Steel Building Systems and Technologies, Inc.

February 25, 2009 BIR RULING [SH-(015) 153-09] RR 11-97/RA 7279; S-20-003-2003 Steel Building Systems and Technologies, Inc. 429 M. Martinez St.,Plainview Mandaluyong City Attention: Mr. Demetrio L. Posadas President Gentlemen : This refers to your letter dated April 2, 2008 requesting in effect, for exemption from taxes pursuant to the provisions of Republic Act (RA) No. 7279 or the "Urban Development and Housing Act of 1992". EIASDT Documents submitted show that Steel Building Systems and Technologies, Inc. with Tax Identification No. (TIN) 226-600-821-000 is a corporation duly organized by virtue of Philippine laws. It is the project developer of Tierra Benita Subdivision located at Brgy. Muzon, San Jose del Monte City, Bulacan with an area of 4.5077 has. under Certificate of Registration No. 20003 and License to Sell No. 21111 issued by the Housing and Land Use Regulatory Board (HLURB) Region III on September 12, 2008. ETDHaC In reply, please be informed that Section 20 of RA No. 7279, reads: "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. 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." The owner of the raw land is exempt from the payment of capital gains tax on the conveyance of the said property for use in the aforestated socialized housing project. Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA No. 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, based on the consideration or the fair market value of the property, whichever is higher. Furthermore, under Revenue Regulations No. 11-97, within six (6) months after this issuance of tax exemption from the capital gains tax or creditable withholding tax, the buyer/developer of raw land shall apply with the HLURB or Local Government Unit (LGU) concerned for a permit to develop the properties and shall start the development of the socialized housing project within one (1) year after the approval of the Development Permit and issuance of permit. Otherwise, the exemption from the capital gains tax or creditable withholding tax becomes automatically null and void, and the buyer/developer shall be held liable for the payment of taxes that should otherwise have been paid, plus the penalties incident to late payment. Provided, further, that in case of misrepresentation, an additional penalty equivalent to one hundred percent (100%) of the capital gains tax or creditable withholding tax due shall be imposed and paid by the buyer/developer. As the developer of the properties used for the above-mentioned socialized housing project, the sale of the socialized housing units (house and lot or lots only) shall be exempt from project-related income taxes, and creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98 implementing Section 57 (B) of the Tax Code of 1997. It shall be understood that to be tax-exempt, the selling price per lot or house and lot shall not exceed P150,000.00, in accordance with Revenue Regulations No. 9-93, as amended by Revenue Regulations No. 11-97, implementing RA No. 7279 [maximum of P180,000.00 per unit pursuant to Section 5.1 of Memorandum of Agreement on Housing Finance entered into by and between the Housing and Urban Development Coordinating Council (HUDCC), and Department of Finance (DOF), Department of Budget and Management (DBM), the Government Service Insurance System (GSIS), the Home Development Mutual Fund (Pag-ibig), the National Home Mortgage Finance Corporation (NHMFC), and the Social Security System (SSS), in Metro Manila and highly urbanized areas mentioned in Table 25, Priority Area for Shelter Development and Implementation of RA No. 7279, as further amended by HUDCC Memorandum Circular No. 02, Series of 2002 dated October 21, 2002 issued by Secretary Michael T. Defensor, and now as per issuance of Vice-President Noli L. de Castro and in his capacity as the HUDCC Chairman wherein it further adjusted the socialized housing package to P300,000.00 per HUDCC Memorandum Circular No. 03, Series of 2005 dated June 10, 2005. SDTaHc In this connection, any sale made by the owner/s and developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA No. 7279, shall not be entitled to the foregoing tax exemption should there be non-compliance with any of the aforestated sine qua non terms and conditions. It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real properties, the actual selling price per sale transaction of the units in this case does not really exceed P300,000.00. Thus, sale of a unit above the maximum amount shall be subject to the corresponding internal revenue taxes. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Section 20 of RA No. 7279. Such being the case, the owners/project developer/seller shall be liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. On the other hand, the contractor of the socialized housing units under RA No. 7279 is exempt from the payment of value-added tax pursuant to the aforecited provision. However, purchases of goods/articles by the project contractor shall be subject to value-added tax, even if the said purchases are to be used for the socialized housing project. 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. STIEHc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service