National Police Commission-Philippine National Police

July 15, 2009 BIR RULING [SH-(059) 435-09] RA 7279; RR 11-97;RMC 42-01; DA-147-03 & DA-067-03 National Police Commission-Philippine National Police National Capital Region Police Office, Regional Logistic Division Camp Bagong Diwa, Bicutan, Taguig City Attention: PSSUPT. Elmer M. Macapagal Chief, Regional Logistic Division Gentlemen : This refers to your letter dated May 22, 2009 requesting for a ruling exempting ITP Construction, Inc. from the payment of value-added tax (VAT) on the services it rendered as a contractor of the Pulis Kalinga Quartering Project in Bicutan, Taguig City for the Philippine National Police (PNP), in accordance with Section 20 of Republic Act (RA) No. 7279. The facts as represented are as follows: The Philippine National Police-National Capital Region Police Office (PNP-NCRPO) has implemented its Housing Program through its Regional Logistic Division (RLD), thus, leading to the proposal of constructing the "Pulis Kalinga Quartering Project", a socialized housing project intended for the underprivileged and homeless families who are members of the PNP. The General Appropriations Act (GAA) for FY 2008 has allocated funds for the construction of Pulis Kalinga Quartering Project in Bicutan, Taguig City with an approved budget for contract in the amount of P125,000,000.00. The PNP conducted a public bidding for the said housing project wherein ITP Construction, Inc. emerged as the winning bidder. On May 22, 2009, a certification was issued by the PNP stating that the above construction contract is for a socialized housing project, hence, VAT should not be included in the computation of unit cost for items of work under the contract. In reply, please be informed that Section 20 of R.A. No. 7279 provides as follows: DISEaC "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. 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) As project contractor of the PNP on its socialized housing project, ITP Construction, Inc., therefore, is 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 disclosed 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