National Housing Authority

October 9, 2009 BIR RULING [SH-(095) 632-09] 20 (d) RA 7279; S-20-020-2007 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Ms. Lorna M. Seraspe Officer-in-Charge Visayas Management Office Gentlemen : This refers to your letter dated October 5, 2009 requesting on behalf of your contractor, ISH Construction, Inc., 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". It is represented that a Contract for the Land Development of the San Isidro Resettlement Project was executed between the National Housing Authority and ISH Construction, Inc., as the contractor; that the Land Development of the San Isidro Resettlement Project, located in Barangay San Isidro, Jaro, Iloilo City involves the following works: survey works, general roadworks, drainage works and water supplies; and that the Land Development of the San Isidro Resettlement Project was certified by the National Housing Authority as a socialized housing project. In reply, please be informed that pertinent portion of Section 20 of RA No. 7279 reads: "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: cTSHaE (1) Project-related income taxes; (2) . . . ; Considering that ISH Construction, Inc. is a project contractor whose services are engaged by NHA for the land development of the San Isidro Resettlement Project which was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by ISH Construction, Inc. from the development of the said socialized housing site shall be exempt from project-related income taxes. Moreover, ISH Construction, Inc. is likewise exempt from the payment of 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