National Housing Authority

April 22, 2009 BIR RULING [SH-(031) 269-09] RR 11-97;S-20-023-2006; S-20-005-2008 National Housing Authority Quezon Memorial Elliptical Road, Diliman Quezon City Attention: Arch. Virginia R. Domingo Manager, Southern Luzon and Bicol Regions Gentlemen : This refers to your letter dated March 30, 2009 requesting on behalf of your contractor, HRB Construction, for exemption from project-related income taxes, expanded withholding tax and value-added tax (VAT) pursuant to the provisions of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". From the documents submitted, it appears that on March 16, 2009 a Contract for the Land Development of Magarao Resettlement Project was executed between the National Housing Authority (NHA), as the procuring entity and HRB Construction ("HRB"), as the contractor; that pursuant to the said Contract, HRB shall be the contractor of a socialized housing project known as Land Development of Magarao Resettlement Project, located in Brgy. Monserat, Magarao, Camarines Sur; and that said project was certified by the National Housing Authority as a socialized housing project intended to provide permanent relocation to families residing along danger areas of the Municipality of Magarao. 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) . . .; (3) Value-added tax for the project contractor concerned;" Considering that HRB is engaged in the development of a resettlement project known as the Land Development of Magarao Resettlement Project and was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by HRB from the development of the said socialized housing site shall be exempt from project-related income taxes. caSEAH As project contractor of the Socialized Housing Project known as the Land Development of Magarao Resettlement Project, HRB is likewise exempt from the payment of value-added tax (VAT) on its gross receipts from the said project. 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. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service