5% Withholding Tax - Rental Payments

April 19, 1979 BIR RULING NO. 019-79 5% Withholding tax rental payments This refers to your letter dated March 9, 1979, requesting confirmation of your opinion that under the following facts and circumstances, a court-appointed receiver of property under litigation is not under obligation to further withhold from rentals distributed to the co-owners thereof any amount as creditable income tax considering that the lessees of the property already withheld 5% of said rentals pursuant to Section 1(c) of Revenue Regulations No. 13-78 implementing Presidential Decree No. 1351. The facts of the case are as follows: "Mrs. A sold some of her properties to six (6) of her children. One of said properties was a building which is leased to several tenants. After her death, a sister-in-law of the six children claimed that her late husband was one of the heirs of Mrs. A and therefore she should be entitled to a portion of the building. Because the six 6) co-owners would not honor her claim, the building was placed under Receivership, with the defunct PBC assuming the functions of a Receiver. cdt "Income realized in the form of rentals from various tenants of the building is being distributed to the co-owners, in accordance with the mandate of the Receivership Court (CFI-Manila). However, one seventh (1/7) of the income is held in escrow until the claim of the sister-in-law is finally decided." In reply, I have the honor to inform you that a court-appointed receiver is not obliged to further withhold from the rentals distributed to the co-owners of the property since the ones who are under obligation to withhold the 5% withholding tax on the rental payments are the lessees of the property leased. It is merely the duty of the court-appointed receiver to receive the rental payments and transfer possession of said rentals by distributing them to the co-owners or lessors of the building which is the subject of lease.