BIR Ruling No. 301-2018

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

RA 7279 No. 000-00 301-2018 3-2-2018 Person to Contact: Chief, Law Division Tel. Nos. 926-55-36/ 927-09-63

NATIONAL HOUSING AUTHORITY Quezon Memorial Eiliptical Road Diliman, Quezon City

Attention: MARCELINO P. ESCALADA

General Manager

Gentiemen:

This refers to your letter dated September 13, 2017 reiterating your request that the National Housing Authority (NHA) be exempted from all taxes even on transactions not directly related to socialized housing.

In your ietter, you submit that the NHA was meant to be exempted from payment of all fees and charges. without distinction whatsoever, under Section 19 of Repubiic Act (RA) No. 7279, to wit:

agency in charge of providing housing for the underprivileged and The National Housing Authority, being the primary government "Sec. 19. Incentives for the National Housing Authority.

homeless. shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All docunents 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 title. "

It is your submission that the above provision did not distinguish as to the kinds of charges and fees that are covered by the exemption, hence, said exemption covers ali fees and charges, including taxes, regardiess of whether or not the income is derived from transactions directly related to socialized housing. Furthermore, you posit that the exemption covers not only sale of house and lot but also road lots and other open spaces for community facilities. Thus, you argue that the position of this Office in BIR Ruling No. 433-2012, as circuiarized by Revenue Memorandum Circular (RMC) No. 28-2013, subjecting to taxes the proceeds of the sale by the NHA of a commercial lot to certain private individuais, is contrary to the afore-cited provision. Moreover, it is your concern that the expropriation by the NHA of 148 lots located in Cagayan de Oro City might be

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subject to capital gains tax (CGT), documentary stamp tax (DST) and value-added tax (VAT) in the light of BIR Ruling No. 433-2012

No. 433-2012 that the tax exemption granted to the NHA under Section 19 of RA No. underpriviieged and homeless (Section 20, Repubjic Act.[RA] No. 7279). The sale of commercial iots to persons other than the underprivileged and homeless citizens. who are the target beneficiaries of the law, does not promote the objective of the iaw. Hence. 7279 must be interpreted in relation to its mandate.of providing socialized housing for the underprivileged and homeiess. We note that the rationale for not imposing the taxes on socializert housing projects is to encourage greater private sector's participation in socialized housing and further reduce the cost of housing units for the benefit of the In reply: please be informed that this Office affirms its position in BIR Ruling

only the saieof socialized housing as defined under Section 3 (r) of the same Act comes within the purview of tax exempt transactions'of the NHA, to wit:

proarams and projects covering houses and lots or homelots underprivileged and homeless citizens which shall include sites only undertaken by the Government or the private sector for the and services development, long-term financing, liberalized terms on interest payments, and such other benefis in accordance with the provisions of this Act: " (Underscoring supplied) (r) "Socialized housing"..refers .to.housing

the taxpayer and liberally in favor of the taxing authority. The basic principle in the construction of iaws granting tax exemptions has been very stable. He who ciaims an exemption from his'share of the comnon burden of taxation must Justify his claim by showing that the Legisiature intended to'exempt him by words too plain to be beyond doubt or mistake (City of lloilo, et al. vs. Smart Communications, Inc., G.R. No. 167260. dated February 27, 2009 It bears stressing that tax exemptions are construed in strictissimi juris agamst

lots located in Cagayan de Oro City might be subject to CGT, DST and VAT in the light of BIR Ruling No. 433-2012, we rule that the NHA's expropriation of lots for the purpose of acquiring the same for the Sium Improvement and Resettlement Program of Cagayan De Oro City as mandated under Letter of instruction Nos. 555 and 557 shall not be subject to CGT and DST pursuant to Sections 19 and 20 of RA No. 7279, which reads: However, as regards your concern that the expropriation by the NHA of 148

homeless, shall be exempted from the payment of all fees.and charges agency in charge of providing housing for the underprivileged and of amy kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of The National Housing Authority, being the primary government "Sec. 19. : Incentives for the National Housing Authority]

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documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title.

participation in socialized housing and further reduce the cost of Socialized. Housing. Sec. 20. Incentives for the Private Sector Participating in To encourage greater private sector

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.

(2) ( Capital gains tax on raw lands used for the project: Project-related income taxes:

XXX XXX xxx" (Underscoring supplied)

.It is clear from the above-cited provision that the owner of the raw land shall not be subject to the CGT or creditable withholding'tax (CWT) on his disposition of the land that will be used for a socialized housing project. This holds true even if the iot was disposed of involuntarily through expropriation. Moreover, the transfer of the expropriated lots to the'NHA is not subject to the DST in accordance with Section 19 of RA No. 7279. The transfer of the lots, however, may be subject to VAT if the expropriated property is an ordinary asset of the iandowner. (BIR Ruling No. 388-2011 dated October 20, 2011)

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered nuil and void.

Very truly yours. 1ausano

K-1 Commisionerof i eme' 3""4 4 CAESAR R. DULAY