BLGF Opinion No. 024-2016 CO-LFPS-PPPSD

August 3, 2016 BLGF OPINION NO. 024-2016 CO-LFPS-PPPSD 2nd Indorsement Respectfully returned to the OIC Regional Director, BLGF Region VI, Iloilo City, the within Indorsement dated 18 July 2016 relative to the letter dated 13 July 2016 of the ICO-Municipal Treasurer of Carles, Iloilo, requesting for an opinion whether the Municipality of Carles may collect business taxes from the private contractor participating in the housing project of the government for the victims of Typhoon Yolanda. It is submitted that a private contractor is claiming exemption both from the payment of local business taxes, based on Sections 19 and 20 of Republic Act No. 7279, also known as the "Urban Development and Housing Act of 1992," and regulatory fees and charges pursuant to Administrative Order No. 44 dated 28 October, 2014 of the Office of the President. For the early resolution of the herein issues submitted, quoted hereunder are the pertinent provisions of RA No. 7279, viz. : Sec. 19. Incentives for the National Housing Authority . The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kinds, whether local or national, such as income and real taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of titles. Clearly, the preceding provision of law provides that the National Housing Authority (NHA), being the primary government agency in charge of providing housing for the underprivileged and homeless individuals, shall be exempted from the payment of all fees and charges of any kinds, whether local or national, including real estate taxes. Equally clear, however, is that the incentive is exclusively conferred upon the NHA and therefore, private contractors participating in the socialized housing projects of the government for the victims of Typhoon Yolanda cannot claim such privilege or exemption. On the other hand, Section 20 of the same law provides: 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 sectors: HEITAD (a) x x x; and (d) Exemption from the payment of the following: (1) x x x (4) Transfer tax for both raw completed projects ; and xxx xxx xxx. (emphasis supplied) Specifically, the foregoing provides clear exemption for the payment of transfer tax to private sector participating in socialized housing project of the government, in the herein case, to victims of Typhoon Yolanda. It does not speak of incentive granting exemption from the payment of business tax to private contractors participating in the said housing project of the government. In relation thereto, the Department of Finance (DOF) issued Local Finance Circular No. 1-79 dated 16 April 1997, providing guidelines in the implementation of said law, thus, Section 3 thereof, provides: Sec. 3. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduced the cost of housing units for the benefit of the underprivileged and homeless citizens, the private sector shall be exempt from the payment of transfer tax on acquisition of raw land and completed projects: Provided, however, that such exemption from payment of transfer tax on acquisition of raw land may be realized only upon completion of at least fifty percent (50%) of the project as scheduled or in accordance with the program of work submitted, which shall be verified and determined by the assessor concerned. (emphasis supplied) Further, Section 7 of Administrative Order No. 44, dated 28 October 2014 entitled "Streamlining the Process of Issuance of Permits, Certifications, Clearances and Licenses for Housing and Resettlement Projects in Yolanda-Affected Areas, Directing All Government Agencies Concerned to Observe the Same and Imposing Sanctions for Non-Compliance," provides: SECTION 7. Exemption from Fees. Pursuant to Sections 19 and 20 of Republic Act No. 7279, all socialized housing and resettlement projects shall be exempt from the required fees and charges for the issuance of clearances, certifications, permits or licenses with the exception of documentary stamp tax (DST) when one party is exempt, the other party is liable thereof pursuant to Section 173 of the National Internal Revenue Code. As such, the BIR shall facilitate the issuance of a Certificate of Tax Exemption for all socialized housing and resettlement projects to be endorsed by the Resettlement Cluster. As already discussed above, Section 19 of RA No. 7279 provides exemption from payment of all fees and charges, of whatever kind and nature, but only to NHA. There is no explicit assertion that private sector participating in the socialized housing of the government shall also be exempted from such impositions. Even Section 20 of the same law cannot be made as reference for such claim for exemption as it expressly provides exemption only from the payment of transfer tax but not for regulatory fees and charges. Evidently, it can be deduced that exemption from fees provided in Section 7 of A.O. No. 44, s. 2014, refers to exemption of all fees and charges for the NHA but not to private sectors participating in the socialized housing project of the government particularly for the victim of Typhoon Yolanda. Please be guided accordingly. (SGD.) NIO RAYMOND B. ALVINA OIC-Executive Director