Payments by a Multinational Company of Rentals on Equipment and Machineries to Non-resident Lessors Subject to Final Withholding Tax

December 3, 1981 BIR RULING NO. 248-81 024-b 117-80 248-81 Atty. Ambrosio M. Lina 1668 Dasmarias Avenue Makati, Metro Manila Dear Atty. Lina: This refers to your letter dated December 27, 1978 requesting a ruling as to whether or not your client, BJ Services International, Inc. doing business under the name of Bj Services (Phils.) is subject to the 7 1/2% final tax on the rentals of equipment and machineries leased by Bj Singapore which are being sent to the Philippines for its petroleum and geothermal operations. It is represented that your client Bj Services International, Inc., a multinational corporation with head office at California, U.S.A. is authorized to engage in petroleum and geothermal operations in the Philippines; that Bj Singapore (area headquarters in Singapore), leases equipment and machineries in Singapore and sends them to the Philippines for the use of Bj Services (Phils.) in its petroleum and geothermal operations; that Bj Services (Phils.) does not make direct payments to the corporations owning the machineries and equipment leased by the Singapore Office but Bj Singapore allocates the corresponding rental and other management expenses against the Philippine Office through book entries; and that it is the Singapore Office which pays the rentals to the lessors in Singapore. In reply thereto, I have the honor to inform you that under the foregoing facts, your client, in effect, makes payments of rentals on equipment and machineries to non-resident lessors. Accordingly, your client is subject to a final withholding tax of 7 1/2% pursuant to Section 24(b)(1)(vii) of the Tax Code of 1977, as amended. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner