BIR Ruling No. 441-15

December 29, 2015 BIR RULING NO. 441-15 RA 7279; BIR Ruling No. 063-14 Linear Construction Corporation 142 Katipunan Road, Quezon City Attention: Godofredo J. Abesamis President and General Manager Gentlemen : This refers to your letter dated September 23, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project under the Yolanda Housing Project located at Site 1 and 2, Brgy. 13, Victorias 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 parcels of land covered by two (2) Transfer Certificates of Title (TCT) located at Brgy. 13, Victorias City, Negros Occidental, to wit: TCT Lot Area (sq.m.) 091-2015002793 4 30,899 091-2015002795 7 45,795 Total Area 76,694 ====== all issued by the Registry of Deeds for Province of Negros Occidental. 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. The NHA has issued Notices of Award dated March 31, 2015 to that Linear Construction Corporation (TIN 000-392-340-000) for the "Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Housing Program located at Site 1 and 2, Brgy. 13, Victorias City, Negros Occidental" with a contract price of Three Hundred Ninety Seven Million Five Hundred Sixty Seven Thousand One Hundred Twenty Four Pesos and 53/100 (P397,567,124.53). 1 To give effect to the Notices of Award, Contracts for the Procurement of House and Lot Packages Villa Victoria 1 and 2, Brgy. 13, Victorias City, Negros Occidental were executed on July 23, 2015 between NHA and Linear Construction Corporation, whereby the latter is committed to deliver One Thousand Three Hundred Seventy Two (1,372) 2 units (House and Lot Package) for a price of P397,567,124.53; 3 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 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: ATICcS 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 Linear Construction Corporation is a project contractor whose services are engaged by NHA to undertake construction of 1,372 4 Housing Units with its necessary construction components in Villa Victoria 1 and 2, Brgy. 13, Victorias City, Negros Occidental 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 Linear Construction Corporation from the land development and housing construction with its necessary construction components for 1,372 5 Housing Units in Villa Victoria 1 and 2, Brgy. 13, Victorias City, 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 housing construction with its necessary construction components for 1,372 6 Housing Units in Villa Victoria 1 and 2, Brgy. 13, Victorias City, Negros Occidental by Linear Construction Corporation shall be exempt from VAT. However, the purchases of goods/articles by Linear Construction Corporation 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 Linear Construction Corporation 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. P199,025,334.71 for Site 1 (Villa Victoria 1) and P198,541,789.82 for Site 2 (Villa Victoria 2). 2. 687 Units for Site 1 (Villa Victoria 1) and 685 Units for Site 2 (Villa Victoria 2). 3. P199,025,334.71 for Site 1 (Villa Victoria 1) and P198,541,789.82 for Site 2 (Villa Victoria 2). 4. 687 Units for Site 1 (Villa Victoria 1) and 685 Units for Site 2 (Villa Victoria 2). 5. Id. 6. Id.