RFN Construction and Development Corporation

June 7, 2016 BIR RULING NO. 241-16 RA 7279; BIR Ruling No. 003-16 RFN Construction and Development Corporation Rm. 210 Tia Maria Bldg. C.V. Starr Avenue, Pamplona, Las Pias City Attention: Rafael A. Ilagan President Gentlemen : This refers to your letter dated April 18, 2016, requesting issuance of Certificate of Tax Exemption for socialized housing project, the "Fully Developed & Completed Housing Units" under NHA's Yolanda Permanent Housing Program located at Brgy. Tinampaan Site 2, Cadiz City 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 two (2) Transfer Certificates of Title (TCT), to wit: Landowners TCT Lot No. Area (sq.m.) Castelvi Properties, Inc. T-11311 1251-A 40,807 Cadiz Highland Ventures T-11312 1251-B 60,000 Total 100,807 ======= both issued by the Registry of Deeds for the Cadiz City. The following Deeds of Absolute of Sale conveying certain portions of the abovementioned properties 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 TCT Area (sq.m.) Consideration Absolute Sale (PhP) Castelvi Properties, Inc. April 20, 2016 T-11311 9,910 396,400.00 Cadiz Highland Ventures April 20, 2016 T-11312 60,000 2,400,000.00 Total 69,910 ====== The following taxes were paid, to wit: TCT Date of Payment Withholding Tax Documentary Stamp Tax T-11311 April 21, 2016 P23,784.00 P5,955.00 T-11312 April 21, 2016 P144,000.00 P36,000.00 The above described properties 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. cHDAIS The NHA has issued Notice of Award dated November 12, 2015 to RFN 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. Tinampaan, Cadiz City, Negros Occidental-1,000 Housing Units" with a contract price of Two Hundred Eighty Nine Million Eight Hundred Thousand Pesos (P289,800,000.00). To give effect to the Notice of Award, a corresponding Contract for the Procurement of House and Lot Packages at Don Salvador Heights 2, Brgy. Tinampaan, Cadiz City, Negros Occidental, Site 2 was executed on February 24, 2016 between NHA and RFN Construction and Development Corporation, whereby the latter is committed to deliver One Thousand (1,000) units (House and Lot Package) for a price of P289,800,000.00; 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 Section 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "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 Considering that RFN Construction and Development Corporation is a project contractor whose services are engaged by NHA to undertake construction of 1,000 Housing Units with its necessary construction components in Don Salvador Heights 2, Brgy. Tinampaan, Cadiz City, Negros Occidental, Site 2 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 RFN Construction and Development Corporation from the land development and housing construction with its necessary construction components for 1,000 Housing Units in Don Salvador Heights 2, Brgy. Tinampaan, Cadiz City, Negros Occidental, Site 2 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 1,000 Housing Units in Don Salvador Heights 2, Brgy. Tinampaan, Cadiz City, Negros Occidental, Site 2 by RFN Construction and Development Corporation shall be exempt from VAT. However, the purchases of goods/articles by RFN 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 RFN 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