To date, developers of mass housing projects continue to suffer the persistent requirement of the BIR to present a ruling issued by its 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), which is 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 honoured 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 and are given no other choice but to pay the CWT. This totally contradicts and nullifies the entitlements grated under certain laws, particularly R.A. 7279 and E.O. 226.
In October 2011, the four major national associations of real estate developers and other industry stakeholders bonded together to wage 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.
These associations are the Chamber of Real Estate & Builders’ Associations, Inc. (CREBA), 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).
The groups mutually aver that 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 housing units.
To further support this joint initiative, the Board of Directors of CREBA passed a resolution in January 6, 2012 elevating the appeal to Vice-President Jejomar C. Binay, chairman of the Housing and Urban Development Coordinating Council (HUDCC). The date of the resolution marked one year since CREBA sought the intervention of the Vice-President in raising the VAT-exemption thresholds for real estate transactions. Through the endorsement by the Housing Czar, Revenue Regulation No. 16-2011 was issued and took effect in January 1, 2012.
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 construction and real estate industries would also be good for the fiscal coffers.
We hope that the BIR can consider the industry’s proposal to 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.