BIR Ruling No. 358-15

October 19, 2015 BIR RULING NO. 358-15 Section 20 of RA 7279; BIR Ruling No. 171-15; BIR Ruling No. 063-14 Eddmari Construction & Trading/ William Uy Construction Corporation Joint Venture San Juan, San Luis Pampanga Attention: Andrew L. Ruiz Gentlemen : This refers to your undated letter requesting issuance of Certificate of Tax Exemption for the socialized housing project, St. James Ville, under the Yolanda Permanent Housing Project located at Brgy. Old Sagay, Sagay City, Negros Occidental, pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that the National Housing Authority (NHA) (TIN: 000-916-384-012), is the registered owner of a parcel of land with an area of Seventy One Thousand One Hundred Seventy One square meters (71,171 sq.m.), identified as Lot No. 1-A, Plan No. PSD-06-085052, situated at Brgy. Taba-ao, City of Sagay, and covered by Transfer Certificate of Title (TCT) No. 091-2015001741 issued by the Registry of Deeds for the Province of Negros Occidental. The said property shall be developed 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 Contract for the project "Procurement of Fully Developed Lots Completed Housing Units under the NHA's Yolanda Permanent Housing Program Located at Brgy. Old Sagay, Sagay, Negros Occidental 1,000 Units" has been awarded to Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture by the NHA evidenced by its Notice of Award dated October 24, 2014, for a contract price of Two Hundred Eighty Nine Million Four Hundred Sixty Nine Thousand Nine Hundred Seventy Pesos and 45/100 (P289,469,970.45). Subsequently, a Contract for the Procurement of House and Lot Packages, St. James Ville, Brgy. Old Sagay, Sagay, Negros Occidental, was executed on February 17, 2015 between NHA and Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture, whereby the latter has committed to deliver One Thousand (1,000) units (House and Lot Packages) for a price of P289,469,970.45. The scope of works under the project includes Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction. CAIHTE In reply, please be informed that pursuant to Section 20 of Republic Act (RA) No. 7279, pertinent portions of which state 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 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;" 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 Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture is a project contractor whose services have been engaged by NHA to undertake construction of 1,000 Housing Units (House and Lot Packages) with its necessary construction components in St. James Ville, Brgy. Old Sagay, Sagay, Negros Occidental, a project duly certified by the NHA in its letter dated July 23, 2015 as a socialized housing program of the NHA pursuant to R.A. 7279, in connection with its Yolanda Permanent Housing Project, the income directly realized by Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture from the construction of 1,000 Housing Units (House and Lot Packages) with its necessary construction components, in St. James Ville, Brgy. Old Sagay, Sagay, Negros Occidental 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 1,000 Housing Units (House and Lot Packages) with its necessary construction components, in St. James Ville, Brgy. Old Sagay, Sagay, Negros Occidental by Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture shall be exempt from VAT. However, the purchases of goods/articles by Eddmari Construction & Trading/William Uy Construction Corporation Joint Venture 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue