5% Expanded Withholding Tax — Rental Deposit

July 30, 1981 BIR RULING NO. 138-81 53-f 48-80 138-81 Masagana Realty Co., Inc. 957 G. Masangkay Street Binondo, Metro Manila Attention: Mr . Tan Suy Hong Administrator Gentlemen : This refers to your letter dated June 17, 1981, requesting a ruling on whether rental deposits made to answer for any unpaid rentals constitute a taxable income. It is represented that as a real-estate-lessor, you require your tenants to make two (2) month rental deposits; that these deposits are deposited in a bank by the lessor to answer for any unpaid rentals, water, light, telephone bills and for any damages caused by the tenant to the rented room or building; and that in the absence of the above-mentioned unpaid bills, the full amount of the deposit is refundable to the tenant anytime he or she leaves. In reply, please be informed that, under the foregoing facts, the rental deposit does not form part of the tenant-lessor's income at the time deposit is made. However, if so much of the rental deposit is subsequently applied as rental, the same shall be considered as income and, therefore, subject to the 5% expanded withholding tax. aisadc Very truly yours, RUBEN B. ANCHETA Acting Commissioner