BIR Ruling No. 260-15

July 30, 2015 BIR RULING NO. 260-15 Sec. 20, RA 7279; BIR Ruling No. 063-14 Rosand Builders 39 Pasacola St., Brgy. Nagkaisang Nayon Novaliches, Quezon City Attention: Vicente M. Mendoza, Jr. General Manager Gentlemen : This refers to the letter of Lorna M. Seraspe, Group Manager of Visayas Management Office, National Housing Authority (NHA) dated March 19, 2014 and your letter dated September 19, 2014, requesting tax exemption on the land development of La Castellana Resettlement Project located at Sitio Villa Cana, Brgy. Robles, La Castellana, Negros Occidental pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclosed that Rosand Builders is a sole-proprietorship owned by Vicente Mabagos Mendoza Jr. (TIN: 148-780-698-000) and is duly registered with the Department of Trade and Industry (DTI) under Certificate No. 0175311 dated April 19, 2012; that the NHA has issued a Notice of Award dated December 19, 2013 to Rosand Builders for the land development of La Castellana Resettlement Project located in Sitio Villa Cana, Brgy. Robles, La Castellana, Negros Occidental; that a Contract for La Castellana Resettlement Project was executed between NHA and Rosand Builders for a bid price of Nine Million Two Hundred Twenty Six Thousand Eight Hundred Eighty Two and 04/100 pesos (P9,226,882.04); that according to the contract, the scope of work under this project are " preliminary works, site preparation, road works, drainage works, sewerage and survey works "; and that the NHA issued a certification dated March 19, 2014 stating the La Castellana Resettlement Project is a socialized housing project and VAT is not included in computation of the unit cost for items of works under the contract. Memorandum for the NHA Board of Directors dated December 12, 2013, the project profile shows that the Municipality of La Castellana, Negros Occidental is the land owner and the total lots generated by the project will be 109 serviced lots for 109 beneficiary families residing in danger areas, those affected by infrastructure projects of the City and other urban families who qualify for relocation 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;" xxx xxx xxx" Considering that Rosand Builders is a project contractor whose services are engaged by NHA to undertake land development and its necessary construction components for one hundred nine (109) socialized lots in La Castellana Resettlement Project located in Sitio Villa Cana, Brgy. Robles, La Castellana, Negros Occidental and which was certified by the NHA as a socialized housing project as resettlement site pursuant to RA 7279, the income directly realized by Rosand Builders from the development of the La Castellana Resettlement Project located in Sitio Villa Cana, Brgy. Robles, La Castellana, Negros Occidental shall be exempt from project-related income taxes in so far as the one hundred nine (109) socialized lots (including preliminary works, site preparation, road works, drainage works, sewerage and survey works) are concerned. (BIR Ruling No. 063-14 dated February 19, 2014) ISHCcT Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the land development by Rosand Builders and its necessary construction components for one hundred nine (109) socialized lots 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