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BIR clarifies tax exemption rule for socialized housing projects

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01:26 AM July 25th, 2012

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By: Ronnel W. Domingo, July 25th, 2012 01:26 AM

The Bureau of Internal Revenue clarified that the tax relief for socialized housing projects covered only buildings that were developed for the poor.

The BIR issued Revenue Memorandum Circular No. 32-2012 dated July 16 amid attempts to take advantage of a law that exempts contractors and developers of such projects from paying income tax, value added tax and other related levies, even if their projects are not qualified under the law.

In RMC 32-2012, Revenue Commissioner Kim S. Henares said the Urban Housing and Development Act of 1992 (or Republic Act No. 7279) defined socialized housing as houses and lots, or homelots, that were developed for the underprivileged or the homeless.

Tax exemption “is limited to the construction of homelots with the view of reducing the cost of housing units for the benefit of the underprivileged and homeless and to encourage greater private-sector participation in socialized housing,” Henares said.

The BIR chief reiterated that the agency’s issuances were meant to clarify the coverage of the tax rules and to stop unqualified parties from taking advantage of the tax breaks.

“The development and construction of classrooms, school buildings, multipurpose halls and covered courts, and livelihood centers are not qualified for the tax incentives,” Henares said.

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