BIR Ruling No. 467-12

July 17, 2012 BIR RULING NO. 467-12 RA 7279; BIR Ruling No. 347-2011 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Virginia R. Domingo Manager, Southern Luzon & Bicol Region Gentlemen : This refers to your letter dated September 9, 2010 requesting for and in behalf of E.A. Ramirez Construction, Inc. for exemption from the payment of value-added tax (VAT) on the services it rendered for the construction of one (1) unit, Public Market in Southville 8C, Site 1 Housing Project, Brgy. San Isidro, Rodriguez, Rizal. It is represented that the construction of one (1) unit, Public Market in Southville 8C, Site 1 Housing Project, Brgy. San Isidro, Rodriguez, Rizal, is under the socialized housing project of the National Housing Authority (NHA) being undertaken by E.A. Ramirez Construction, Inc. (TIN 005-449-557-000). In reply, please be informed that your request for the exemption of E.A. Ramirez Construction, Inc. from payment of Value-Added Tax relative to the "construction of one (1) unit, Public Market in Southville 8C, Site 1 Housing Project, Brgy. San Isidro, Rodriguez, Rizal" cannot be granted for lack of legal basis. Section 20 of R.A. No. 7279, states that: "Sec. 20. Incentives for the 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: HAIaEc xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; xxx xxx xxx (3) Value-added tax for the project contractor concerned;" 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;" (Underscoring supplied) In this case, E.A. Ramirez Construction, Inc. is engaged in the construction of one (1) unit, Public Market in Southville 8C, Site 1 Housing Project, Brgy. San Isidro, Rodriguez, Rizal, although certified by the NHA as a socialized housing project, is nevertheless outside the definition of a "socialized housing" in relation to the tax incentives for the private sector under Section 20 of R.A. 7279. It is apparent that the tax incentive provision, granting exemption from project related taxes and 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. (BIR Ruling No. 347-2011 dated September 28, 2011) 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: "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. Elsewise stated, taxation is the rule, exemption therefrom is the exception." In view of the foregoing, the request for exemption from payment of VAT and project related taxes of E.A. Ramirez Construction, Inc., relative to its participation as contractor in the project "construction of one (1) unit, Public Market in Southville 8C, Site 1 Housing Project, Brgy. San Isidro, Rodriguez, Rizal", is hereby denied for lack of legal basis. EIDTAa 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.