BIR Ruling [UN-059-95]

February 10, 1995 BIR RULING [UN-059-95] The Law Firm of Nitorreda & Nasser Suite 211, Doa Margarita Building J.P. Rizal corner Cardona Streets Makati, Metro Manila Attention: Atty . Leocadio S . Nitorreda Gentlemen : This refers to your letter dated November 22, 2994 requesting in behalf of your client, HLC Construction and Development Corporation (HLC), for a ruling that the joint venture agreement it has entered into with the National Housing Authority (NHA) to provide low cost housing for the benefit of the less privilege and homeless citizen is exempt from the payment of project-related income taxes and value-added tax for the project contractor concerned, pursuant to Section 20 of Republic Act No. 7279, and exempt from withholding tax in accordance with Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. Documents submitted show that a joint venture agreement was entered into between NHA and HLC concerning a project known as the Niceville Subdivision situated at Panabo, Davao del Norte, containing a total area of 140,575 square meters covered by TCT Nos. T-81171 and T-81173 issued by the Registry of Deeds of Davao del Norte in the name of HLC; that the said project is intended for socialized housing and will benefit the landless and homeless residents of Panabo, Davao del Norte, banana plantation workers, privately employed and self-employed and members of the AFP and PNP and the public school teachers, who are qualified under the Unified Lending Program (ULP) of the National Home Mortgage Finance Corporation (NHMFC); and that the Development Permit of the said project was duly approved and issued by the Housing and Land Use Regulatory Board (HLURB), attested by its certification dated September 7, 1994. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which 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; xxx xxx xxx Upon the sale of the socialized housing units (Lot and House) or lots only, HLC as landowner, shall be exempt from the project-related income taxes, and creditable withholding tax prescribed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. It shall be understood that to be tax-exempt, the selling price per lot or house and lot shall not exceed P150,000.00, in accordance with Revenue Regulations No. 9-93 implementing R.A. No. 7279. Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds, having jurisdiction over the property, to the effect, that the said property is to be applied or is being applied to socialized housing project pursuant to R.A. No. 7279. The project-contractor shall be issued a separate certificate of exemption from value-added tax on his gross receipts for developing the property into socialized housing project upon submission of the development permit from the Housing and Land Use Regulatory Board (HLURB) and such other documents as may be required. However, purchase of goods/articles by the project contractor shall be subject to value-added tax, even if the said purchases are to be used for the socialized housing project. Moreover, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. No. 7279. Such being the case, the HLC as landowner shall be liable to pay the documentary stamp tax on the document conveying the properties to its intended beneficiaries imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the said beneficiaries. (BIR Ruling No. 393-93 dated October 1, 1993) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)