ISH Construction, Inc.

May 14, 2009 BIR RULING [SH-(040) 316-09] RR 11-97;S-20-023-2006; S-20-005-2008 ISH Construction, Inc. #38 Carmina's Drive, South Green Park Village Project 6, Quezon City Attention: Mr. Imelberto S. Hollero President/CEO Gentlemen : This refers to your letter dated May 7, 2009 requesting 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 April 24, 2009, an Agreement for the Construction of 1 Unit 3-Storey, 15 Classroom School Building in Southville 3 Site 2 (NBP) Resettlement Housing Project was executed between the National Housing Authority (NHA) and ISH Construction, Inc. ("ISH"); that pursuant to the said Agreement, ISH shall supply construction materials, labor and equipments for the development of a socialized housing project known as the Construction of 1 Unit 3-Storey, 15 Classroom School Building in Southville 3 Site 2 (NBP) Resettlement Housing Project, in Muntinlupa City; and that said project was certified by the National Housing Authority as a socialized housing project. 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 ISH is engaged in the development/construction of a school building project known as the Construction of 1 Unit 3-Storey, 15 Classroom School Building in Southville 3 Site 2 (NBP) Resettlement Housing Project and was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by ISH from the development of the school building within a socialized housing site shall be exempt from project-related income taxes. IAEcCT As project contractor of the Socialized Housing Project known as the Construction of 1 Unit 3-Storey, 15 Classroom School Building in Southville 3 Site 2 (NBP) Resettlement Housing Project, ISH 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