Prismodial Construction

October 21, 2009 BIR RULING [SH-(100) 662-09] RA 7279; SH (086) 572-2009 dtd. 9/10/09 Prismodial Construction General Contractor No. 4 Republic Avenue, Bgy. Holy Spirit Quezon City Attention: Mr. Bernardito C. Sabalilag General Manager Gentlemen : This refers to your letter dated September 18, 2009, requesting for exemption from project-related income taxes 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". From the documents submitted, it appears that on June 02, 2009 a Contract Agreement for the completion of the Package 1B-Construction of 1 Unit 3-Storey, 15 Classroom School Building at Southville 3, Site 2, NBP, Muntinlupa City was executed between Prismodial Construction as the contractor, and the National Housing Authority (NHA); that pursuant to the said Contract, Prismodial Construction represents that it has the capacity to undertake the construction of school building project known as Package 1B-Construction of 1 Unit 3-Storey, 15 Classroom School Building at Southville 3, Site 2, NBP, Muntinlupa City; and that said project was certified by the National Housing Authority (NHA) with availability of funds. In reply, please be informed that Section 20 of RA No. 7279, reads: "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: xxx xxx xxx (d) Exemption from the payment of the following: HAEDIS (1) Project-related income taxes; (2) . . .; (3) Value-added tax for the project contractor concerned;" Considering that Prismodial Construction is engaged in the construction project known as Package 1B-Construction of 1 Unit 3-Storey, 15 Classroom School Building at Southville 3, Site 2, NBP, Muntinlupa City is regarded as a socialized housing related project of the NHA pursuant to RA 7279, the income directly realized by Prismodial Construction from the development of the said project shall be exempt from project-related income taxes. As project contractor of the Socialized Housing Project known as the Package 1B-Construction of 1 Unit 3-Storey, 15 Classroom School Building at Southville 3, Site 2, NBP, Muntinlupa City is likewise 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 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