Bilrey Construction

June 16, 2016 BIR RULING NO. 245-16 Section 20, RA 7279; BIR Ruling No. 063-2014; BIR Ruling No. 227-2015 Bilrey Construction 94 Aramismis St., Veterans Village Project 7, Quezon City Attention: Billy Reymond De Leon General Manager Gentlemen : This refers to your letter dated January 7, 2016 requesting on behalf of Bilrey Construction for a certificate of exemption on the Land Development of Christian-Muslim Upai Z3R Project located at Brgy. Sta. Catalina, Zamboanga City, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". As represented, and based on the documents submitted, it is shown that Bilrey Construction (TIN: 935-391-280-001), is a sole proprietorship duly registered with the Department of Trade and Industry (DTI) under DTI Registration No. 01782698 dated July 6, 2012; that on November 11, 2014, Bilrey Construction and the National Housing Authority (NHA) entered into a Contract for Land Development of Christian-Muslim Upai Z3R Project for a contract price of Eleven Million Four Hundred Sixty One Thousand Five Hundred Twenty Two Pesos and 32/100 (P11,461,522.32); that based on said contract, the scope of works for the project includes General Requirements, Road Works and Drainage Works; that the corresponding Notice of Award dated September 8, 2014 and Notice to Proceed dated November 14, 2014 relative to the aforementioned project have been duly issued in favor of Bilrey Construction ; and that the housing component (258 units) of the above project is also being undertaken by Bilrey Construction pursuant to the Contract for the Construction of Duplex Housing Units (Loftable Type) Rehabilitation of Christian-Muslim UPAI (Z3R Project), Brgy. Sta. Catalina, Zamboanga City, dated July 22, 2014, which has already been confirmed to be exempt from project-related income taxes and value-added tax (VAT) by this Office per BIR Ruling No. 227-2015 dated June 29, 2015. 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) . . .; CAIHTE (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 Bilrey Construction is a project contractor whose services have been engaged by NHA for the construction of the 258 housing units, including the Land Development of Christian-Muslim Upai Z3R Project located at Brgy. Sta. Catalina, Zamboanga City, the income directly realized therefrom by Bilrey Construction shall be exempt from project-related income taxes (in so far as the General Requirements, Road Works and Drainage Works are concerned). (BIR Ruling No. 063-2014 dated February 19, 2014) Moreover, pursuant to Section 20 (d) (3) of RA 7279, the construction of the 258 housing units, including the Land Development of Christian-Muslim Upai Z3R Project (in so far as the General Requirements, Road Works and Drainage Works are concerned) by Bilrey Construction shall be exempt from VAT. However, Bilrey Construction's purchases of goods/articles shall be subject to VAT even if 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