Monthly Installment Payments on the Sale of Rights Over a Contract of Lease Not Covered by the Expanded Withholding Tax System

July 9, 1981 BIR RULING NO. 110-81 53-f 000-00 110-81 Mr. Ambrosio S. Velasquez 2882 F.B. Harrison Street Corner Cuneta Avenue Pasay City S i r : This refers to your letter dated March 4, 1981, inquiring whether the monthly installments being paid to your corporation by the vendee of its rights over an existing contract of lease on a parcel of land, are subject to the 5% withholding tax. It appears that on May 12, 1972, a 10-year contract of lease over a 2,011.82 square-meter parcel of land was drawn between Sandigan Motors, Inc. of which you are President, and Lazatin de Asis, Inc.; that on June 29, 1978, your corporation sold to De Narra Inn Corporation its rights as lessee over the unexpired portion of the said contract of lease for a total consideration of P164,500.00 payable in monthly installments of P3,500.00 during the period from July 1, 1978 to May 31, 1982; and that, from these monthly installment payments, a 5% withholding tax is being deducted and withheld by the vendee, De Narra Inn Corporation. cdti In reply, please be informed that the monthly installment payments for the sale of your right over a contract of lease are not covered by the expanded withholding tax system. However, the rental payments to Lazatin de Asis, Inc. for the use and possession of the land shall be subject to the 5% withholding tax prescribed by 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. Very truly yours, RUBEN B. ANCHETA Acting Commissioner