BIR Ruling No. 290-11

August 12, 2011 BIR RULING NO. 290-11 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Felicisimo F. Lazarte, Jr. Department Manager Northern and Central Luzon Gentlemen : This refers to your letter dated August 10, 2010 requesting on behalf of R.D. SADSAD CONSTRUCTION AND TRADING for exemption from payment of Value-Added Tax (VAT). It is represented that the National Housing Authority ("NHA") is a government-owned and controlled corporation organized and existing pursuant to Presidential Decree No. 757, as amended; that R.D. SADSAD CONSTRUCTION AND TRADING with Tax Identification Number (TIN) 113-227-076, is a duly organized firm, registered, and existing under the laws of the Philippines and with business office at Jupiter St., Santo Nio, San Fernando City, Pampanga; and that it is registered with the Department of Trade and Industry under Certificate No. 00798521 and is engaged in the business of construction building. It is further represented that NHA, in its desire to address the need of relocates for community facilities, gave a Notice of Award dated December 1, 2009 to R.D. SADSAD CONSTRUCTION AND TRADING to undertake the construction of one (1) unit of multi-purpose livelihood building, two (2) units of health/day care centers and two (2) units of police centers at Northville 14 and 14A Resettlement Project, Brgy. Calulut, San Fernando City, a socialized housing project intended for the underprivileged and homeless families who are affected by the Northrail/Southrail Relocation Program; and that a Contract dated March 24, 2010 was executed between NHA and R.D. SADSAD CONSTRUCTION AND TRADING embodying the said contract works. In support of your request, you have submitted the following documents: 1) Certified true copy of Contract dated March 24, 2010; 2) Certified true copy of Certification dated August 10, 2010 issued by the National Housing Authority; aCSTDc 3) Certified machine copy of BIR Certificate of Registration; 4) Copy of DTI Certificate of Registration; and 5) Certified true copies of 2008 and 2009 Annual Income Tax Returns and Audited Financial Statements. In reply, please be informed that your request for the exemption of R.D. SADSAD CONSTRUCTION AND TRADING from payment of Value-Added Tax relative to the construction of one (1) unit of multi-purpose livelihood building, two (2) units of health/day care centers and two (2) units of police centers at Northville 14 and 14A Resettlement Project, Brgy. Calulut, San Fernando City, cannot be granted for lack of legal basis. Section 20 of Republic Act (RA) No. 7279 limits the grant of VAT exemption to project contractors on the construction of housing units only, pertinent portion of which states that: "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 sectors: (d) Exemption from the payment of the following: (1) Project-related income taxes; xxx xxx xxx (2) Value-added tax for the project contractor concerned; xxx xxx xxx" Laws and statutes granting tax exemptions are construed strictissimi juris against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable doubt. 1 In Mactan Cebu International Airport Authority v. Marcos , 2 it was held therein that: "Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting the exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception." Applying the foregoing, although the multi-purpose livelihood building, health/day care centers and police centers is part of the socialized housing project of the National Housing Authority, nevertheless, the law relied upon by R.D. SADSAD CONSTRUCTION AND TRADING, in this case the provisions of Section 20 of RA 7279, is explicit that the entitlement to the exemption from payment of Value-Added Tax shall be limited to the construction of housing units. 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. HCTEDa Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005). 2. G.R. No. 120082, 11 September 1996, 261 SCRA 667.