When a Lessee of Real Property Used for Residential Purposes Must Register as Withholding Agent and Must Withhold Creditable Income Tax

May 17, 1991 BIR RULING NO. 088-91 50 (b) 000-00 088-91 Gentlemen : This refers to your letter dated February 18, 1991, in effect, requesting for a clarification as to whether or not the rental payments for certain residential properties leased by SEND International of the Philippines, Inc. (hereinafter referred to as SEND Philippines) in behalf of its missionary members are subject to the creditable expanded withholding tax. It is represented that SEND Philippines has foreign missionaries working in the Philippines so much so that it has become necessary for SEND Philippines to lease residential properties for such members. Documentary evidence submitted show that this Office has issued to SEND Philippines a certificate of exemption from income tax dated February 19, 1987 as a non-stock, non-profit, religious organization under Section 26 (e) of the Tax Code as amended, that it is incorporated in the Philippines and duly registered with the Securities and Exchange Commission on May 9, 1983; and that the gross monthly rental per such lease contract with several and separate lessors is less than ten thousand pesos (P10,000.00). In reply, please be informed that pursuant to Section 2 in relation to Section 1 of Revenue Regulation No. 8-90 dated October 15, 1990 amending Section 1 of Revenue Regulations No. 6-85 and implementing Section 50 (b) of the Tax Code as amended, the lessee of real property used for residential purposes, where the gross monthly rental paid or payable by such lessee for the used or possession of real property amounts to at least ten thousand pesos (P10,000.00), must register as withholding agent and must, accordingly, withhold a creditable income tax at the rate of five per centum (5%) of the rentals regularly and periodically paid to this lessor. In view thereof, this Office is of the opinion as it hereby holds that SEND International of the Philippines, Inc. is under no obligation to withhold taxes nor to register as a withholding agent for the rental payments made by it to lessors of residential properties if and only if the gross month rentals thereof are less than ten thousand pesos (P10,000.00). However, in case of aforesaid rental payments are not subject to withholding tax, the payer, e.g., SEND Philippines, shall render an information return on such payments pursuance to Section 61 of the Tax Code, as amended by the Batas Pambansa Blg. 135 and as implemented by Section 21 of Revenue Regulations No. 1-82 dated March 18, 1982. Very truly yours, (SGD.) JOSE U. ONG Commissioner