National Housing Authority

August 24, 2009 BIR RULING [SH-(077) 517-09] RA 7279; RR 11-97;RMC 42-01; DA-147-03; DA-067-03 & SH (030) 165-2008 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Arch. Virginia R. Domingo Manager, Southern Luzon and Bicol Region Gentlemen : This refers to your letter dated July 27, 2009 requesting for a ruling exempting ITP Construction, Inc. ("ITP" for brevity) from the payment of value-added tax (VAT) on the services it rendered as a contractor of the National Housing Authority (NHA) in accordance with Section 20 of Republic Act (RA) No. 7279. Documents submitted show that the NHA has entered into a Memorandum of Agreement with the Local Government of Cabuyao, wherein it agreed to provide fifteen (15) classrooms in addition to the existing twelve (12) classrooms in Southville 5A Housing Project located in Bian, Laguna; that the NHA, in its desire to fulfill its commitment has proposed to implement the construction of One (1) Unit, 3-Storey (15 classroom) School Building for the said housing project which serves as a relocation site for those displaced residents from Metro Manila and nearby towns of Laguna; that the NHA recommended that the contract be awarded through public bidding, wherein ITP emerged as the winning bidder; and that on July 23, 2009, a certification was issued by the NHA stating that the above construction contract is for a socialized housing project and that the VAT is not 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: "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. CSIcHA 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 NHA on its socialized housing project, ITP, 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