BIR Ruling No. 343-15

October 8, 2015 BIR RULING NO. 343-15 Sec. 20, RA 7279; BIR Ruling No. 063-14 E.M. Cuerpo, Inc. 3 E.M. Cuerpo, Inc. Bldg. Metropoli Drive, Metropoli Residenza Bagumbayan, Quezon City Attention: Celerino S. Cuerpo President and CEO Gentlemen : This refers to your letter dated March 18, 2015, duly indorsed by Felicisimo F. Lazarte, Jr., Group Manager of Northern and Central Luzon Management Office, National Housing Authority (NHA), requesting issuance of Certificate of Tax Exemption for the socialized housing project under the Yolanda Housing Project located at Brgy. Dayhagan, Carles, Iloilo pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that National Housing Authority (NHA), is the registered owner of two (2) parcels of land located at Brgy. Dayhagan, Carles, Iloilo and covered by the following Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Area (sq. m.) 090-2014009558 Lot 3-A 73,213 090-2014009559 Lot 3-C 4,523 total area 77,736 ===== both issued by the Registry of Deeds for Iloilo, Iloilo. HTcADC The above described properties has been identified and certified for development into a residential project under the Yolanda Permanent Housing Program intended for the families affected by Typhoon Yolanda and qualified for housing assistance under R.A. No. 7279. The NHA has issued a Notice of Award dated October 24, 2014 to E.M. Cuerpo, Inc. (TIN: 212-880-129-000) for the "Procurement of Fully Developed Lots and Completed Housing Units under the INHA's Yolanda Housing Program located at Site 2 Brgy. Dayhagan, Carles, Iloilo-1, 000 Housing Units" . To give effect to the Notice of Award, a Contract for the Procurement of Fully Developed Lots and Completed Housing Units (1,000 units), St. Therese Village Housing Project-Phase 1, Brgy. Dayhagan, Carles, Iloilo was executed on February 2, 2015 by and between E.M. Cuerpo, Inc. and NHA with a contract price of Two Hundred Eighty Nine Million Three Hundred Eighty Five Thousand Pesos (P289,385,000.00); that according to the contract, the scope of work under the 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" ; that the NHA issued a certification dated March 31, 2015 stating that the land development and housing construction located St. Therese Village Housing Project-Phase 1, Brgy. Dayhagan, Carles, Iloilo is a socialized housing project intended for Typhoon Yolanda's victims. In reply, please be informed that pertinent portions of Section 20 of R.A. No. 7279 read: "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 E.M. Cuerpo, Inc. is a project contractor whose services are engaged by NHA to undertake construction of 1,000 Housing Units with its necessary construction components in St. Therese Village Housing Project-Phase 1, Brgy. Dayhagan, Carles, Iloilo and which was certified by the NHA as a socialized housing project as resettlement site pursuant to R.A. 7279, the income directly realized by E.M. Cuerpo, Inc. from the land development and housing construction with its necessary construction components for 1,000 Housing Units in St. Therese Village Housing Project-Phase 1, Brgy. Dayhagan, Carles, Iloilo 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 land development and housing construction with its necessary construction components for 1,000 Housing Units in St. Therese Village Housing Project-Phase 1, Brgy. Dayhagan, Carles, Iloilo by E.M. Cuerpo, Inc. shall be exempt from VAT. However, the purchases of goods/articles by E.M. Cuerpo, 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 ascertained that the facts are different, then this ruling shall be considered as null and void. aScITE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue