BIR Ruling No. 290-12

April 25, 2012 BIR RULING NO. 290-12 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Engr. Victor C. Balba OIC Group Manager NCRAMO Gentlemen : This refers to your letter dated September 16, 2010 requesting on behalf of CLINTON BUILDERS for exemption from payment of Value-Added Tax (VAT) relative to the contract for the construction of one (1) unit, one (1) Storey, Police Station at Southville 3 Resettlement Project, NBP, Muntinlupa City. THAECc It is represented that the National Housing Authority ("NHA") with Tax Identification Number (TIN) 000-916-384, is a government-owned and controlled corporation organized and existing pursuant to Presidential Decree No. 757, as amended; that CLINTON BUILDERS with TIN 109-446-679, is a duly organized firm, registered, and existing under the laws of the Philippines, with address at Unit 402 Lyones Office & Commercial Building, East Avenue corner V. Luna Road, Quezon City, represented by its President, Jose S. Lansang and that it is registered with the Department of Trade and Industry under Certificate No. 00575212 dated November 11, 2008. It is further represented that CLINTON BUILDERS was awarded the contract for the construction of one (1) unit, one (1) Storey, Police Station thru NHA Board Resolution No. 5214 dated November 3, 2009 in the amount of Php6,171,477.54; that the said Police Station was constructed to serve and maintain the peace and order in the 50 Has. Southville 3 Housing Project (SV3HP),a socialized housing project of the NHA intended for the informal settlers who will be displaced from the PNR's Railroad Track Right-of-Way; and that the 50 Has. SV3HP presently occupied by approximately 7,000 families is a portion of the 416 Has. NBP Reservation Area in Brgy. Poblacion, Muntinlupa City. In support of its request, CLINTON BUILDERS has completely submitted on May 18, 2011 the following documents: 1) Duplicate Original copy or Certified true copy of Service Contract; 2) Certified true copy of BIR Certificate of Registration; 3) Certified true copies of the Annual Income Tax Return and Financial Statements for the last three (3) years of operation; 4) Certification dated May 10, 2011 issued by the National Housing Authority; and 5) Copy of the duly approved Socialized Housing Plan of Southville 3 Housing Project including a provision for one (1) unit, one (1) Storey, Police Station. SHaIDE In reply, please be informed that the request of CLINTON BUILDERS for exemption from payment of VAT relative to the contract for the construction of one (1) unit, one (1) Storey, Police Station at Southville 3 Resettlement Project, NBP, Muntinlupa 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." IcaHCS Applying the foregoing, although the Police Station is part of the socialized housing project of the National Housing Authority, nevertheless, the law relied upon by CLINTON BUILDERS, 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. 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.