National Housing Authority

December 15, 2009 BIR RULING [SH-(132) 785-09] 20 (d) RA 7279; S-20-092-99 National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Mr. Felicisimo F. Lazarte, Jr. Department Manager Northern and Central Luzon Gentlemen : This refers to your letter dated December 9, 2009 requesting on behalf of your contractor, Compact Builders, 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." TEDHaA It is represented that a Contract for the Construction of a Two-Storey Multi-Purpose Livelihood Productivity and Training Center in Barangay Iba O'Este, Calumpit, Bulacan was executed between the National Housing Authority, as the procuring entity, and Compact Builders, Inc., as the contractor; that the project is intended to serve as venue for the various livelihood training programs and community activities in Northville 9 Resettlement Site which was certified by the National Housing Authority as a socialized housing project intended for the underprivileged and homeless families affected by the Northrail Relocation Program in Bulacan. 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: (1) Project-related income taxes; (2) . . .; (3) Value-added tax for the project contractor concerned;" Considering that Compact Builders, Inc. is engaged in the construction of Two-Storey Multi-Purpose Livelihood Productivity and Training Center located in a resettlement project known as Northville 9 Resettlement Project which was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by Compact Builders, Inc., from the development of the said socialized housing site shall be exempt from project-related income taxes. Moreover, Compact Builders, 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. aIEDAC 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