BIR Ruling No. 361-15

October 19, 2015 BIR RULING NO. 361-15 Section 20 of RA 7279; BIR Ruling No. 171-15; BIR Ruling No. 063-14 Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture 2nd Floor, Unit 208 FBR Arcade, 317 Katipunan Ave. Loyola Heights, Quezon City Attention: Leah L. Bajita Project Coordinator Gentlemen : This refers to your letter dated August 14, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project, Lizares Village, under the Yolanda Permanent Housing Project of the National Housing Authority (NHA) pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that the NHA (TIN: 000-916-384-012), is the registered owner of two (2) parcels of land located at Brgy. Bulanon, Sagay City, Negros Occidental, described below, to wit: TCT No. Area (sq. m.) 091-2015001434 27,742 091-2015001433 21,002 Total 48,744 ====== The aforesaid properties shall be developed into a residential project under the NHA's 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 and Completed Housing Units under the NHA's Yolanda Permanent Housing Program Located at Brgy. Bolanon, Sagay, Negros Occidental 621 Housing Units" has been awarded by the NHA to Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture, evidenced by its Notice of Award dated July 1, 2015, for a contract price of One Hundred Seventy Nine Million Nine Hundred Fifty Seven Thousand Eight Hundred Ninety Five Pesos and 60/100 (P179,957,895.60). On August 3, 2015, a Contract for the Procurement of House and Lot Packages, Lizares Village, Brgy. Bolanon, Sagay, Negros Occidental, was executed between NHA and Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture, whereby the latter has committed to deliver Six Hundred Twenty One (621) units (House and Lot Packages) for a price of P179,957,895.60. 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. 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 Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture is a project contractor whose services have been engaged by NHA to undertake the construction of the 621 Housing Units (House and Lot Packages) with its necessary construction components in Lizares Village, Brgy. Bolanon, Sagay, Negros Occidental, a housing project under the socialized housing program of the NHA pursuant to R.A. 7279, in connection with its Yolanda Permanent Housing Project, the income directly realized by Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture from the construction of 621 Housing Units (House and Lot Packages) with its necessary construction components, in Lizares Village, Brgy. Bolanon, Sagay, Negros Occidental, shall be exempt from project-related income taxes. (BIR Ruling No. 063-14 dated February 19, 2014) ETHIDa Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the construction of the 621 Housing Units (House and Lot Packages) with its necessary construction components, in Lizares Village, Brgy. Bolanon, Sagay, Negros Occidental by Opusland, Inc./R.U. Aquino Construction and Development Corporation Joint Venture, shall be exempt from VAT. However, the purchases of goods/articles by Opusland, Inc./R.U. Aquino Construction and Development 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