BIR Ruling No. 252-15

July 21, 2015 BIR RULING NO. 252-15 Sec. 20, RA 7279; BIR Ruling No. 063-14 Patrila Builders, Inc. Rm. 201 AJL Bldg. Gen. Luna St., Iloilo City Attention: Erlisa V. Martinez Acctg. & Finance Div. Mgr. Gentlemen : This refers to your letter dated March 4, 2015, requesting tax exemption on the land development and housing construction of Ajuy People's Village Project located at Brgy. San Antonio, Ajuy, Iloilo pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclosed that Patrila Builders, Inc. (004-865-108-000) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under Registration No. ES096000050; that the National Housing Authority (NHA) has issued a Notice of Award dated August 4, 2014 to Patrila Builders, Inc. for the land development and housing construction at Ajuy People's Village Project located in Brgy. San Antonio, Ajuy, Iloilo; that a Contract for land development and housing construction of Ajuy People's Village Project dated October 31, 2014 was executed between NHA and Patrila Builders, Inc. for a bid price of Eighty Five Million Three Hundred Twenty Seven Thousand Eighteen and 51/100 pesos (P85,327,018.51); and that according to the contract, the scope of work under this project are "land development to include boundary and subdivision survey, roadworks, drainage works, water works, housing construction and miscellaneous requirements necessary for the completion of the project''. In the Memorandum for the NHA Board of Directors dated August 4, 2014, the project profile shows that the Municipality of Ajuy, Iloilo is the land owner and the total lots generated by the project will be 341 house and lots for families affected by Super Typhoon Yolanda in areas of Ajuy, Iloilo qualified under R.A. No. 7279. 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) . . .; (3) Value-added tax for the project contractor concerned;" AHCETa xxx xxx xxx" Considering that Patrila Builders, Inc. is a project contractor whose services are engaged by NHA to undertake land development and housing construction with its necessary construction components for three hundred forty one (341) socialized lots in Ajuy People's Village Project located in Brgy. San Antonio, Ajuy, Iloilo and which was certified by the NHA as a socialized housing project as resettlement site pursuant to RA 7279, the income directly realized by Patrila Builders, Inc. from the development of the Ajuy People's Village Project located in Brgy. San Antonio, Ajuy, Iloilo shall be exempt from project-related income taxes in so far as the three hundred forty one (341) socialized lots (including boundary and subdivision survey, roadworks, drainage works, water works, housing construction and miscellaneous requirements necessary for the completion of the project) are concerned. (BIR Ruling No. 063-14 dated February 19, 2014) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the land development and housing construction by Patrila Builders, Inc. and its necessary construction components for three hundred forty one (341) socialized lots shall be exempt from VAT. However, its purchases of goods/articles 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 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