National Housing Authority

October 19, 2009 BIR RULING [SH-(098) 654-09] RA 7279; RR 11-07; RMC 42-01; SH(039)-165-2008 National Housing Authority Quezon Memorial Elliptical Road Quezon City Attention: Arch. Virginia R. Domingo Manager Southern Luzon and Bicol Region Gentlemen : This refers to your letter dated July 15, 2009, requesting in behalf of M.Y. REYES BUILDERS DEVELOPMENT CORPORATION (M.Y. REYES, for short), exemption from payment of the Value-Added Tax (VAT), pursuant to Republic Act (RA) 7279. Documents submitted disclosed that the National Housing Authority (NHA) entered into a Memorandum of Agreement (MOA) with the Local Government of Sta. Rosa wherein it agreed to provide 15 additional classrooms within Southville 4 Housing Project, Barangay Caingin, Sta. Rosa, Laguna, for the children of the newly relocated families; that the NHA recommended that the contract be awarded through public bidding; that M.Y. Reyes with TIN: 201-792-849-000 was awarded the contract to construct the said 15 additional classrooms for the affected families; that NHA certified that the construction of the One (1) Unit Three (3) Storey Classroom School Building at Southville 4 Resettlement Project, Caingin, Sta. Rosa, Laguna is considered as one of the basic needs for the socialized housing project. In reply, please be informed that Section 20 of RA 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. HSCcTD 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." As project contractor of NHA on its socialized housing project, M.Y. REYES, 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service