VAT Ruling No. 095-91

December 18, 1991 VAT RULING NO. 095-91 Solemar Development Corporation UPL Building Sta. Clara St., Intramuros Manila Attention: Mr . Renato M . Tanseco President Gentlemen : This refers to your letter dated July 22, 1991 requesting for a ruling as to whether or not the lease of cold storage rooms in your ice plant and cold storage is subject to the expanded withholding tax and value-added tax. cdll The copy of the Contract of Lease submitted show the following: 1. The contract of lease is for a period of one (1) year with the lessee having an option to renew the lease for a similar period. However, lease rental is paid monthly and the lessee has an option to terminate the lease after 30 days notice. Lessee pays rental based on the size of the cold storage room under lease, whether the lessee uses the room to store goods or for other use, or it is kept empty and is not used at all. 2. The lessee may at any time introduce improvements, alteration, and additions in the leased property upon written notice to the lessor upon expiration/termination of the lease agreement, any improvements, additions or alterations which can be removed without destroying or causing any alteration to the building shall belong to the lessee. 3. Lessee's workers and employees are solely responsible for the handling, storing, tallying and recording of lessee's goods in the cold storage rooms and in cleaning and maintaining the sanitary condition of the leased premises. Lessee also deploys its own security guards for securing its goods and property in the leased premises. Lessor is not given any copy of the records of the goods and properties kept by the lessee in the leased premises nor of the keys to the padlock used by the lessee to secure the cold storage rooms. 4. Lessor's responsibility is to maintain the leased premises in good and tenantable condition and to maintain the temperature at the leased cold storage rooms as agreed in the Contract of Lease. In reply, please be informed that under the foregoing circumstances, you are a warehouseman because you are "engaged in business of receiving and storing goods of others for compensation or profit" (U.C.C., 7-102, State ex. rel. and for Use and Benefit of Course v. American Surety Co. of New York, 148 Or. 1, 35 P. 2d 487, 491); and by reason thereof, you are subject to the 10% VAT under Section 102 of the Tax Code. Furthermore, the lessee shall withhold 5% expanded withholding tax on the rental paid to you for the lease of your warehouse pursuant to Section 50(b) of the Tax Code, as implemented by Section 1(c) of Revenue Regulations 6-86, as amended. cdti Very truly yours, JOSE U. ONG Commissioner of Internal Revenue