BIR Ruling No. 488-12

July 30, 2012 BIR RULING NO. 488-12 Sec. 20 (d) (3), RA 7279; BIR Ruling No. 412-11 National Housing Authority Quezon Memorial Elliptical Rd. Diliman, Quezon City Attention: Mr. Felicisimo F. Lazarte, Jr. Department Manager, Northern and Central Luzon Gentlemen : This refers to your letter dated November 18, 2010 stating that the National Housing Authority (NHA) engaged Bilrey Construction (or Bilrey for brevity with TIN 935-391-280-001) to build two (2)-storey Multi-Purpose Livelihood, Productivity and Training Center in Northville 3 Resettlement Project located at Barangay Bayugo, Meycauayan, Bulacan. The afore-stated edifice is a socialized housing project intended for the families affected by the Northrail Relocation Program in Bulacan qualified under the Socialized Housing Program of the government. Based on the coordination with the Local Government of Meycauayan, Bulacan, families relocated in said resettlement project is in need of a community facility to serve as their venue for various livelihood training programs and community activities. 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; xxx xxx xxx (3) Value-added tax for the project contractor concerned;" DcCASI 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, Bilrey was engaged to construct 2-storey Multi-Purpose Livelihood, Productivity and Training Center in Northville 3 Resettlement Project located at Barangay Bayugo, Meycauayan, Bulacan. Although certified by the NHA as a socialized housing project, the erection of the aforesaid structure 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: "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." In view of the foregoing, the request for exemption from payment of VAT and project-related income taxes relative to Bilrey's construction of 2-storey Multi-Purpose Livelihood, Productivity and Training Center in Northville 3 Resettlement Project located at Barangay Bayugo, Meycauayan, Bulacan is hereby denied for lack of legal basis. (BIR Ruling No. 412-2011 dated October 28, 2011) ETaHCD 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.