Armvet Printing Company, Inc.

June 29, 2009 BIR RULING [SH-(055) 397-09] Sec. 20 RA 7279; RR 2-98; RMC Nos. 42-01 & 30-09; VAT-038-03; DA-386-98 Armvet Printing Company, Inc. 5626 Ampere Street, Palanan Makati City Attention: Mr. Aristeo R. del Mundo CEO Gentlemen : This refers to your letter dated June 1, 2009 requesting a ruling on the tax consequences arising from the sale of socialized housing units (townhouses) by Armvet Printing Company, Inc. to its deserving employees. It is represented that Armvet Printing Company, Inc. is a medium-sized printing company located at Makati City; that it has been in the printing business for thirty-three years; that it has purchased a lot at 129 Elizalde Avenue, BF Homes, Paraaque City, with an area of 8,363 square meter, to be developed into a socialized housing project, known as "Armvet Place", intended for its deserving employees; that the Paraaque City Council has granted Armvet a development permit for the aforesaid housing project pursuant to Batas Pambansa Blg. 220 on March 8, 2007; and that on June 10, 2008, a Certificate of Registration and a License to Sell were issued to Armvet Printing Company, Inc. by the Housing and Land Use Regulatory Board (HLURB). In support of your request, you submitted the following documents: 1) Proposed Deed of Absolute Sale; 2) Corresponding Transfer Certificate of Title; 3) Corresponding Tax Declaration; 4) HLURB Certificate of Registration; AIDTHC 5) License to Sell issued by the HLURB; 6) Paraaque City Council Resolution No. 528; 7) Site development plan; and 8) Other pertinent documents. In reply, please be informed that pursuant to Section 20 of RA No. 7279, pertinent portions of which read: "Sec. 20. Incentives for the Private Sector Participating in Socialized Housing. To encourage greater 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;" [Emphasis supplied] On the other hand, Section 2.57.5 of RR No. 2-98, as amended, provides, viz. : "Section 2.57.5. Exemption from Withholding. The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: xxx xxx xxx (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: aCASEH (1) Sales of real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory Board (HLURB) or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed one hundred eighty thousand pesos (P180,000.00) in Metro Manila and other highly urbanized areas and one hundred fifty thousand pesos (P150,000.00) in other areas or such adjusted amount of selling price for socialized housing as may later be determined and adopted by the HLURB, as provided under Republic Act No. 7279 and its implementing regulations ;...." [emphasis supplied] The current adjusted price ceiling for socialized housing units (lots and/or houses and lots) is P400,000.00 per Housing and Urban Development Coordinating Council (HUDCC) Resolution No. 1, series of 2008, dated December 11, 2008, signed by Vice President Noli L. de Castro. (Circularized by Revenue Memorandum Circular No. 30-2009) Based on the foregoing provisions, Armvet Printing Company, Inc.,the owner/contractor/developer of the socialized housing project known as "Armvet Place",a socialized housing project intended for the deserving employees of Armvet Printing Company, Inc.,with a price per unit (townhouse unit) not exceeding P300,000.00, is exempt from the payment of project related income taxes, and consequently, from withholding tax on the construction and the eventual sale of the socialized housing units to the intended beneficiaries. Moreover, Armvet Printing Company, Inc. is exempt from the payment of value-added tax (VAT) on its sale of the socialized housing units to the intended beneficiaries. However, purchases of goods/articles of Armvet Printing Company, Inc. shall be subject to VAT, even if the said purchases are to be used for the socialized housing project. (Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001. (BIR VAT Ruling No. 038-03, dated September 8, 2003). However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax incentives/exemption clause under Section 20 of R.A. 7279. Such being the case, the sale of socialized housing units by Armvet Printing Company, Inc. to its employees, is subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code of 1997, as amended. The documentary stamp tax shall be based on the consideration contracted to be paid or the fair market value of the realty determined in accordance with Section 6 (E) of the Tax Code of 1997, as amended, whichever is higher. (BIR Ruling No. DA-386-98, dated August 24, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. ACDIcS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service