National Housing Authority

December 22, 2009 BIR RULING [SH-(137) 813-09] 20 (d) RA 7279; S-20-092-99 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 December 16, 2009 requesting, on behalf of your contractor, TRM Construction & Development Corporation, 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 Construction of One (1) Unit Livelihood Production and Training Center in Barangay Aguado, Trece Martires City, Cavite was executed between the National Housing Authority, as the procuring entity, and TRM Construction & Development Corporation as the contractor; that the project is a livelihood, production and training center intended to provide a venue for the various livelihood training programs, seminars, production, marketing show, window of products manufactured by the beneficiaries and community activities in the resettlement site which was certified by the National Housing Authority as a socialized housing project intended for the underprivileged and homeless families. 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. aHDTAI 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 TRM Construction & Development Corporation is engaged in the construction of One (1) Unit Livelihood Production and Training Center located in a resettlement project known as Southville 2 Housing Project which was certified by the National Housing Authority as a socialized housing project pursuant to RA 7279, the income directly realized by TRM Construction & Development Corporation from the development of the said socialized housing site shall be exempt from project-related income taxes. Moreover, TRM Construction & Development Corporation 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. EHDCAI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service