Prismodial Construction Corporation

June 21, 2016 BIR RULING NO. 250-16 Section 20 of RA 7279; BIR Ruling No. 063-14 Prismodial Construction Corporation 4 Republic Avenue Holy Spirit, Quezon City Attention: Johfel C. Valmocina AMO/President Gentlemen : This refers to your letter dated May 15, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project, Chamberry Homes 2, under the National Housing Authority (NHA)'s Yolanda Permanent Housing Project, located at Site 2, Brgy. Chambery, Manapla, Negros Occidental, pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Prismodial Construction Corporation (TIN: 007-530-798) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with Company Registration No. CS200919339; and that on March 25, 2015, a Contract for the Procurement of House and Lot Packages Chamberry Homes 2, Brgy. Chambery, Manapla, Negros Occidental, was executed between NHA and Prismodial Construction Corporation, whereby the latter has committed to deliver One Thousand (1,000) units (House and Lot Package) for a price of P289,795,078.05; and that according to the contract, the scope of works under the said project includes "Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction. In reply, please be informed that Section 20 of Republic Act (RA) No. 7279 provides: "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 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) CAIHTE xxx xxx xxx" 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 Prismodial Construction Corporation is a project contractor whose services have been engaged by the NHA to undertake the construction of 1,000 Housing Units with its necessary construction components in Chamberry Homes 2, Brgy. Chambery, Manapla, Negros Occidental, a socialized housing program of the NHA pursuant to R.A. 7279 in connection with its Yolanda Permanent Housing Project, the income directly realized by Prismodial Construction Corporation from the construction of the 1,000 Housing Units (House and Lot Packages) with its necessary construction components in Chamberry Homes 2, Brgy. Chambery, Manapla, Negros Occidental, shall be exempt from project-related income taxes. (BIR Ruling No. 063-14 dated February 19, 2014) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the construction of the 1,000 Housing Units (House and Lot Packages) with its necessary construction components in Chamberry Homes 2, Brgy. Chambery, Manapla, Negros Occidental by Prismodial Construction Corporation shall be exempt from VAT. However, the purchases of goods/articles by Prismodial Construction 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. 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