National Housing Authority

June 16, 2010 BIR RULING [SH-(010) 043-10] RA 7279; RR 11-97; BIR Ruling S-20-077-2000; BIR Ruling 272-93 National Housing Authority Quezon Memorial Elliptical Road Baligang Resettlement Project Diliman, Quezon City Attention: Mr. Albert A. Perfecto Deputy Area Management Officer SLB-Region V Gentlemen : This refers to your letter dated January 11, 2010 requesting confirmation that Verzontal Builders (VERZONTAL) is exempt from the payment of project-related income tax, capital gains tax, documentary stamp tax and value-added tax as landowner and project contractor of a socialized housing project of the National Housing Authority (NHA) known as the Baligang Resettlement Project which is intended for the families affected by Supertyphoon "Reming". Documents submitted show that VERZONTAL, with TIN 180-277-120-000, is the absolute and registered owner of a parcel of land located at Brgy. Baligang, Camalig, Albay and covered by Transfer Certificate of Title (TCT) No. T-149483. The property was developed by VERZONTAL into a socialized housing site called the Baligang Resettlement Project. The Baligang Resettlement Project has an aggregate area of 65,733 square meters and consists of 1,003 developed lots. It is intended as a permanent resettlement site for families affected by Supertyphoon "Reming". On January 11, 2010, a Memorandum of Agreement (MOA) was executed between VERZONTAL, as the landowner/developer, Baligang Homeowners Association, Inc., as the beneficiaries, and the NHA, with TIN 000-916-384-000, as the implementing government agency of the Bicol Calamity Assistance Rehabilitation Effort. The Baligang Homeowners Association is composed of affected families in Camalig, Albay. Under the MOA, members of the Baligang Homeowners Association shall be provided by the NHA with a financial grant for the acquisition of developed lots in the Baligang Resettlement Project through the Community Association Initiative Approach Program in the amount not exceeding Php75,000.00 per lot per affected family/member. Pursuant to the provisions of the MOA and to facilitate the acquisition of the lots, VERZONTAL executed a Deed of Absolute Sale over the 1,003 developed lots in favor of the NHA. SCEDAI In reply, please be informed that pursuant to Sections 19 and 20 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: (d) Exemption from the payment of the following: (1) Project-related income taxes; (2) . . .; (3) Value-added tax for the project contractor concerned; xxx xxx xxx" the landowners/developers of properties who sell their properties for use in a socialized housing project are exempt from the payment of the project-related income taxes. Such being the case, income from the sale of developed lots by VERZONTAL to NHA is exempt from capital gains tax/income tax and consequently from the expanded withholding tax (SH(134) 795-09 dated December 17, 2009) . Moreover, the Deed of Absolute Sale conveying the real property to NHA is not subject to the documentary stamp tax as provided under Section 19 of RA 7279, which exempts all documents or contracts executed by and in favor of the NHA from documentary stamp tax. (S-20-077-2000 dated August 14, 2000 citing BIR Ruling No. 272-93 dated June 24, 1993) ATcaHS Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. Relative thereto, Section 109 (P) of the Tax Code of 1997, as amended by R.A. 9337, provides: "(P) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business, or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, residential lot valued at One million five hundred thousand pesos (P1,500,000) and below, house and lot, and other residential dwellings valued at Two million five hundred thousand pesos (P2,500,000) and below: Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amounts herein stated shall be adjusted to their present values using the Consumer Price Index, as published by the National Statistics Office (NSO);" Thus, VERZONTAL, being the contractor of a socialized housing project known as the Baligang Resettlement Project, is likewise exempt from the payment of VAT on its gross receipts from the land development of the socialized housing site and from the sale of developed lots to NHA. However, its purchases of goods/articles 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. Moreover, it shall be understood that VERZONTAL must issue non-VAT official receipts on its gross receipts from the said socialized housing project. Finally, upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificates of Title of the land to be issued in the name of the beneficiary association of the socialized housing program shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect, that said properties shall be used for used socialized housing pursuant to RA 7279. 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. DAETcC Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service