Markbilt Construction

July 30, 2009 BIR RULING [SH-(065) 468-09] 20 RA 7279; S20-111-2000 Markbilt Construction Rm. 205 2nd Floor S. Medalla Bldg., Gen. McArthur St.,cor. Edsa Araneta Center Cubao, Quezon City Attention: Mr. Billy M. Aceron General Manager Gentlemen : This refers to your letter dated July 8, 2009 requesting for exemption from the payment of project-related taxes and other taxes pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Markbilt Construction is an accredited National Housing Authority contractor undertaking construction of the NHA Housing Project at the North-South Rail Linkage Project (NSLP) through the Community Association Initiative Program; that Markbilt Construction is one of the contractors endorsed by families affected by the NSLP on the construction of lots covered by approved consolidation subdivision plan, Pcs-00-012607 located at Bgy. Bagumbong, Caloocan City of which the individual Transfer Certificates of Title are registered under the name of the National Housing Authority; that these housing units are subject to the acquisition by the National Housing Authority pursuant to NHA Board Resolution No. 5028 and 5114 dated January 31, 2007 and July 18, 2008, respectively under its socialized housing program; and that the abovementioned properties are covered by TCT Nos.:C-398301, C-398302, C-398303, C-398304, C-398305, C-398306, C-398307, C-398308, C-398309, C-398310, C-398311, C-398312, C-397808, C-397809, C-398313, C-397807, C-397806, C-397805, C-397804, C-397803, C-397802, C-397801, C-397800, C-397799, C-397798, C-397797, C-397796, C-397795, C-397794, C-397793, C-397792, C-397791, C-397790, C-397810, C-397811, C-397812, C-397813, C-397814, C-397815, C-397816, C-397817, C-397818, C-397819, C-397820, C-397821, C-397822, C-397823, C-397824, C-397825, C-397826, C-397827, C-398109, C-398110, C-398111, C-398112, C-398113, C-398115, C-398117, C-398119, C-398121, C-398123, C-398125, C-398127, C-398129, C-398131, C-398133, C-398135, C-398137, C-398139, C-398141, C-398143, C-398145, C-398272, C-398273, C-398274, C-398275, C-398276, C-398277, C-398278, C-398279, C-398280, C-398281, C-398282, C-398283, C-398284, C-398285, C-398286, C-398287, C-398288, C-398289, C-398290, C-398291, C-398292, C-398293, C-398294, C-398295, C-398296, C-398297, C-398298, C-398299, C-398300. IaECcH In reply, please be informed that Section 19, Article V of RA 7279, which amends the Charter of NHA, reads as follows: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title." Under the foregoing provisions, NHA enjoys exemption from all forms of taxation. Thus, at the time of the sale of the above-quoted property NHA was not liable to pay any kind of taxes, fees and charges. Section 19 of RA 7279 gives further incentives to the NHA, as the entity tapped by the National Government to carry out the purposes of RA 7279, in the form of exemptions from the payment of all national taxes, such as income tax and the corresponding creditable withholding tax or the capital gains tax, including exemptions from documentary stamp taxes upon documents or contracts executed by and in favor of the NHA. (BIR Ruling No. 071-98 dated May 25, 1998) In view of the foregoing, NHA is exempt from the payment of creditable withholding tax imposed under Section 57 (B) of the Tax Code of 1997, as implemented by Section 2.57.2 (J) of Revenue Regulations No. 2-98, or capital gains tax under Section 27 (b) (5) of the Tax Code of 1997, whichever is applicable on its sale of the expropriated property and documentary stamp tax imposed under Section 196 of the Tax Code of 1997. It is to be noted that under RMC 42-2001 dated October 5, 2001, the exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Further, Section 20 of RA No. 7279 provides as follows: "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: aCTHEA 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;" Accordingly, the contractor of the socialized housing units under R.A. No. 7279 is exempt from the payment of project related income tax, capital gains tax and 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service