BIR Form 2307 for Equipment and Personal Property Rentals: The 5% EWT Rate
Renting machinery, vehicles, generators, or other equipment isn’t just a real-estate transaction — it triggers the same 5% expanded withholding tax as renting office or retail space, once payments to the same lessor exceed ₱10,000 for the year. Revenue Regulations (RR) No. 2-98, Section 2.57.2, as amended by RR No. 11-2018, covers rentals of real and personal property together, but real property rent and personal property rent are reported under different Alphanumeric Tax Codes (ATCs) on BIR Form 2307.
This guide is part of the BIR Form 2307 series. It covers who withholds on equipment and personal property rentals, the ₱10,000 threshold, and a worked example — for real property (office, retail, or residential) rent, see Withholding Tax on Rent: How to Complete BIR Form 2307 for Lessors.
Generate an Equipment Rental BIR Form 2307 FREE →What counts as personal property rental for withholding purposes? #
Personal property, in this context, means any movable asset rented for business use — as distinct from real property (land and buildings). Common examples that trigger the same withholding rule as real-estate rent include:
- Construction machinery and heavy equipment
- Company vehicles, trucks, and delivery fleets rented (not leased-to-own) from a supplier
- Generators, scaffolding, and event equipment
- Billboards, LED screens, and outdoor advertising structures rented from a third party
- Office equipment (copiers, computers) rented rather than purchased
Regulations that cover “rentals” as an expanded withholding item apply this coverage to income “derived from any activity conducted for profit or income derived from real or personal property” — the personal-property half of that scope is exactly what applies to equipment and machinery.
The ₱10,000 threshold and the 5% rate #
Once cumulative rental payments to the same lessor exceed, or are reasonably expected to exceed, ₱10,000 within the calendar year, the lessee withholds 5% on the entire rental amount — not just the amount above ₱10,000.
Rentals of personal property in excess of, or reasonably expected to exceed, ₱10,000 within the year are subject to five percent (5%) expanded withholding tax.
| Condition | Withholding treatment |
|---|---|
| Total annual rent to the same lessor ≤ ₱10,000 | No withholding required |
| Total annual rent to the same lessor > ₱10,000, or reasonably expected to exceed it | 5% on the full rental amount |
Because the test looks at cumulative payments to the same lessor across the year, a company renting equipment repeatedly from one supplier should track the running total from the first rental, not wait until a later invoice happens to push the year-to-date figure over ₱10,000.
Which ATC code applies, and how is it different from real property rent? #
Equipment and personal property rentals are reported under a different Alphanumeric Tax Code than real property rent, even though both currently carry the same 5% rate. Real property rent uses ATC WC100 (corporate lessor) or WI100 (individual lessor), as covered in the rent guide for this series. Personal property rentals use a separate code from the current alphalist/ATC table — confirm the exact code against that table before filing, since using the real-property code on an equipment rental misclassifies the transaction on the payor’s Quarterly Alphalist of Payees (QAP). See What Is an ATC and How to Find the Right One for BIR Form 2307 for how to look up the current code.
Worked example: renting a generator for a construction site #
A construction company rents a generator from an equipment-rental supplier for ₱15,000 per month, for four months, on an ordinary operating rental (not a finance lease).
| Month | Gross rental | Cumulative rent this year | Withholding required? |
|---|---|---|---|
| Month 1 | ₱15,000 | ₱15,000 | Yes — already past ₱10,000 |
| Month 2 | ₱15,000 | ₱30,000 | Yes |
| Month 3 | ₱15,000 | ₱45,000 | Yes |
| Month 4 | ₱15,000 | ₱60,000 | Yes |
| Item | Amount |
|---|---|
| Monthly gross rental | ₱15,000.00 |
| EWT withheld (5%) | ₱750.00 |
| Net amount paid to lessor | ₱14,250.00 |
Since the first month’s payment alone already exceeds ₱10,000, the construction company withholds 5% starting with that first payment — not only from the month the cumulative total crosses the threshold. Each month, the company issues (or consolidates into a quarterly) BIR Form 2307 to the equipment lessor showing the gross rental and the ₱750 withheld.
Frequently asked questions #
Is renting equipment or machinery subject to the same withholding tax as renting an office space? #
Yes, at the same 5% rate. Revenue Regulations No. 2-98, Section 2.57.2, as amended by RR No. 11-2018, covers rentals of both real and personal property at 5% expanded withholding tax, but real property rent and personal property rent are reported under different Alphanumeric Tax Codes (ATCs) on BIR Form 2307.
What is the threshold before I need to withhold on equipment rental payments? #
The 5% withholding applies once total rental payments to the same lessor exceed, or are reasonably expected to exceed, ₱10,000 within the calendar year. Once that threshold is reasonably expected to be crossed, withhold 5% on the full rental amount, not just the portion above ₱10,000.
Which ATC code applies to equipment or vehicle rental on BIR Form 2307? #
Rentals of personal property (machinery, vehicles, equipment, and similar movable assets) generally use a different ATC than the WC100/WI100 codes used for real property rent. Confirm the exact current code against your alphalist/ATC lookup rather than reusing the real-property rent code, since using the wrong ATC misclassifies the payment type.
Does a short-term equipment rental for a single event still count toward the ₱10,000 threshold? #
Yes. The threshold is measured against cumulative payments to the same lessor within the calendar year, not per transaction. A single large equipment rental invoice that alone exceeds ₱10,000, or several smaller rentals from the same supplier that add up past it, both trigger withholding.
Do I withhold on a finance lease of equipment the same way as an operating rental? #
No. A finance lease is generally treated differently from an ordinary operating rental for withholding tax purposes because the lessee is effectively acquiring the asset over time rather than merely renting its use. Confirm which category your lease agreement falls into before applying the standard 5% rental withholding, since misclassifying a finance lease as an operating rental can misstate both the withholding and the payor’s own asset accounting.
Summary #
Equipment, vehicle, and machinery rentals are withheld at the same 5% rate as real property rent once annual payments to the same lessor exceed ₱10,000, under RR No. 2-98 as amended by RR No. 11-2018 — but they use a different ATC code and are easy to overlook if a company only thinks of “rent withholding” as a real-estate rule. Track cumulative payments per lessor from the first invoice, confirm the correct ATC, and issue BIR Form 2307 accordingly. For real property rent, see Withholding Tax on Rent, and for contractor-type equipment-with-operator arrangements, see BIR Form 2307 for Contractors and Subcontractors.