Confirmation that Only 10% of Monthly Car Rental is Taxable as Fringe Benefits Tax

January 5, 2000 BIR RULING NO. 009-00 33 000-00 009-2000 Santos Tardecilla Verdolaga & Co . Suite 505-C ITC Building 337 Gil J. Puyat Avenue Makati City Attention: Mr . Virgilio R . Santos Partner Gentlemen : This refers to your letter dated November 10, 1998 stating that your client is a manufacturer and distributor of consumer products all over the Philippines; that in the course of normal operations, the Company leases cars and other vehicles for the use of the company's salesmen, marketing executives and other officers of the company; that because the cars and other vehicles are being used for business as well as for personal purposes, the company requires the officers and employees to share at least 40% of the monthly rental; that the employees' share on monthly rental is being deducted from their payroll which are subjected to withholding tax on compensation; and that the company booked only its 60% share of the monthly rental as rental expense. Based on the foregoing representations, you are now requesting for a ruling confirming your opinion that under Section 2.33(B)(3)(f) of Revenue Regulations No. 3-98 only 10% of the monthly car rental is taxable as fringe benefits tax in as much as the 40% share of the employees on the monthly rental has already been taxed as compensation. In reply, please be informed that Section 2.33(B)(3)(f) of Revenue Regulations No. 3-98 implementing Section 33 of the Tax Code of 1997, reads: "(f) If the employer leases and maintains a fleet of motor vehicles for the use of the business and the employer, the value of the benefit shall be the amount of rental payments for motor vehicles not normally used for sales, freight, delivery services and other non-personal use. The monetary value of the fringe benefit shall be fifty percent (50%) of the value of the benefit." Such being the case, and since your client requires the officers and employees to share at least 40% of the monthly rental and deducted from their payroll subject to the withholding tax on compensation, this Office is hereby confirming your opinion that only 10% of the monthly car rental is taxable as fringe benefit tax in as much as the 40% share of the employer on the car rental has already been taxed as compensation. This ruling is being 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 considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue