BIR Ruling

May 18, 1973 Mr. Artemio A. Pascual Certified Public Accountant 3350 Third St., Sampaloc Manila S i r : This refers to your letter dated April 14, 1973, stating the following: "On behalf of a client, we would like to inquire under what provision of the tax code would a firm be liable for business tax purposes if it leases its office and delivery equipments for a fix monthly rental, excluding operators. This firm is engaged and licensed in the general merchandising business, buying merchandise for re-sale. As incidental to said business have some spare equipments which it intends to lease to a sister company on a fixed monthly rental basis, consisting of a printing machine and a delivery pick-up, the lessor providing its own operators/drivers. If the above operations being incidental to its main or principal business may be liable to some kind of taxation based on rulings of the Commissioner, for our guidance please furnish us complete details. May we have your opinion, immediately if possible, so we can secure and pay the necessary license." In reply, I have the honor to inform you that for leasing its office and delivery equipments for a fixed monthly rental, your client is a Lessor of Personal Property subject to the 3% tax on its gross rental receipts regardless of the terms and conditions of the lease contract. Before the amendment of Section 191 of the Tax Code by Presidential Decree No. 69, said lessors were considered contractors only when under the terms and conditions of the lease, they retain control of the possession, use and operation of the leased property (BIR Ruling No. 62-0118 dated October 17, 1962). The said ruling was, however, superseded by Presidential Decree No. 69. Accordingly, as long as personal property is leased, the lessor thereof becomes subject to the P50.00 fixed annual tax and to the 3% tax prescribed under Sections 182(A)(1) and 191 respectively of the Tax Code, as amended by Presidential Decree No. 69. Very truly yours, CONRADO P. DIAZ Acting Commissioner of Internal Revenue