BIR Ruling No. 394-15

December 7, 2015 BIR RULING NO. 394-15 Section 20 of RA 7279; BIR Ruling No. 171-15; BIR Ruling No. 063-14 Bilrey Construction/Eddmari Construction & Trading Joint Venture 94 Aramismis St., Veterans Village Project 7, Quezon City Attention: Annabelle B. Jara Project Coordinator Gentlemen : This refers to your letter dated July 8, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project, "Antonino Heights", under the Yolanda Permanent Housing Project located at Brgy. Luna, Cadiz 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 Luisa C. De Locsin, married to Domingo Locsin, is the registered owner of a parcel of land situated in Brgy. Luna, Cadiz City, with an area of 796,924 square meters covered by Transfer Certificate of Title (TCT) No. (T-14860) 325 issued by the Registry of Deeds for the Province of Negros Occidental. On April 13, 2015, a Unilateral Deed of Sale was executed by Luisa C. De Locsin, through her Attorney-in-Fact, Jose Luis C. Locsin, wherein she transferred and conveyed a portion of the above-described property, specifically an area of 70,000 square meters, in favor of the National Housing Authority (NHA) (TIN: 000-916-384-012) at an agreed price of One Million Four Hundred Thousand Pesos (P1,400,000.00). The above-described property has been identified and certified for development 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 NHA has issued a Notice of Award dated December 19, 2014 to Bilrey Construction/Eddmari Construction & Trading Joint Venture for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Brgy. Luna, Cadiz City, Negros Occidental-1,000 Housing Units" with a contract price of Two Hundred Eighty Nine Million Nine Hundred Thirty Two Thousand Two Hundred Pesos and 62/100 (P289,932,200.62). CAIHTE To give effect to the Notice of Award, a Contract for the Procurement of House and Lot Packages, Antonino Heights, located at Brgy. Luna, Cadiz City, Negros Occidental, was executed on March 18, 2015 between NHA and Bilrey Construction/Eddmari Construction & Trading Joint Venture, whereby the latter has committed to deliver One Thousand (1,000) units (House and Lot Packages) for a price of P289,932,200.62; and that according to the contract, the scope of work under the said 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 Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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 Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA,"the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. DETACa xxx xxx xxx Sale by the Landowner to NHA The landowner who sells its property for use in a socialized housing project is exempt from the payment of the capital gains tax. Such being the case, the sale by Luisa C. De Locsin to the NHA of the Seventy Thousand (70,000) square meters portion of the property covered by TCT No. (T-14860) 325 is exempt from capital gains tax. (BIR Ruling No. 171-2015 dated June 8, 2015) The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale. Accordingly, the transfer by Luisa C. De Locsin to the NHA of the Seventy Thousand (70,000) square meters portion of the property covered by TCT No. (T-14860) 325 is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 171-2015 dated June 8, 2015) Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. Please take note that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the lands in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR) after the submission of the requirements provided under Revenue Memorandum Order (RMO) No. 15-2003. Transaction between Bilrey Construction/Eddmari Construction & Trading Joint Venture and NHA Considering that Bilrey Construction/Eddmari Construction & Trading Joint Venture is a project contractor whose services have been engaged by the NHA to undertake construction of 1,000 Housing Units with its necessary construction components in Antonino Heights located at Brgy. Luna, Cadiz City, Negros Occidental, 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 Bilrey Construction/Eddmari Construction & Trading Joint Venture from the construction of 1,000 Housing Units (House and Lot Packages) with its necessary construction components in Antonino Heights located at Brgy. Luna, Cadiz City, Negros Occidental, shall be exempt from project-related income taxes. (BIR Ruling No. 063-14 dated February 19, 2014) aDSIHc 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 Antonino Heights located at Brgy. Luna, Cadiz City, Negros Occidental by Bilrey Construction/Eddmari Construction & Trading Joint Venture shall be exempt from VAT. However, the purchases of goods/articles by Bilrey Construction/Eddmari Construction & Trading 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