Verzontal Builders, Inc.

June 27, 2016 BIR RULING NO. 283-2016 Section 20 of RA 7279 Verzontal Builders, Inc. Suite 21, 3J Heights Bldg. No. 35 Visayas Avenue Diliman, Quezon City Attention: Geo Salvatorre Vinci B. Duran Authorized Managing Officer Gentlemen : This refers to your letter dated February 18, 2015 requesting issuance of Certificate of Tax Exemption for the two (2) socialized housing projects, Magalona Heights 2 and Magalona Heights 3, under the National Housing Authority (NHA)'s Yolanda Permanent Housing Project, located at Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Sites 2 and 3), pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." HTcADC Documents submitted show that Verzontal Builders, Inc. (TIN: ___________) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with Company Registration No. __________; and that on February 17, 2015, the NHA and Verzontal Builders, Inc. executed two (2) separate contracts, namely: 1). Contract for the Procurement of House and Lot Packages Magalona Heights 2 , Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Site 2); and Contract for the Procurement of House and Lot Packages Magalona Heights 3 , Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Site 3), in which Verzontal Builders, Inc. has committed to deliver 260 units (House and Lot Package) for Magalona Heights 2 for a contract price of ______________ and 240 units (House and Lot Package) for Magalona Heights 3 for a contract price of __________ and that according to both contracts, the scope of works for the above-projects 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) 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 Verzontal Builders, Inc. is a project contractor whose services have been engaged by the NHA to undertake the construction of 260 Housing Units with its necessary construction components in Magalona Heights 2, Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Site 2), and 240 Housing Units with its necessary construction components in Magalona Heights 3, Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Site 3), which are both under the socialized housing program of the NHA pursuant to R.A. 7279 in connection with its Yolanda Permanent Housing Project, the income directly realized by Phintecstar Construction, Incorporated from the construction of the 260 and 240 (or a total of 500) Housing Units (House and Lot Packages) with its necessary construction components in Magalona Heights 2 and 3, Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Sites 2 and 3), 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 260 and 240 (or a total of 500) Housing Units (House and Lot Packages) with its necessary construction components in Magalona Heights 2 and 3, Brgy. Sto. Nio, E.B. Magalona, Negros Occidental (Sites 2 and 3), by Verzontal Builders, Inc. shall be exempt from VAT. However, the purchases of goods/articles by Verzontal Builders, Inc. 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. aScITE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue