BIR Ruling [DA-242-04]

May 7, 2004 BIR RULING [DA-242-04] RR 6-2001; 86-99 Ms. Ma. Charito P. Villaruel #18-B India cor. Don Bosco Streets Better Living Subdivision Paraaque City M a d a m : This refers to your letter dated June 23, 2003 requesting clarification as to the rate of creditable withholding tax of your customers. Documents submitted to this office disclosed that you are engaged in the business of leasing motor vehicles; and that BIR Ruling No. 086-99 dated July 01, 1999 has been issued in your favor stating that as a lessor of motor vehicles or as a transportation contractor, you are subject to 1% creditable withholding tax imposed under Section 2.57.2(E)(4)(e) of Revenue Regulations No. 2-98. In reply, please be informed that Section 2.57.2(E)(4)(e) of Revenue Regulations No. 2-98 has been amended by Revenue Regulations No. 6-2001 which provides, viz : "Section 2.57.2 Income payment subject to creditable withholding tax and rates prescribed thereon Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: xxx xxx xxx (E) Income payments to certain contractors On gross payments to the following contractors, whether individual or corporate Two percent (2%) xxx xxx xxx (4) Other contractors xxx xxx xxx (e) Transportation contractors which include common carriers for the carriage of goods and merchandise of whatever kind by land, air or water, where the gross payments by the payor to the same payee amounts to at least two thousand pesos (P2,000) per month, regardless of the number of shipments during the month." Thus, lessors of motor vehicles or transportation contractors are now subject to two (2) percent creditable withholding tax pursuant to Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 6-001. This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be declared null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Enforcement Group