BIR Ruling No. 347-11

September 28, 2011 BIR RULING NO. 347-11 Sec. 20, RA 7279 National Housing Authority Quezon Memorial Elliptical Road, Diliman, Quezon City Attention: Mr. Felicisimo F. Lazarte, Jr. Department Manager Northern and Central Luzon Gentlemen : This refers to the letter of National Housing Authority (NHA) dated November 5, 2009 requesting, on behalf of Triumph Builders & Steel, Inc. , exemption from payment of Value Added Tax (VAT) relative to its participation as contractor in a socialized housing project known as "Construction of Two-Storey Multi-Purpose Livelihood, Productivity and Training Center" . Documents submitted by Triumph Builders & Steel, Inc. on January 14, 2010 disclose that it is a domestic corporation engaged in the business of general construction and registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 131545 dated March 13, 1986; that is also registered with the BIR with Taxpayer Identification No. 000-298-175-000; that NHA, with Taxpayer Identification No. 000-916-384-000, is the procuring entity of a "Contract for Two-Storey Multi-Purpose Livelihood, Productivity and Training Center Northville 5 Resettlement Site, Brgy. Batia, Bocaue, Bulacan" ; that on July 9, 2009, NHA issued a Notice of Award relative to the aforesaid contract to Triumph Builders & Steel, Inc. ; and that on November 5, 2009, the NHA, through Mr. Felicisimo F. Lazarte, Jr., Department Manager of Northern and Central Luzon, issued a Certification affirming that the said Contract being implemented is a socialized housing project intended for the underprivileged and homeless families affected by the Northrail Relocation Program in Bulacan. In reply, please be informed that your request for the exemption of Triumph Builders & Steel, Inc. from payment of Value-Added Tax relative to the "Contract for Two-Storey Multi-Purpose Livelihood, Productivity and Training Center Northville 5 Resettlement Site, Brgy. Batia, Bocaue, Bulacan" cannot be granted for lack of legal basis. Section 20 of R.A. No. 7279, states that: "Sec. 20. Incentives for the 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; xxx xxx xxx (3) Value-added tax for the project contractor concerned;" 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;" (Emphasis supplied) In this case, Triumph Builders & Steel, Inc. is engaged in the construction of a Two-Storey Multi-Purpose Livelihood, Productivity and Training Center Northville 5 Resettlement Site located in Brgy. Batia, Bocaue, Bulacan, although certified by the NHA as a socialized housing project, is nevertheless outside the definition of a "socialized housing" in relation to the tax incentives for the private sector under Section 20 of R.A. 7279. It is apparent that the tax incentive provision, granting exemption from project related taxes and VAT, is limited to project contractors on the construction and development of houses and lots or homelots only with a view to reduce the cost of housing units for the benefit of the underprivileged and homeless. It should be remembered that laws and statutes granting tax exemptions are strictly construed 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 the case of Mactan Cebu International Airport Authority v. Marcos , 2 the Supreme Court held: "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." In view of the foregoing, the request for exemption from payment of VAT and project related taxes of Triumph Builders & Steel, Inc. , relative to its participation as contractor in the project "Contract for Two-Storey Multi-Purpose Livelihood, Productivity and Training Center Northville 5 Resettlement Site, Brgy. Batia, Bocaue, Bulacan" , is hereby denied for lack of legal basis. 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.