National Housing Authority

November 24, 2009 BIR RULING [SH-(119) 734-09] RA 7279; SH (086) 572-2009 dtd. 9/10/09 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 October 29, 2008 requesting on behalf of your contractor, Rota Flex Construction, 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". From the documents submitted, it appears that on July 30, 2008 a Contract for Repair and Reconstruction of Riprap at Kapayapaan Ville, Canlubang, Laguna, was executed between National Housing Authority (NHA), as the procuring entity and Rota Flex Construction, as the contractor; that pursuant to the said Contract, Rota Flex Construction shall be the contractor of a socialized housing project known as Repair and Reconstruction of Riprap at Kapayapaan Ville, Canlubang, Laguna; and that said project was certified by the National Housing Authority as a socialized housing project intended for the assistance in the repair and rehabilitation of the riprap along the creek damaged by Typhoon "Milenyo" that hit the area last September 28, 2006. 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: EDIaSH xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; (2) . . .; (3) Value-added tax for the project contractor concerned;" Considering that Rota Flex Construction is engaged in the development of rehabilitation of the riprap and was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by Rota Flex Construction from the development of the said socialized housing site shall be exempt from project-related income taxes. As project contractor of the Socialized Housing Project known as Repair and Reconstruction of Riprap at Kapayapaan Ville, Canlubang, Laguna, Rota Flex Construction 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