Lessor of Motor Vehicles Subject to Creditable Withholding Tax

July 1, 1999 BIR RULING NO. 086-99 RR2-98 256; 257-000-00-086-99 YEP Rent A Car #43-B India cor. Don Bosco Streets Better Living Subdivision Paraaque City Attention: Ms . Ma . Charito P . Villaruel Proprietress Gentlemen : This refers to your letter dated September 11, 1998 requesting clarification as to the correct rate of creditable withholding tax your customers will withhold as lessee of motor vehicles and the sanctions imposed against customers for failure to withhold the correct creditable tax. It appears that you are engaged in the business of leasing motor vehicles; that you entered into a lease contract with Bonifacio Construction Management Corporation (BCMC) for the lease of your motor vehicle for use as a service car of their consultants; that the contract states that you will provide them a car with driver while gasoline will be borne by BCMC; that some minor expenses will be charged to you; that the agreed amount is P28,000.00 inclusive of driver's salaries with a normal working time of not exceeding ten (10) hours; that the overtime pay, however, will be shouldered by BCMC and will not be included in the billings you prepared and submitted to them every end of the month; that for the past months, BCMC has been deducting 1% creditable withholding tax; and that only recently they charged/imposed you creditable withholding tax at the rate of 5%. In reply, please be informed that this Office holds the opinion that you are classified as a lessor of motor vehicles or a transportation contractor subject to 1% creditable withholding tax imposed under Section 2.57.2(E)(4)(e) of Revenue Regulations No. 2-98; hence, BCMC is not liable to withhold five percent (5%) from its gross payment to YEP Rent A Car, but only to one percent (1%). This ruling is issued on the basis of the foregoing. 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue