THE Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 32-2012 dated July 16, 2012 clarifying the incentives of the private sector participating in socialized housing under Section 20 of Republic Act (RA) No. 7279 or the Urban Development and Housing Act of 1992, particularly the exemption from project-related income and value-added taxes (VAT).
Under Section 3(r) of RA 7279. “socialized housing” is defined as housing programs and projects covering houses and lots or homelots only 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 payments, and such other benefits in accordance with said law. The definition of socialized housing was reiterated in Revenue Regulations (RR) No. 11-97 and in RR No. 17-01.
From the foregoing, the BIR has clarified that the tax incentive granting exemption from project-related taxes and VAT to project contractors/developers, is limited to the construction and development of houses and lots or homelots only with a view to reduce the cost of housing units for the benefit of the underprivileged and homeless and to encourage greater private sector participation in socialized housing.
Therefore, 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 No. 7279.
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