BIR Form 2307 for Car Rental and Rent-a-Car Companies: The 5% Equipment Rental Rate
A company that rents a vehicle from a car rental or rent-a-car company for business use withholds 5% expanded withholding tax (EWT) on the rental fee — the same personal-property rental rate that applies to machinery and equipment, not the transportation-contractor rate used for cargo hauling. Whether withholding applies at all depends on who the client is: a business client withholds; a private individual renting a car for personal use does not.
Generate a Car Rental BIR Form 2307 FREE →This guide is part of the BIR Form 2307 series — see What Is BIR Form 2307 and When Must You Issue It? for the form itself, and BIR Form 2307 for Equipment and Personal Property Rentals for the same rental framework applied to machinery and generators.
Is a vehicle rental subject to withholding tax the same way equipment is? #
Yes — a vehicle is personal property, and Revenue Regulations (RR) No. 2-98, Section 2.57.2, as amended by RR No. 11-2018, covers rentals of personal property at the same 5% rate as real property rent, once the lessee is a withholding agent. BIR Form 2307 for Equipment and Personal Property Rentals already covers this framework for machinery, generators, and company vehicles rented (not leased-to-own) from a supplier — a rented service vehicle from a car rental company falls under exactly the same rule, because the regulation does not carve vehicles out as a separate category from other rented personal property.
The obligation sits with the payor, not the car rental company: a business that pays a rent-a-car company for the use of a vehicle withholds 5% on the rental fee and remits it to the BIR, issuing BIR Form 2307 to the rental company as proof.
Business client vs private individual — who actually withholds #
Withholding only applies when the person paying for the rental is itself engaged in trade or business and required to withhold — a private individual renting a car for a personal trip is not a withholding agent, so no EWT applies to that rental at all. The distinction turns entirely on the payor, not the car rental company:
| Renter (payor) | Purpose of rental | Withholding on the rental fee |
|---|---|---|
| Corporation or business renting a service vehicle | Business use (staff transport, business trip, project vehicle) | 5% EWT, BIR Form 2307 issued to the rental company |
| Sole proprietor or professional renting under their registered business | Business use | 5% EWT, same as above |
| Private individual, not engaged in trade or business | Personal or leisure use | No withholding — the individual is not a withholding agent |
A car rental company that serves both business accounts and walk-in leisure customers should expect to receive a BIR Form 2307 from its corporate clients and none from its individual, personal-use renters — the rental company’s own revenue includes both, but only the business-client portion carries a withholding certificate.
Does a “rent-a-car with driver” arrangement change the treatment? #
A vehicle rented without a driver, where the client’s own staff operates it, is treated as a straightforward personal-property rental at 5% EWT, the same as any other rented equipment. Whether a “with driver” arrangement — where the rental company also supplies and pays the driver — shifts the payment into a service or transportation-contractor category instead of an equipment rental is a narrower classification question this post cannot confidently resolve from the sourcing available. Available guidance describes a separate rule for a car rental company’s own percentage tax: a company that rents out vehicles driven by the lessee (i.e., a self-drive arrangement) is classified together with common carriers and “keepers of garages” for purposes of the 3% common carrier’s percentage tax the rental company itself pays on its gross receipts under NIRC Section 117 — but that classification concerns the rental company’s own tax liability, not the client’s withholding obligation, and it does not, on the sourcing available, settle whether a with-driver rental should instead be withheld as a transportation contractor.
Separately, RR No. 2-98’s transportation-contractor clause (Section 2.57.2(E), covering companies like the ones in BIR Form 2307 for Trucking and Cargo Hauling Companies) is written around “common carriers for the carriage of goods and merchandise” — cargo, not passengers — which suggests a passenger vehicle rental, with or without a driver, does not automatically fall into that specific 2% clause. That said, a business that regularly hires a rent-a-car company with driver for extended engagements should confirm the correct Alphanumeric Tax Code (ATC) and withholding treatment for that specific arrangement with their RDO before assuming the base 5% equipment-rental rate applies unchanged — this is the one part of the rule this post flags as needing case-by-case confirmation rather than treating as settled.
Worked example: renting a service vehicle for a business trip #
Bataan Agri Supply Corp. rents a van (no driver — the company’s own staff drives it) from Metro Fleet Rent-a-Car for a month-long provincial sales trip, at ₱40,000 for the month.
| Item | Amount |
|---|---|
| Monthly gross rental | ₱40,000.00 |
| EWT withheld (5%) | ₱2,000.00 |
| Net amount paid to Metro Fleet Rent-a-Car | ₱38,000.00 |
Bataan Agri Supply withholds ₱2,000 from the rental payment, remits it with its next expanded withholding tax return, and issues BIR Form 2307 to Metro Fleet Rent-a-Car showing the ₱40,000 gross rental and the ₱2,000 withheld. Metro Fleet Rent-a-Car uses that certificate as proof of creditable tax already withheld when it computes its own income tax due for the period.
Summary #
Renting a vehicle from a car rental or rent-a-car company for business use is withheld at 5% EWT under the same personal-property rental rule that applies to equipment and machinery — not under the transportation-contractor rate used for cargo hauling. Withholding depends on the client: a business renter withholds and issues BIR Form 2307; a private individual renting for personal use does not withhold at all. A “with driver” arrangement is the one area a business should confirm directly with its RDO rather than assume follows the same rate automatically. For the equipment-rental rule generally, see BIR Form 2307 for Equipment and Personal Property Rentals, and for the full form itself, What Is BIR Form 2307.
Sources #
Primary sources
- Revenue Regulations No. 2-98, Section 2.57.2, as amended by Revenue Regulations No. 11-2018 — creditable withholding tax on rentals of real and personal property, the basis for the 5% rate applied here (citation of record; cross-checked against the equipment-rental treatment already sourced on this site rather than re-fetched independently in this session).
- National Internal Revenue Code, Section 117 — common carrier’s percentage tax, covering “cars for rent or hire driven by the lessee” and keepers of garages, cited here only for the rental company’s own separate tax classification, not the client’s withholding obligation.
Secondary sources
- BusinessMindedPinoy — 5% Withholding Tax on Rental Philippines: Complete SME Guide, corroborating the 5% EWT rate on rentals of real and personal property generally.
- Respicio & Co. — commentary on withholding tax on rent and BIR Form 1601-E requirements, corroborating that the withholding obligation sits with the payor/lessee.
- This site’s own BIR Form 2307 for Equipment and Personal Property Rentals and BIR Form 2307 for Trucking and Cargo Hauling Companies, used to keep the personal-property-rental and transportation-contractor citations consistent with the site’s existing sourcing.