BIR Ruling No. 436-12

June 27, 2012 BIR RULING NO. 436-12 Sec. 20, RA 7279; BIR Ruling No. 155-2012 National Housing Authority Quezon Memorial Elliptical Rd. Diliman, Quezon City Attention: Ms. Lorna M. Seraspe Officer-in-Charge, VMO Gentlemen : This refers to your letter dated November 2, 2010 stating that the National Housing Authority (NHA) engaged Vircon Survey Services (TIN 145-387-848-000) for the Survey Works of Yulo's Park Slum Upgrading Project in Phase I and II, Brgys. 14 and 16, Bacolod City. The NHA is desirous that certain works in its socialized housing project shall be undertaken by Vircon Survey Services, namely: relocation/boundary survey, consolidation/subdivision survey and individual lot titling. You now apply on behalf of the latter for VAT-exemption. In reply, please be informed that pertinent portion of Sec. 20 of Republic Act (RA) No. 7279 reads: "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; aCcSDT xxx xxx xxx (3) Value-added tax for the project contractor concerned;" in addition Sec. 3 (r) of RA 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;" (Underscoring supplied) In this case, Vircon Survey Services was engaged to provide survey works of Yulo's Park Slum Upgrading Project in Phase I and II, Brgys. 14 and 16, Bacolod City. Although certified by the NHA as a socialized housing project, the survey works such as: relocation/boundary survey, consolidation/subdivision survey and individual lot titling is outside the definition of a "socialized housing" in relation to the tax incentives for the private sector under Section 20 of RA 7279. It is apparent that the tax incentive provision, granting exemption from 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: DSTCIa "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. Else wise stated, taxation is the rule, exemption therefrom is the exception." TcDaSI In view of the foregoing, the request for exemption from payment of VAT and project-related income taxes relative to Vircon Survey Services contract for the survey works of Yulo's Park Slum Upgrading Project in Phase I and II, Brgys. 14 and 16, Bacolod City is hereby denied for lack of legal basis. (BIR Ruling No. 155-2012 dated March 2, 2012) 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. 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.