ARR Construction

December 19, 2016 BIR RULING NO. 439-16 RA 7279; BIR Ruling No. 243-2016 ARR Construction 3 Salem Street East Fairview Subdivision Brgy. Fairview, Quezon City Attention: AAA _______________ Gentlemen : This refers to your letter dated July 15, 2016, requesting issuance of Certificate of Tax Exemption for socialized housing project, the "Fully Developed & Completed Housing Units" under NHA's Yolanda Permanent Housing Program-Esperanza Homes Site 1 (1000 Units) and Site 2 (974 Units) located at Brgy. Esperanza, Culasi, Antique pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." Documents submitted show that the following landowners of sixteen (16) parcels of land located at Brgy. Esperanza, Culasi, Antique and covered by the following Original Certificate of Title (OCT), to wit: Landowner OCT No. Lot No. Tax Declaration Area (sq.m.) No. Hrs. of BBB CARP2015000214 8185-C 07-00019-00489 6,367 Hrs. of BBB CARP2015000222 8120-D 07-00019-00478 13,309 Hrs. of CCC CARP2015000219 8120-I 07-00019-00472 12,894 Hrs. of CCC CARP2015000221 8120-C 07-00019-00479 3,450 Hrs. of DDD CARP2015000229 8121-A 07-00019-00492 4,099 Hrs. of DDD CARP2015000224 8120-B 07-00019-00480 396 EEE P-37510 8119-B 07-00019-00471 5,369 EEE P-38615 4915 07-00019-00062 5,236 Hrs. of FFF CARP2015000209 8185-D 07-00019-00488 6,367 Hrs. of FFF CARP2015000217 8120-J 07-00019-00477 12,895 Hrs. of FFF CARP2015000218 8185-I 07-00019-00483 12,769 Hrs. of FFF CARP2015000220 8120-E 07-00019-00476 6,126 GGG CARP2015000201 4913 07-00019-00463 10,232 HHH P40020 4914 07-00019-00063 18,547 Hrs. of III CARP2015000213 8185-B 07-00019-00490 6,367 JJJ N-5804 4912 07-00019-00463 22,873 all issued by the Registry of Deeds for the Province of Antique. AHDacC On January 29, 2016, a Deed of Absolute Sale was executed whereby the Landowners transferred and conveyed the subject properties to National Housing Authority (NHA) (TIN: 000-000-000-000) at an agreed price of ____________________ Pesos (P__________). Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) have been paid on the above mentioned properties pursuant to Certificate Authorizing Registration No. CAR 201400103939 dated February 18, 2016 duly issued by Revenue District Office No. 73-San Jose, Antique. The above described properties have been identified and certified for development 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. SITE 1 The NHA has issued a Notice of Award dated December 23, 2015 to ARR Construction, a single proprietorship, owned by AAA, which is duly registered with the Department of Trade and Industry (DTI) under Certificate No. 02066399 dated May 27, 2013 for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Site 1 Brgy. Esperanza, Culasi, Antique-1,000 Housing Units" with a contract price of ____________________ Pesos (P__________). To give effect to the Notice of Award, a Contract for the Procurement of Fully Developed Lots and Completed Housing Units (1,000 units) at Esperanza Homes-Site 1, Brgy. Esperanza, Culasi, Antique was executed on March 8, 2016 between NHA and ARR Construction, whereby the latter is committed to deliver One Thousand (1,000) units (House and Lot Package) for a contract price of P__________; and that according to the contract, the scope of work under this project are "Survey Works, Earthworks, Road Works, Drainage Works, Water System, Electrical Power Lines, Miscellaneous Works and Housing Construction." SITE 2 The NHA has issued a Notice of Award dated December 23, 2015 to ARR Construction for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Permanent Housing Program located at Site 2 Brgy. Esperanza, Culasi, Antique-974 Housing Units" with a contract price of ____________________ Pesos (P__________). To give effect to the Notice of Award, a Contract for the Procurement of Fully Developed Lots and completed Housing Units (974 units) at Esperanza Homes-Site 2, Brgy. Esperanza, Culasi, Antique was executed on March 8, 2016 between NHA and ARR Construction, whereby the latter is committed to deliver Nine Hundred Seventy Four (974) units (House and Lot Package) for a contract price of P_______________; and that according to the contract, the scope of work under this project are "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 Considering that ARR Construction is a project contractor whose services are engaged by NHA to undertake construction of 1,974 Housing Units with its necessary construction components in Esperanza Homes-Sites 1 and 2, Brgy. Esperanza, Culasi, Antique and which was certified by the NHA as a socialized housing project as resettlement site pursuant to R.A. 7279, the income directly realized by ARR Construction from the land development and housing construction with its necessary construction components for 1,974 Housing Units in Esperanza Homes-Sites 1 and 2, Brgy. Esperanza, Culasi, Antique shall be exempt from project-related income taxes. (BIR Ruling No. 243-2016 dated June 7, 2016) Moreover, pursuant to Section 20 (d) (3) of R.A. No. 7279, the housing construction with its necessary construction components for 1,974 Housing Units in Esperanza Homes-Sites 1 and 2, Brgy. Esperanza, Culasi, Antique by ARR Construction shall be exempt from VAT. However, the purchases of goods/articles by ARR Construction 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. It shall be understood that ARR Construction must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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.) CAESAR R. DULAY Commissioner of Internal Revenue