corporation for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Site 3 Brgy. Cangmoya, Palompon, Leyte-298 Housing Units" with a contract price of Eighty Six Million Four Hundred Seven Thousand Five Hundred Seventy Six and 8/100 Pesos (P86,407,576.08). To give effect to the Notice of Award, a Contract for the Procurement of House and Lot Packages at Mont. Eagle Ville IV Subdivision Site 3, Brgy. Cangmoya, Palompon, Leyte was executed on May 19, 2015 between NHA and Eagle Rock Construction and Development Corporation, whereby the latter is committed to deliver Two Hundred Ninety Eight (298) units (House and Lot Package) for a contract price of P86,407,576.08; and that according to the contract, the scope of work under this project are "Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction." In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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) Capital Gains Tax on raw lands used for the project; (3) Value-Added Tax for the project contractor concerned;" xxx xxx xxx Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : AIDSTE xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx NHA's acquisition of raw land The landowner who sells their properties for use in a socialized housing project is exempt from the payment of the capital gains tax. Such being the case, the sale by the landowners to NHA of Lot Nos. 14113-N, 14113-O and 14113-P covered by OCT No. OC-24486 is exempt from capital gains tax. (BIR Ruling No. 003-2016 dated January 6, 2016) The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale. Accordingly, the transfer by the landowners to NHA of Lot Nos. 14113-N, 14113-O and 14113-P covered by OCT No. OC-24486 are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 003-2016 dated January 6, 2016) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of Lot Nos. 14113-N, 14113-O and 14113-P covered by OCT No. OC-24486 by the landowner to NHA for purposes of the Yolanda Permanent Housing Program is exempt from the imposition of VAT. (BIR Ruling No. 003-2016 dated January 6, 2016) Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. Please take note that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the lands in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR) after the submission of the requirements provided under Revenue Memorandum Order (RMO) No. 15-2003. Transaction between NHA and Eagle Rock Construction and Development Corporation Considering that Eagle Rock Construction and Development Corporation is a project contractor whose services are engaged by NHA to undertake construction of 984 3 Housing Units with its necessary construction components in Mont. Eagle Ville IV Subdivision Sites 1, 2 and 3 located at Brgy. Cangmoya, Palompon, 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 Eagle Rock Construction and Development Corporation from the land development and housing construction with its necessary construction components for 984 4 Housing Units in Mont. Eagle Ville IV Subdivision Sites 1, 2 and 3 located at Brgy. Cangmoya, Palompon, Leyte shall be exempt from project-related income taxes. (BIR Ruling No. 003-2016 dated January 6, 2016) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the housing construction with its necessary construction components for 984 5 Housing Units in Mont. Eagle Ville IV Subdivision Sites 1, 2 and 3 located at Brgy. Cangmoya, Palompon, Leyte by Eagle Rock Construction and Development Corporation shall be exempt from VAT. However, the purchases of goods/articles by Eagle Rock 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. It shall be understood that Eagle Rock Construction and Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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. Duly represented by Attorney-in-Fact, Ma. Cecilia D. Arevalo. 2. Id. 3. Site 1 343 units, Site 2 343 units and Site 3 298 units. 4. Id. 5. Id.