Gross Monthly Rental Payment of P2,700.00 is Subject to 5% Expanded Withholding Tax

December 23, 1987 BIR RULING NO. 420-87 51 147-84 420-87 Gentlemen : This refers to your letter dated September 12, 1987 requesting a ruling as to whether the monthly rental to be paid by your client, Mr. Gerry Bangui for the use of a commercial apartment is subject to the expanded withholding tax; and whether he can deduct said rental payments from his gross income. It is represented that your client, Mr. Gerry Bangui of 107 Rd. 1, Project 6, Q.C. is presently paying a monthly rental of P2,700.00 for the use of a commercial apartment where he holds business; that he withholds 5% expanded withholding tax from the said monthly rentals; that the owner of the building, Mr. Vicente S. Gatmaytan, has expressed disapproval of Mr. Bangui's actions, claiming that he has the right to prevent the tenant, Mr. Bangui, from making such withholdings, that he also does not want an arrangement whereby he can remit to this Office the equivalent of 5% of the gross rentals he receives but in your client's name, and that Mr. Bangui intends to include the rental payments among his deductible expenses. In reply, I have the honor to inform you that the gross rental payment for the lease of real property amounting to at least P500.00 is subject to the 5% expanded withholding tax under Section (1)(c) of Revenue Regulations No. 6-85, implementing Section 51(b) [formerly Section 51(f)] of the Tax Code. For this purpose, an individual payor of rentals is constituted as the withholding agent, with respect to payments made in connection with his trade or business (Section 2, Revenue Regulations No. 6-85). Such being the case, the gross monthly rental payment of P2,700.00 by your client, Mr. Gerry Bangui to Mr. Vicente S. Gatmaytan is subject to the 5% expanded withholding tax which Mr. Bangui, as the payor and withholding agent, should deduct from said monthly rental payment of P2,700.00. aisadc Moreover, pursuant to Section 9 of Revenue Regulations No. 6-85 your rental payments shall be allowed as a deduction from your gross income only if it is shown that the 5% expanded withholding tax has been paid to the Bureau of Internal Revenue. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner