The 5% expanded withholding tax on rent, and the net to the lessor.
Withholding tax per month
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Net to lessor (monthly)
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Withholding per year
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What this calculator is really telling you
When a business rents space in the Philippines, it does not hand the full rent to the landlord. It holds back a slice, sends that slice to the Bureau of Internal Revenue (BIR), and pays the landlord the rest. That held back slice is the expanded withholding tax on rent. This tool takes a gross monthly rent and splits it into the part the tenant withholds and the part the lessor actually receives, then annualises the withheld amount. The rate it applies is 5 percent of gross rent. That figure is the long standing rate for rentals of real property, but treat it as the calculator's assumption and confirm the current rate with the BIR, since withholding rates are set by regulation and can be revised.
Who actually does the withholding
This is the point people most often get wrong, so it deserves the first detailed word. The 5 percent only bites when the payer is a withholding agent. In plain terms that means a business, a company, or another entity the BIR has tagged to withhold, paying rent on commercial or business use property. If you are an ordinary individual renting an apartment to live in, you are generally not a withholding agent, so you pay the landlord the full rent and withhold nothing. So before you apply this calculator, ask who is signing the cheque. A corporation leasing an office: yes, withhold. A private tenant renting a condo unit for their family: typically no. When in doubt about whether a particular payer is required to withhold, confirm with the BIR rather than assuming.
A PHP 50,000 monthly lease, step by step
Use the value the tool loads by default, PHP 50,000 of gross monthly rent paid by a business tenant. The arithmetic, using the rate this calculator applies, runs like this.
| Item | Amount (PHP) |
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So the landlord banks PHP 47,500 a month, and the tenant routes PHP 2,500 a month, PHP 30,000 over twelve months, to the BIR on the landlord's behalf. The chart above shows how each monthly payment divides.
Why the 5 percent is not a real cost to the landlord
A lessor seeing PHP 2,500 vanish from each payment can feel taxed twice, but the withholding is an advance, not an extra charge. At filing time the landlord declares the full rental income and computes income tax on it, then subtracts the PHP 30,000 already withheld during the year as a credit against that bill. If the income tax due is larger than what was withheld, the landlord pays the difference. If it is smaller, the excess credit can reduce other tax or be carried forward. The economic burden over the year is the landlord's actual income tax, and the 5 percent is just collected early. The tenant should hand the lessor a withholding tax certificate showing the amount remitted, because without that proof the landlord cannot claim the credit. Chasing that certificate is the single most useful habit for any lessor renting to businesses.
The taxes this tool keeps separate
Expanded withholding tax sits on top of the lessor's other obligations rather than replacing them. If the landlord's annual rental receipts stay under the PHP 3,000,000 VAT registration threshold, those receipts usually attract a percentage tax, while a landlord above the threshold charges VAT on the rent instead. As modelled across this site, the percentage tax is 3 percent and VAT is 12 percent, figures to confirm with the BIR. Those business taxes are calculated separately from the 5 percent income tax withholding shown here, so do not net them together. A frequent error is for a tenant to withhold 5 percent and assume the landlord's VAT or percentage tax is now handled. It is not. This calculator deliberately isolates the income tax withholding so you can see that one mechanic clearly, and you should treat VAT or percentage tax as a distinct line.
How and when does the tenant send the withheld amount to the BIR?
The withholding agent files and remits the tax it held back on a regular cycle, generally monthly, and issues the lessor a certificate of the tax withheld for the period. There are specific BIR forms for the remittance and the annual reporting, typically filed through the agency's electronic channels, but the exact form references and deadlines should be confirmed with the BIR for your filing situation rather than assumed from memory. The functional point is simple: withhold, remit on schedule, and give the landlord documentary proof.
Is the 5 percent calculated on rent before or after VAT?
Income tax withholding is generally applied to the rental amount itself, with VAT treated as a separate component rather than part of the base the 5 percent is computed on. Because lease invoices can present rent and VAT in different ways, this can get fiddly in practice. The cleanest approach is to identify the rental charge that represents income to the lessor, apply the rate this calculator uses to that figure, and handle VAT on its own line. Where a contract or invoice format makes the base unclear, confirm the correct treatment with the BIR.