Congressman Rodolfo G. Valencia, Chairman of the House Committee on Housing and Urban Development, filed House Resolution No. 1823. The proposed measure seeks to investigate, in aid of legislation, the perceived “onerous” additional requirement for revenue rulings imposed by the Bureau of Internal Revenue on housing developers that have “led to adverse outcomes” in the housing sector.
To date, developers of mass housing continue to suffer the persistent requirement to present a ruling issued by the BIR national office for every housing project that is granted exemption from the payment of the Creditable Withholding Tax (CWT).
The ruling is required by the BIR before the issuance of the Certificate Authorizing Registration (CAR), a foremost precondition of the Registry of Deeds for the transfer of the Certificate of Title. Without the revenue ruling, the Certificate of Income Tax Holiday (ITH) issued by the Board of Investments (BOI) is not honored as sufficient evidence of tax exemption and, thus, the revenue district officers will only release the CAR after collecting the CWT.
This means that whilst the national government continues to recognize mass housing as a priority sector by retaining its status in the Investment Priorities Plan (IPP), real estate developers are deprived of their ITH benefits. Taxpayers are thus given no other choice but to pay the CWT even as two laws, particularly the tax incentives for socialized housing under Sec. 20 of the Urban Development and Housing Act or UDHA (R.A. 7279) and the Omnibus Investments Act (E.O. 226), already exempt them from income tax.
Since 2011, the Chamber of Real Estate & Builders’ Associations, Inc. (CREBA) has joined hands with the other three major national associations of real estate developers, namely the Subdivision and Housing Developers’ Association, Inc. (SHDA), the National Real Estate Association, Inc. (NREA) and the Organization of Socialized Housing Developers in the Philippines, Inc. (OSHDP) to find a solution on the issue.
The groups waged a concerted appeal to the BIR Commissioner to immediately cause a memorandum restraining all RDO’s nationwide from requiring the presentation of BIR rulings for BOI-registered projects and such other projects that are already deemed exempted from payment of income tax under existing laws and finally put a stop to a duplicating and irrational policy that is undermining the broader fiscal benefits of housing and construction activities.
The requirement of BIR ruling at the stage of getting a CAR is redundant since the BOI has already ensured that the developer has complied with all requirements for the grant of ITH before a certification is issued. Furthermore, the BIR can still conduct a verification of the books of account of the taxpayer if only to ascertain that the developer should enjoy ITH privilege under the rules of the IPP. It also grossly weakens the private sector’s efforts to help address a major social problem: a burgeoning housing backlog of at least 3.7 million housing units.
To CREBA’s mind, the additional requirement defeats the very purpose for which the tax incentives were made available to developers, which is to encourage more players to undertake mass housing projects, and thus increase economic activities, mass housing being the major pump-primer of the economy. The additional taxes generated by heightened activity in the real estate industry would also be good for the fiscal coffers.
We hope that the BIR can consider the industry’s proposal to accept the certificate of ITH entitlement in the case of BOI-registered projects or the HLURB certificate of registration and license to sell in the case of socialized housing projects, as evidence that the transaction is indeed exempt from income tax and CWT.
This will encourage more players to participate in the delivery of socialized housing units for the marginalized, and, in the process, harmonize the seemingly conflicting, unreasonable and overlapping requirements imposed upon an already heavily-taxed and highly-regulated industry.
Providing mass housing the impetus it deserves will lead to more activities in construction and real estate, which will then redound to the benefit of both the public and private sectors. It is a move that works to the advantage of all stakeholders and, at the very least, deserves the attention and consideration of government.