BIR Ruling

July 12, 1976 Carag, Bravo & Associates Suite 416 Equitable Bank Building Juan Luna, Manila Attention: Quirico T . Carag, Jr . Gentlemen : This refers to your letter dated June 4, 1976 requesting the tax consequence and business tax liabilities of your client, under the following facts: "A real estate lessor, with several properties in Manila, recently added a new building divided into separate and completely furnished apartment units for lease on monthly rates. Each unit is fully equipped with all necessary fixtures, furnitures and appliances, with separate electric meters. It caters primarily to foreign tenants and is registered with the Department of Tourism as a tourist-oriented industry. However, in case of vacancies, short term local and foreign tenants are admitted at daily rates, which is higher than the monthly rentals as electricity bills are not charged. Hence, it has both a privilege Tax Receipt as a real estate lessor and a hotel. "Query No. 1: What should be the basis for paying the 3% tax on receipts? Are monthly rentals being paid by tenants, including store tenants on the ground floor, subject to said tax or is it imposable only on receipts from daily rate tenants? The building does not have the usual hotel facilities and amenities such as bars, restaurants, conference halls, etc. although on the ground floor a restaurant and a grocery store is owned and operated by other lessors. "Query No. 2: Under the DOT regulations, tenants paying their bills in foreign exchange are exempted from paying science and documentary stamps, including the 3% tax while PD 31 exempts all foreign tourists and travellers from payment of all taxes while in the country. Hence, should a foreign tourist or traveller pay his rentals or bills in Philippine peso, is he still exempted from paying the 3% tax?" In reply, I have the honor to inform you that as regards to your No. 1 query, monthly rentals being paid by store tenants are not included in the computation of the 3% tax on hotel receipts. However, all income derived from the rental of stores and hotel rooms should be reflected in the income tax return of your client for income tax purposes. With respect to No. 2 query, please be informed that foreign tourists and travellers are exempt from the payment of documentary and science stamp taxes on the hotel receipts and the 3% percentage tax on the hotel revenue from hotel room occupancy, in accordance with Presidential Decree No. 31 dated October 21, 1972. This exemption, however, is subject to the condition that the payment of the hotel room charges should be effected in any of the acceptable foreign currencies. (Rev. Regs. No. 10-72 dated November 8, 1972). Such being the case, should a foreign tourist or traveller pays his hotel bills in Philippine peso, the corresponding hotel receipts as well as the hotel revenue are subject to the said taxes. cdta Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3