Gross Rental Payments Received from MWSS for Leasing Asian Utility Vehicle Exempt from Expanded Withholding Tax

January 25, 1984 BIR RULING NO. 012-84 53-f-96-83-012-84 Gentlemen : This refers to your letter dated September 27, 1982 requesting a ruling to the effect that gross rental payments you received from Metropolitan Waterworks and Sewerage System (MWSS) for leasing Asian Utility Vehicle (AUV) are exempt from the 5% expanded withholding tax required under Section 1(c) of Revenue Regulations No. 13-78 implementing Section 53(f) of the Tax Code as amended. Documentary evidence submitted show that on March 12, 1981, Contract No. MV-1-1981 "For the Furnishing of One Hundred Sixty (160) Units of Vehicles exclusively AUV type for the use of MWSS" was entered into between F. Mesina Enterprises (otherwise known as the Contractor) and MWSS; that each unit is properly equipped with pintle hook for towing, a driver for each, gasoline, oil and other operating necessities to be supplied by the Contractor; that for and in consideration of furnishing said transport services, MWSS shall pay the Contractor P139.40 for every eight (8) hours duty (1) shift for each unit; and that MWSS shall pay the contractor the bills for actual services rendered under said contract every 15th and end of every month; however, only 95% of such bi-monthly bills shall be paid to the Contractor and the 5% which is retained will only be remitted by MWSS to the contractor upon termination of the contract. In reply, please be informed that under Revenue Regulations No. 4-82 amending Section 1(c) of Revenue Regulations No. 13-78 as amended by Revenue Regulations No. 6-79 implementing Section 53(f) of the Tax Code, otherwise known as Expanded Withholding Tax Regulations, income payments on lease of equipment whether under operating or finance lease agreement beginning April 1, 1982 are exempt from the 5% expanded withholding tax. The term "equipment" mentioned in Section 1 of Revenue Regulations No. 4-82 includes vehicles. Such being the case, rental income derived by your enterprise from leasing AUV type vehicles are not subject to the expanded withholding tax. However, since the rental payments are not subject to withholding tax, the payor shall render an information return on such payments pursuant to Section 77 of the Tax Code as amended by Batas Pambansa Blg. 135 and as implemented by Section 21 of Revenue Regulations No. 1-82 dated March 18, 1982. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner