Coverage of tax exemption of private contractors undertaking socialized housing projects

The exemption from project-related income and value-added taxes (VAT) of private contractors/developers engaged in socialized housing projects under Section 20 of Republic Act No. (RA) 7279 — or the Urban Development Housing Act of 1992 — is limited to the construction and development of houses and lots or homelots.

Under Section 3(r) of RA 7279, the term “socialized housing” refers to housing programs and projects covering houses and lots or homelots undertaken by the government or the private sector for the underprivileged and homeless citizens, which shall include sites and services development, long-term financing, liberalized terms on interest payment, and such other benefits in accordance with the provisions of the law.

Based on the definition of socialized housing under RA 7279, the BIR has clarified that the development and/or construction of classrooms, school buildings, multi-purpose halls/covered courts, and livelihood centers falls outside the definition of the term “socialized housing” and cannot qualify for the tax incentives granted under Section 20 of RA 7279.

Revenue Memorandum Circular No. 32-2012, July 16, 2012

Tax Brief – August 2012

Punongbayan and Araullo