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November 10, 1986

January 1, 1987

REVENUE REGULATIONS NO. 19-86 SUBJECT TO : : Taxation of Leases

All Internal Revenue Officers and Others Concerned

SECTION 1. Purpose. — These regulations pursuant to Section 277 of the National Internal Revenue Code, prescribe the rules to govern the tax treatment of lease agreements and provide guidelines for determining whether certain transactions purporting to be leases of tangible personal property are in reality conditional sales contracts. PART A INCOME TAX SECTION 2. Reporting of Income and Deductions by a Lessor or a Vendor. 2.01 Lessor if contract is a lease — The amount paid for the use of property under an agreement which is determined under these regulations to be a lease shall be considered as rental ( and therefor includible in gross income) of the lessor. Such lessor may deduct all ordinary and necessary expenses paid or incurred during the taxable year which are attributable to the earning of the income. In addition, the lessor, with respect to properties subject to an "operating lease" as defined in subparagraph 2.01/1 of this Section, will be allowed a deduction for depreciation determined pursuant to Section 30 (f) of the National Internal Revenue Code (NIRC) and the Regulations thereunder: Provided, however, that tangible personal properties listed in Annex "A" of these Regulations which are subject to "finance lease" (as defined in subparagraph 2.01/2 of this Section) may be depreciated during the primary lease period but such period shall not be less than 60% of the depreciable life of the property as indicated in Annex "A". If, under the agreement, the lessee pays to the lessor a stipulated rental, and in addition pays certain other expenses which are properly payable by the lessor, the lessor is deemed to have received as rental income not only the stipulated rental but also the amount of such other expenses paid by the lessee to, or for the account of, the lessor. 2.01/1Operating lease defined — An "operating lease" is a contract under which the asset is not wholly amortized during the primary period of the lease, and where the lessor does not rely solely on the rentals during the primary period for his profits, but looks for the recovery of the balance of his costs and for the rest of his profits from the sale or re-lease of the returned asset of the primary lease period. 2.01/2Finance lease defined — "Finance lease" or full payout lease is a contract involving payment over an obligatory period (also called primary or basic period) of specified rental amounts for the use of a lessor's property, sufficient in total to amortize the capital outlay of the lessor and to provide for the lessor's borrowing

costs and profits. The obligatory period refers to the primary or basic noncancellable period of the lease which in no case shall be less than 730 days. The lessee, not the lessor, exercises the choice of the asset and is normally responsible for maintenance, insurance and such other expenses pertinent to the use, preservation and operation of the asset. Finance leases may be extended, after the expiration of the primary period, by non-cancellable secondary or subsequent periods with the rentals significantly reduced. The residual value shall in no instance be less than five per centum (5%) of the lessor's acquisition cost of the leased asset. 2.02 "Packaged lease" not taxable as a corporation — A "package lease" or "lease package" shall not be considered as a joint venture or association taxable as a corporation as defined in Section 20(b) of the National Internal Revenue Code. 2.03 "Packaged Lease" or "Lease Package" defined — A lease package refers to that type of finance lease which has two or more lessors, particularly if the size of the lease facility is substantial relative to the exposure limits of a lessor. Under a lease package, the lead lessor either invites one or more lessors to participate as a co-lessor in the funding lease. Consequently, two or more lessors may have co-ownership of a single leased item, proportionate to their participation. For the purpose of this subparagraph, the lessors in a lease package shall be limited to finance and leasing companies registered under Republic Act No. 5980. 2.04 Taxation of income derived from "'package leases" — The rental income derived from a packaged lease shall be taxable directly to each of the participating lessors in their individual capacity, the respective shares of which shall be determined in accordance with their sharing agreement. Any gain or loss derived by the lessor who sells the lease contracts or lease receivables to one or more buyers shall be taxed as ordinary gain or loss. To compute ordinary gain or loss, the outstanding principal value of the lease as determined in Annex "B" shall be deducted from the selling price. 2.05 Vendor, if contract is a conditional sale — If the agreement is determined to be a sale, the amounts received under the contract by the vendor will be considered to be payments which are part of the sales price to the extent such amounts do not represent interest other charges. SECTION 3. Deductions Allowable to Lessee or Purchaser. 3.01 Lessee, if contract is a lease — If under the criteria set forth in these Regulations, an agreement constitutes a lease, the lessee may deduct the amount of rent paid or accrued, including all expenses which under the terms of the agreement the lessee is required to pay to, or for the account of, the lessor. If the payments are so arranged as to constitute advance rentals, such payments shall be duly apportioned over the lease term. In computing the term of the lease, all options to renew, shall be taken into consideration if there is a reasonable expectation that such options will be exercised.

if contract is a conditional sale — If under the provisions of these Regulations. In ascertaining such intent no single test or any special combination of tests is absolutely determinative. a lease is an agreement between a lessor and a lessee giving the lessee possession and use of a specific property upon payment of rentals over a period of time. Whether an agreement. 4. On the other hand.03 Factors to be considered. No general rule. A contract or agreement purported to be a lease shall be treated as conditional sales contract if one or more of the following compelling persuasive factors are present: (A) The lessee is given the option to purchase the asset at anytime during the obligatory period of the lease. and for a period which may be definite or indefinite (Article 1643. read in the light of the facts and circumstances existing at the time the agreement was executed. 4.03/1In general. The lessor retains ownership of the asset so that it shall not become the property of the lessee or any related third party during the term of the lease. the amounts paid to the vendor will be considered as payments which are part of the purchase price to the extent such amounts do not represent interest or other charges. General criteria for characterizing an agreement as a conditional sale.02 Vendee. is in substance a conditional sales contract depends upon the intent of the parties as evidenced by the provisions of the agreement. the agreement is to be treated as a sale. (B) The lessee acquires automatic ownership of the asset upon payment of the stated amount of "rentals" which under the contract he is required to make. the Commissioner shall make the determination on the basis of all relevant facts and circumstances of each transaction.02 Characterizing a transaction that does not readily fit statutory concepts — In cases where the true character of the transaction cannot be definitely determined from the terms and conditions of the agreement. Civil Code. acd SECTION 4.3. (Article 1458. .) 4.03/2Compelling persuasive factors. notwithstanding that the option price is equivalent to or higher than the current fair market value of the asset. among which are (but not limited) those indicated in the following subparagraphs. 4. Civil Code ). a sale is a contract whereby one of the contracting parties (seller or vendor) obligates himself to transfer ownership of and to deliver a determinate thing while the other party (buyer or vendee) obligates himself to pay for said thing a price certain in money or its equivalent. which in form is a lease. 4.01 Statutory basis for distinguishing a lease from a sale — A lease is a contract whereby one of the parties (lessor) binds himself to give to another (lessee) the enjoyment or use of a thing for a price certain. applicable to all cases can be laid down. In other words.

01/2 of these Regulations shall be divided into two components. for example. need not be submitted for advance ruling. (b) The property may be acquired under a purchase option. any specific lease agreement entered into by the lessor and a lessee which does not substantially deviate from the terms and conditions of the model contract on the basis which the advance ruling had been secured. — In the absence of the above compelling persuasive factors or contrary implication.01 The rental amounts received by a lessor from a lessee under an agreement qualifying as a finance lease as defined in Section 2. 4. at a price which is nominal in relation to the value of the property at the time when the option may be exercised. The amount representing interest shall be determined in accordance with the formulae prescribed in Annex "B".03/3Absence of compelling persuasive factors. 6. — The parties to a lease agreement may secure from the Commissioner an advance ruling recognizing the fact that an agreement actually constitutes a lease for tax purposes.02 The amount of interest. Thereafter. Advance Ruling Required to Recognize Existence of a lease. SECTION 5. an intent warranting treatment of a transaction for tax purposes as a purchase and sale rather than as a lease or rental agreement. cdtai (D) The receipts of payment indicate that the payment made were partial or full payments of the asset. as determined at the time entering into the original agreement. one or more of the following conditions are present: (a) Portions of the periodic payments are made specifically applicable to an equity to be acquired by the lessee. casia PART B GROSS RECEIPTS TAX SECTION 6. may in general be said to exist if. namely principal and interest to be arrived at using either the Annuity or the Sum-of-the-Years-Digits method of accounting. Basis of the Gross Receipts Tax 6. In cases where a lessor is engaged in the leasing business and frequently enters into a contract with various lessees under the same or essentially similar terms and conditions. or which is a relatively small amount when compared with the total payments which are required to be made.A. Amounts .(C) Portions of the periodic rental payments are credited to the purchase price of the asset. if the same is derived by a finance and leasing company registered under R. 5980 shall be subject to the gross receipts tax prescribed in Sections 260 and 261 (as amended by PD 1739 ) of the National Internal Revenue Code based on the remaining maturity of the lease. the lessor may submit a model lease agreement on which to base an advance ruling.

2. Effectivity. 5980 and sells its lease contract or merely sells its receivables (and therefore retains title to the equipment). Land Transportation Equipment 4 years Water Transport Equipment 8 years Air Transport Equipment 8 years Industrial Equipment Agricultural Equipment 5 years 4 years Construction Equipment 5 years Telecommunication Equipment 5 years Office Machines 3 years 5 years Main Frame Computer . — These regulations shall take effect on January 1.) BIENVENIDO A.01) shall be excluded for purposes of the gross receipts tax determined under this subparagraph. the rental amount received by the buyer shall be subjected to the pertinent provisions governing corporate taxation under the NIRC without prejudice to the exemptions and benefits allowed by special laws.A. TAN. 9. casia SECTION 7. 5980.which the lessee. 4. 7. 8. Commissioner of Internal Revenue ANNEX "A" SCHEDULE OF DEPRECIATION Asset classification Depreciable Life 1.04 If the lessor is a finance and leasing company registered under R. 5.A.) JAIME V. JR. under the agreement. 6. 6. 6.03 If the lessor is a person other than a finance and leasing company registered under R. ONGPIN Minister of Finance Recommending Approval: (SGD. 1987 and shall be applicable to all leases written on or after the said date. 3. then the rentals resulting from the lease agreement shall be subjected too the 4% contractor's tax imposed under Section 205 of the National Internal Revenue Code." (SGD. pays to the lessor (in addition to a stipulated rental) for certain other expenses properly payable by the lessor (as described in Section 2.

8 1. 2. 3.3 1. Materials Handling Equipment Auxiliary Equipment 5 years 5 years (Please refer to subsequent pages for details of various asset classification) 1. as may be mutually agreed upon from time to time.4 2. 1.3 2.5 2.4 1.10 1. 3. as may be mutually agreed upon from time to time.8 And such other similar or related equipment.6 2.1 1. 11.1 2. 2.12 And such other similar or related equipment.7 1.5 1.10.7 WATER TRANSPORT EQUIPMENT Tugboats Barges Tankers Purse Seiner Reefer Vessels Container Vessels Passenger Vessels 2.9 1.6 1.2 2.1 AIR TRANSPORT EQUIPMENT Helicopters .11 LAND TRANSPORT EQUIPMENT Automotive Vehicles Passenger Bus Tourist Bus Asian Utility Vehicles Light-Duty Trucks (Such as Pick-ups) Medium-Duty Trucks (Such as Dump Trucks) Heavy-Duty Trucks (Prime Mover) Locomotives Trailers (Flatbed & Skeletal) Tankers (Bulk Carriers) Motorcycles AEIHaS 1.2 1.

5 4.5 And such other similar or related equipment.3.20 4. as may be mutually agreed upon from time to time.14 4.18 4. TaCIDS 4.2 3.2 4.21 INDUSTRIAL EQUIPMENT Injection Moulding Machines Extruding Machines Foundry Equipment Metal Fabrication Equipment Welding Equipment Logging Equipment Sawmill Equipment Woodworking Equipment Kiln Drying Equipment Refrigerating Equipment Mining and Quarrying Equipment Printing Equipment Textile Machines Refractory Equipment Boilers Industrial Pumps Industrial Gas Manufacturing Equipment Distilling Equipment Laboratory Testing Equipment Medical Equipment Drilling Equipment AaCTID 4. 4.16 4.17 4.15 4.8 4. .1 4.3 4.3 4.6 4.9 4. as may be mutually agreed upon from time to time.7 4.4 Prop Aircraft Turbo-Prop Aircraft Jet Aircraft 3.12 4.19 4.3 3.13 4.10 4.11 4.22 And such other similar or related equipment.

as may be mutually agreed upon from time to time.3 5.1 5.10 5.5.8 5. 6.6 5.7 6.1 6.9 6.8 6.12 6. 5.7 5.5 5.4 5. 6.3 6.13 CONSTRUCTION EQUIPMENT Bulldozers (Track type or wheel) Loaders (Track type of Wheel) Compactors Motor Graders Tractor-Scrapers Off-Highway Trucks Excavators (Track Type or Wheel) Crushing Plant Concrete Batching Plant Asphalt Mixing Plant Pipelayers Asphalt Laying Machines Hydraulic Breakers .2 6.6 6.5 6.12 And such other similar or related equipment.10 6.2 5.9 5.11 AGRICULTURAL EQUIPMENT Threshers Palay Drilers Rice Mills Corn Mills Feed Mills 4-Wheel Tractors with farm implements 2-Wheel Tractors with farm implements Track type agricultural tractors with farm implement Hard Tractors with prime mover and farm implements Irrigation Pumps/Aerators Diesel Engines 5.11 6.4 6.

2 7.9 8.1 10.5 8. 7.2 10. 9. 10 10.4 7.6.1 8.11 And such other similar or related equipment.7 8. 8.4 8.14 And such other similar or related equipment.3 MAINFRAME COMPUTERS MATERIALS HANDING EQUIPMENT Forklifts Container Vans Conveyor Systems .6 TELECOMMUNICATIONS EQUIPMENT PABX Systems Telex Machines VFT Equipment Teleprinters Broadcasting Equipment Transmitting Equipment HaTDAE 7.10 OFFICE MACHINES Adding Machines Copiers Calculators Typewriters Mini-Computers Micro-Computers Stencil Machines Mimeographing Machines Posting Machines Cash Registers 8.6 8.7 And such other similar or related equipment.3 8.3 7.2 8.1 7.5 7. as may be mutually agreed upon from time to time. as may be mutually agreed upon from time to time. as may be mutually agreed upon from time to time. 7.8 8. 8.

3 11. as may be mutually agreed upon from time to time.6 10. Explanation follows.7 11. PART A: ANNUITY METHOD Lease income under the annuity method is derived by computing the lease rate on the diminishing outstanding principal of the net lease facility. 1.2 11.11 And such other similar or related equipment.4 10. Determination of Lease Rate . the latter being subjected to the gross receipts tax under Sections 260 and 261 of NIRC.4 11. as may be mutually agreed upon from time to time.10 Audio-Visual Equipment 11.7 Box Cars AEaSTC Cranes (mounted or overhead) Loaders with tines Cement Mixers 10.6 11. 1739.5 10.D. 11 11. aTcIAS ANNEX "B" GUIDELINES IN THE DETERMINATION OF THE PRINCIPAL AND LEASE INCOME COMPONENT OF FINANCIAL LEASE RENTAL Lease rentals received by financial lessor shall be broken down into a principal and lease income component.8 11.10.8 And such other similar or related equipment. as amended by Section 15 of P. Recognition of lease income shall be based either on the annuity methods or the sum-of-the years'-digits (SYD) method. SEC.5 11.1 11.9 AUXILIARY EQUIPMENT Air-conditioning Systems Generators and Accessories Elevators Escalators Water Tanks Water Heating Systems Air Compressors Cooling Tanks Anti-Pollution Equipment 11.

periodic payment. namely: the lease amount. the cash flows accruing for a period. 2.) SEC. guarantee deposit. DTIcSH (Please refer to Exhibit I for computational examples in the determination of the lease rate factor. lease rental. The lease rate is defined as the internal rate of return of a specific lease transaction such that: Where Ct = cash flow or period t. quarterly. semi-annually or yearly. Determination of SYD The SYD is computed by .The lease rate is a function of the basic parameters that normally comprise a lease transactions. Explanation follows: SEC. å = the summation of the series of cash flow over a period of time n = the last period in which a cash flow is expected For purposes of computing the lease rate factor.) PART B: SUM-OF-THE-YEARS'-DIGITS (SYD) METHOD Lease income under the SYD method is derived by computing the SYD factor (number of remaining periodic payments divided by the sum-of-the-years'-digits) on the total lease income. whether it be a net cash inflow of outflow r t = = the lease rate for a period t the periodic time involved in the lease transaction which may be monthly. whether paid in advance is immaterial and shall be treated as any other in arrears payments. the term of the lease and the residual value. Determination of Lease Income Lease income component of lease rentals shall be determined by the following formula: Outstanding principal balance of lease facility X Lease Lease income rate = for a specific factor period t (Please refer to Exhibit 2A for computational examples in the determination of the lease income component. 1.

Thus. of remaining periodic payments (NRP) —————————————————— SYD period X Lease = specific for a Income (Please refer to Exhibit 28 for computational examples in the determination of the lease income component.) HcaDIA SEC. for a transaction involving twelve (12) periodic payments.) Exhibit 1 Computational Examples in the Determination of the Lease Factor . Determination of Lease Income Lease income component of lease rentals shall be determined by the following formula: Lease Total income No. 2. b) or.a) SYD using the following algebraic equation = ——— 2 N (N+1) where N represents the number of periodic payments. simply adding all the digits representing the periodic payments. 3. 78 Determination of the Total Lease Income The total lease income is derived by deducting the net lease facility (lease facility minus residual value) from the total lease receivables (lease rentals. SYD may be computed as follows: 1) SYD ——— 2 = 2) SYD 78 = 1+2+3+4+5+6+ = 12 (12+1) 7+8+9+10+11+12 = SEC.

415.000.581.415.233.415.415.415.08 80.76642 .415.415.78941 .415.88 93.694.415.415.88 payable quarterly in arrears Lease Rentals Based on the above parameters.88 93.00000 93.88 93.000 P100.88 93.743.415.72242 (1.658.415.88 93.000.000 93. using the formula Where r = lease rate are as follows: Present Value Discount Period Net (in qtr) 0 1 2 3 4 5 6 7 8 9 10 11 12 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 1.415.415.81 85.88 93.000.88 100.000 . the resulting cash flows for the lessor and correspondingly lease rate factor.88 93.415.415.415.70138 . Lease Facility Guarantee Deposit : Residual Value Period : : : 0 P1.88 ————— RentalValue Inflow Rate 1Value 2 (1.88 93.488.053.83748 .88849 .000.509.88 93.52 73.81309 .Example 1.97087 .93 75.88 93.88 93.999.415.68 88.415.88 93.88 93.03 193.415.88 .88 93.415.61 82.50 135.415.415.82 67.000) 90.74409 .91514 .80 69.94260 .000) 1.485.415.88 93.86261 .47 78.88 93.955.88 93.595.88 93.88 93.88 93.88 93.415.000 3 years in 12 quarterly installments : P93.43 71.

97087 . Normally. finding the lease rate factor is a tedious process of trial and error.Total cumulative present value 0 1. the lease rate factor in determining lease income is also .000) 90.782.415. The above example has shown that the lease rate factor for this specific lease transaction with the given parameters above is 3% per quarter or 12% per annum. This however could be determined with greater ease with the use of a financial calculator with the capability of imputing the internal rate of return.000 3 years in 12 quarterly installments P90. example 2 would have the same cash flows as example 1 and thus.415. TDcCIS Example 2. is immaterial. Figures not exact due to rounding off.226.88 payable Lease Rental: quarterly in arrears Given the parameters of this lease transaction. Consequently. the cash flows and the resultant lease rate factor.000 Guaranty Deposit Residual Value Period : P100.000 P100. timing differences of whether a periodic lease rental payment is payable in advance or in arrears. which would necessitate at times. Example 3 Lease Facility : : : P1.000 1 90.03. Same parameters as Example 1 except that lease rental payments are in advance.00000 . the process of interpolation.000) 85.415. For purposes of determining the lease rate factor to be used for computing the lease income component of a lease rental.88 90.88 RentalValue Inflow Rate 1Value 3 (900.415.000. Discount factor at a certain rate need not be computed since this could be acquired from present value tables.06 85. are as follows: Present Value Discount Period Net (in qtr) 0 1 2 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 900.88 90.415.01 .94260 (900.88 1. 2.

72242 82.86261 .55 65.415.296.743. since the guarantee deposit.277. The resulting cash flows for this transaction are the same as in Example 3 due to reasons explained in example 2.88 ————— 90.318. lease rate factor is also 3% per quarter.83748 .88 90.415.375.415.88 90.81309 .415.88 90.25 71.89 90.70138 Total cumulative present value 0 Example 4.000.64 75.88 90.88 90.369.415.88 90.88 90.19 80.74409 .000.415. cashflow wise.516. TIHCcA Example 5.993.76642 . Lease Facility Guaranty Deposit Residual Value Period : : : : P1.415.000 3 years in 12 quarterly installments P83. .415.67 payable Lease Rental: quarterly in arrears The lease rate factor for this transaction is 3% per quarter or 12% per annum as shown by the following table: 1 Lease facility minus guarantee deposit is the net cash outflow of the lessor.000 P100.91514 .415.88 90.3 4 5 6 7 8 9 10 11 12 90.88 90.88 90.415.88 . is 0.88 90.415.415.88 02 .88 90.415.415.88 90.415.20 69. which in this example.88 90.61 77. is also P100.88 90. which is in the amount of P100.415.88 90.415.88849 .721.415.000.88 93. Thus.54 67.415.415. 2 The residual value for this transaction.24 63. Same parameters as Example 3 except that lease rental payments are in advance.000 P200. is given back at the end of the lease term and is netted out with the residual value.415.49 73.333.78941 .

000.000 1 83.369. Same parameters as Example 5 except that lease rental payments are in advance.000) 83. Present Value Discount Period Net (in qtr) 0 1 2 3 4 5 6 7 8 9 10 11 12 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 900.92 128.584.67 83.83748 .54 60.812.67 83.82 183.369.67 100.034.67 83.67 83. 2 Guarantee deposit in the amount of P100.369.67 83.67 83.369.369.00000 .70138 Total cumulative present value 0 Example 6. STaCIA Lease rate factor is also 3% per quarter or 12% per annum as Example 5. Thus.369.12 71.3 Figures not exact due to rounding off.88849 .073.67 83.67 83.67 83.67 83.94260 . .92 74.369. 1 Net cash outflow is lease facility minus guarantee deposit.67 83.67 83.67 83.18 62. residual value is only P100.369.78941 .369.67 83.369.787.97087 .369.000 is netted out at the end of the lease term from the P200.000 residual value.369.369.369.896.86261 .915.820.941.369.294.67 .67 83.67 83. cashflow-wise.81309 .369.369.369.369.000) 80.67 ————— RentalValue Inflow Rate 1Value 3 (900.91514 .369.67 83.369.000 2 1.67 83.369.67 83.72242 (900.25 76.76642 .11 78.51 69.611.369.67 83.74409 .85 63.369.43 67.67 83.04 65.227.

88 93. Thus.899.137.415.415.097.24 663.422.415. the lease rate quarterly factor is .000.34 80.54 1.415.000.375.34 93.3 Figures not exact due to rounding off.88 93.00 15.316.265.75 19.61 69.91 734.76 65.88 93.85 67.88 .415.12 63.415.35 13.03.88 93.000.03) 93.296.88 93.751.800.415.987.36 803.119.415.88 93.52 26.00 936. using the basic formula: Ending Outstanding Principal Balance of the Lease Facility of the Previous Period (t = n) we arrive at the following table: (A) (B) (C) (D) (E) Lease Rate Lease Income for the X Factor = Subsequent period (t = n+1) Ending Payment of (E-D-C) Principal Lease Income Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 Value Repayment (A) x . Lease Facility Guarantee Deposit : Period : : 0 P1.000 3 years in 12 quarterly installments P93.993.078.333.49 17.584.082.000.88 93. Exhibit 2A Computational Examples in the Determination of the Lease Income Component of Lease Rental under the Annuity Method Example 1.415.39 514.97 24.691.88 436.88 30.00 28.64 22.040.694.88 93.721.13 589.09 73.084.318.415.277. example 1.68 77.48 71.53 355.516.88 payable Lease Rental: quarterly in arrears Based on Exhibit 1.88 871.21 75.415.415.

88 436.225.265. lease rate quarterly factor is also .000.88 93. Lease Facility Guaranty Deposit Residual Value Period : : : : P1.88 93.415.88 93.00 87. Example 2.36 10.743.49 17.34 187. caTESD Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value Repayment Income 30.415.672.179.00 28.000 P100.52 26. Same parameters as Example 1 except that lease rental payments are in advance.000.415.415.375.415.663.88 Example 3.00 82.36 803.993.24 5.084.54 8.333.190.225.000.415.415.88 93.000 P100.88 93.88 93.34 80.64 100.137.52 1 936.48 71.782.721.743.54 8.24 663.782.88 93.88 93.082.516.85 67.88 Figures not exact due to rounding off.68 77.39 514.97 24.00 87.88 payable Lease Rental: quarterly in arrears 1 Figures not exact due to rounding off. .34 273.415.422.00 93.296.91 734.35 13.899.21 75.88 93.088.078.691.987.88 93.190.415.12 63.53 355.76 65.75 19.34 187.415. thus.88 871.000.36 85.663.64 100.36 100.09 73.52 1 93.64 22.672.54 10.415.415.316.88 93.040.415.24 5.782.88 93.00 82.415.088.318.415.13 589.000 3 years in 12 quarterly installments P90.751.415.415.88 93.03.000.694.10 11 12 1 273.61 69.00 15.800.097.782.277.36 85.584.

672.03. Thus.415.88 771.88 .36 Value Repayment Income 27.318.316.88 90.52 23.Based on Exhibit A.48 71.61 69.000.415.88 771.36 01 85.415. Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 900.333.88 90.008.800.316.415.88 Example 4.64 87.24 2.078.137.415.415.91 634.987.49 14.75 16.21 75.318.88 90.265. ETIDaH Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 Value Repayment Income 27.691.375.296. lease rate quarterly factor is .91 634.137.899.993.190.296.225.000. Same parameters as Example 3 except that lease rental payments are in advance.422.88 90.64 19.88 90.415.88 90.03.48 71.09 73.00 12.691.24 563.97 21.097.75 16.743.082.415.415.13 489.694.782.54 7.516.415.64 19.415.34 80.88 90.584.88 90.39 414.899.119.61 69.88 90.88 90.68 77.415.633.415.516.415.415.88 90.52 2 90.97 21.88 90.000.21 75.12 63.85 67.00 836.85 67.415.88 90.078. example 3.53 255.987.09 73.277.88 336.36 703.34 173.76 65.88 90.040.00 25.76 65.54 5.415.49 14.694.097.12 63.88 90.39 414.34 87.00 25.782.084.00 836.415.35 10.52 23.040.00 82.36 703.277.13 489.88 90. thus.375. lease rate quarterly factor is also .721.415.821.119.88 90.265.584.800.751.415.88 90.415.24 563.

91 23.725.00 25.24 90.36 85.58 Value Repayment Income 27.00 82.082.33 398.042.88 90.567.96 69.369.802.000.000.33 61.061.422.67 83.569.11 18.308.084.773.99 59.88 87.672.925.333.54 7.09 83.67 83. is given back at the end of the lease term and is netted out with the residual value.67 83.369.03.000 P200.327.021. lease rate quarterly factor is .87 65. residual value is 0 since guarantee deposit.743.633.35 10.415.54 5.069.52 2 90.000 3 years in 12 quarterly installments P83.67 83.88 90.369.34 80. Lease Facility Guaranty Deposit Residual Value Period : : : P100.67 83.88 1 Cashflow-wise.369.766.54 67.53 255.415.782.190.67 .225.58 664.34 87.369.88 90. : P1.36 01 2.7 8 9 10 11 12 336.76 725.369.000. 2 Figures not exact due to rounding off.66 600. Thus.000.64 12.000.369.09 21.68 77.347. in the amount of P100.67 payable Lease Rental: quarterly in arrears Based on Exhibit A. Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 900.060.630.444.56 535.000 Example 5.90 468.369. is also P100.57 58.369.741.67 785.308. example 3.77 63.751.415.415.782.00 843.67 83.170.01 19.77 16.34 173.67 83.369.33 56. which in this example.34 14.993.008.596.377.415.

820.76 725.67 83.069.000.33 398.369. is netted out at the end of lease term from the P200.58 327.41 253. 2 Figures not exact due to rounding off.725. 2 Figures not exact due to rounding off.87 2 83.66 600.613.55 71.55 71.000.000 residual value.33 61.334.000.67 83.340.67 83.925.021. .820.80 75.369.80 100.369. since guarantee deposit which is also in the amount of P100.67 1 Cashflow-wise. Example 6.87 2 843.58 664.03.9 10 11 12 327.347.369.444.67 785.67 83.756. residual value is P100.369.92 73.26 9.56 535.12 100.04 7.00 1 11.340.549.67 83.741.11 18.87 65.369.784.327.308. Same parameters as Example 5.802.34 14.773.000. AcHCED Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value Repayment Income 27.67 83.01 19.54 67.67 83.91 23.55 5.000.170.67 1 Cashflow-wise. since guarantee deposit which is also in the amount of P100.962.369.33 56.377.567. is netted out at the end of lease term from the P200.407.92 73.00 25.028.369.407.756.369.80 83.549.630.042.12 100.04 7.77 63. except that lease rental payments are in advance.67 83.028.77 16.308.67 5.369.000. residual value is P100.334.67 83.060.369.613.00 78.00 1 83.369.63 178.569.000.962.09 11.596.369.80 75.09 21. thus.369.55 78.67 83.67 83.67 83.96 69. lease rate quarterly factor is also .369.369.061.90 468.41 253.63 178.766.369.26 9.028.784.028.000 residual value.99 59.57 58.000.67 83.

415.000-P100.999.88 x 12) .56 11.27 220.498.88 payable Lease Rental: quarterly in arrears Based on the above parameters.55 11/78 220.990.000 P1.56 16.990. Lease Facility Guaranty Deposit Residual Value Period : : : : 0 P100.91 220.990.990. the total lease income is P220.990.85 220.990.000 3 years in 12 quarterly installments P93. using the formula: No.000.56 [(93.56 22.56 8.665.415.990.832.165.56 P33.56 25.56 14.64 .70 220.000)]. Thus.332.166.990. while the SYD is equal to 78.56 31.Exhibit 2B Computational Examples in the Determination of the Lease Income Component of Lease Rentals under the SYD Method Example 1.998.332.499.56 19.06 220.990.990. of remaining periodic Total Lease Lease income for a payments (NRP) ———————— SYD the lease income for periods 1 to 12 are computed as follows: Total Lease Lease Income Period NRP/STD 1 2 3 4 5 6 7 8 9 10 x Income = for the period X Income = specific period 12/78 P220.34 10/78 220.(P1.12 9/78 8/78 7/78 6/78 5/78 4/78 3/78 220.990.56 28.000.49 220.

76 67.88 600.990.91 22.582.03 84. thus.42 220.166.83 93.40 93.250. we arrive at the following table: (A) (B) (C) (D) (E) Payment of Principal Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Repayment (C-D-E) Value RentalIncome 1.415.415.666.22 93.498.248.415.999.67 100.415.37 93.581.582.46 90.33 62.88 745.00 940.332.248.415.332.88 363.499.083.21 Example 2.666.000.832.749.415. DTIACH (A) (B) (C) (D) (E) Payment of Outstanding Residual Lease Lease Principal .332.85 8.88 2.415.916.00 93.415.88 190.000.332.24 87.582.88 445.665.13 93.833.40 93.916.70 19.833.12 25.13 93.249.000.583.67 93.34 28.61 79.417.55 31.21 —————— P220.06 11.416.88 813.88 33.990.82 82.56 =========== Using the figures above.22 93.54 65. Same parameters as Example 1 except that lease rental payments are in advance.331.750.49 16.42 59.56 5.97 70.331.67 93.88 878.39 76.581.165.88 674.415.415.11 12 2/78 1/78 220.415.64 5.56 2. the computation for the lease income is also the same.18 73.27 14.88 524.415.083.37 93.88 278.997.998.990.

000 P100.415.88 674.56 26.67 93.61 79.21 - Example 3.332.70 19.88 payable quarterly 12/78 P184.332.88 190.88 524.67 93.916.833.03 84.88 745.000.(P1.12 25.166.41 10/78 184.09 11/78 184.83 93.39 76.00 : 33.000 3 years payable in 12 quarterly installments Lease Rental: in arrears Based on the given parameters.415.56 [(P90.248.88 878.88 278.88 100.88 813.42 2.832.22 93.22 93.Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value RentalIncome Repayment 59.990.417.249. and the SYD is also 78.415.67 940.91 22.46 90.165.415.666.64 5.416.749.997.083.88 x 12) .415.582.331.716.56 21. Total Lease Lease Income Period NRP/STD 1 2 3 4 x Income = for the period P93. the total lease income is P184.499.24 87.581.916.415.56 23.55 31.415.750.990.415.415.665.083.88 100.088.56 P28.000)].40 93.248.27 14.18 73.000 P100.76 67.250.000.332.990. Lease Facility Guaranty Deposit Residual Value Period : : : P1.999.415.415.49 16.06 11.82 82.583.415.88 445.00 93.998.88 600.85 8.498.13 93.345.06 .990.331.332.37 93.40 93. Thus.582.37 93.990.54 65.000-P100.74 9/78 184.581.000.415.415.97 70.582.460.88 363.34 28.000.13 93.33 62.

115.56 4.49 73.017.415.973.415.230.044.716.743.78 90.415.044.13 90.185.88 707.327.230.04 11.371.716.60 90.814.5 6 7 8 9 10 11 12 8/78 7/78 6/78 5/78 4/78 3/78 2/78 1/78 184.04 184.56 =========== (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment Value RentalIncome 900.88 28.88 492.946.67 —————— P184.88 566.415.442.990.53 88.78 90.300.02 4.345.415.990.56 9.415.044.39 184.990.088.84 78.67 61.14 69.56 16.29 90.672.743.86 85.35 184.51 80.70 184.74 21.74 90.88 90.88 637.88 257.56 2.79 64.56 11.88 416.858.415.88 773.699.88 88.88 337.601.486.990.47 66.21 .00 838.70 7.21 01 90.00.56 7.990.115.415.460.990.716.16 76.415.72 184.09 26.601.486.858.74 90.973.37 9.39 16.21 90.415.56 18.955.690.929.504.35 2.18 83.557.60 90.990.017.371.72 14.990.82 71.02 184.37 184.41 23.56 14.070.06 18.946.504.415.990.415.88 173.29 90.

504.41 23.858.185.814.415. thus. is given back at the end of the lease term and is netted out with the residual value.02 4.82 71.74 90.000. the computation for the lease income is also the same.415.13 90.946.000 P200.37 9.699.78 90.88 773.09 61.88 707.35 64.327.716.16 76.53 90.044.79 26.88 01 - 2.088.929.415.557.369.044.60 90.300.672.415.345.72 14.000.601.06 18.743.67 : - 88. SDHAEC (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment Value RentalIncome 838.88 88.017.415.88 P28.74 90.60 90.88 637.415.000.78 90.442.973. Lease Facility Guaranty Deposit Residual Value Period : : : P1.115.000 3 years.946.67 payable Lease Rental: quarterly in arrears .39 16.88 173.415.49 73.21 Example 5.017.86 85.955.74 21.88 566.044.415.04 11.070.84 78.415.000 P100.29 90.415.14 69.415.415.716.716.460.1 Cashflow-wise. is also P100.47 66. residual value is 0 since guaranty deposit.486. Same parameters as Example 3 except that lease rental payments are in advance.88 416.18 83.504.371. 12 quarterly installments P83.51 80.230.88 337.21 90.88 257.29 90. in the amount of P100.21 90.88 492. which in this example. Example 4.70 7.690.

242. (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 Lease Lease Principal Repayment Value RentalIncome 900.369. is given back at the end of the lease term and is netted out with the residual value.436.77 200.000.04 2.67 734.62 25.04 [(P83.636.04 28.00.436. which in this example.24 20.436.39 200.04 20.54 200.533.67 30.31 11/78 200.04 12.04 17.466.24 200.000)].04 23.363.436.369.67 x 12) (P1.848.04 10.557.36 55.127.85 200.000.266.557.569.369.369.369. is also P100.709.93 9/78 8/78 7/78 6/78 5/78 4/78 3/78 2/78 1/78 200.436.418.04 5.103.127.04 7.74 50. residual value is 0 since guaranty deposit.64 83.436.672.696.62 10/78 200.85 83.436.369.05 57.31 28.436.000. while the SYD is also 78.436.000.59 83.46 200. in the amount of P100.04 15.04 P30.67 611.08 200.67 674.54 52.266.278.00 847.42 83.16 200.29 83.67 792.836.690.987.436.13 .436.836.448.93 23.04 25.43 62.69 1 Cashflow-wise.00-P200.812.The total lease income in this example is P200.436. Total Lease Lease Income Period NRP/STD 1 2 3 4 5 6 7 8 9 10 11 12 x Income = for the period 12/78 P200.436.696.139.

951.090.96 83.43 62.69 - 1 Cashflow-wise.381.90 75.85 15.690.67 100.98 Example 6.90 75.00 83.67 334.59 83.67 180.47 83.47 83.67 674.030.690.67 65.08 5.000 since guaranty deposit.67 100.67 259.51 70.302.987.660.77 7.090.85 83.696.16 12.369.67 407.51 70.369.987.62 25.418.6 7 8 9 10 11 12 546.96 83.67 259.31 28.26 83.98 83.521.67 478.836.302.569. thus.77 7.000.812.709.369. except that lease rental payments are in advance.16 12.75 83.369.000.36 55.85 83.39 2.660.69 80.781.363.82 67.369.00 1 17.278.28 70.230.139.369.521.59 78.799.369. .369.59 78.557.82 67.000.13 65.67 611. Same parameters as Example 5.39 83.67 407.42 83.799.67 734.75 83.67 792.28 2. the computation for the lease income is also the same.00 - 30.46 10.030.799.21 73.466.636. is given back at the end of the lease term from the P200.690.799.369.000.254.448.139.67 478.21 73.98 Value RentalIncome 847.67 180.000 residual value.569.369.127.266.26 83.369.67 546.230.254.54 17.85 83.103. residual value is 100.781.08 5.74 50.672.369.369.24 20.369.67 100.29 83.93 23.418.64 83. in the amount of P100.242.85 15.98 83.369.709.369.369.951. CDESIA (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment 52.381.369.533.05 57.369.46 10.67 334.848.278.848.

. I n c.C o p y r i g h t 2 0 0 8 C D T e c h n o l o g i e s A s i a.