Withholding tax — BIR Form 2307 and 1601-EQ
How expanded withholding tax works in the Philippines: what the payer withholds, the Form 2307 certificate and the quarterly Form 1601-EQ.
Under the expanded withholding tax (EWT) system, a payer designated as withholding agent deducts a percentage of certain payments and remits it to the Bureau of Internal Revenue (BIR). The legal basis is Section 57 of the National Internal Revenue Code (NIRC), and the rate matrix is in Revenue Regulations No. 2-98 as amended. The payer gives the payee BIR Form 2307 (Certificate of Creditable Tax Withheld at Source), which the payee uses as a credit against income tax. The payer files the quarterly remittance return, BIR Form 1601-EQ. Rates depend on the type of payment and on the payee, so check the current matrix.
- Legal basis: Section 57 NIRC and RR 2-98 as amended.
- BIR Form 2307: certificate the payer gives the payee.
- Professional fees of individuals: 5% up to PHP 3,000,000 gross income, 10% above, per BIR guidance.
- BIR Form 1601-EQ: quarterly return, due the last day of the month after the quarter.
How it works
Confirm whether you must withhold. Payers designated as withholding agents, including many corporations and top withholding agents named by the BIR, withhold on covered payments. Check the BIR rules for your case.
Find the rate for the payment type in the RR 2-98 matrix, as amended. Professional fees, rentals, contractor payments and purchases of goods and services each have their own rates and ATC codes.
Compute the withholding on the base set by the rules. Example: a PHP 100,000 professional fee at 5%, on the VAT-exclusive amount, gives PHP 5,000 withheld. With 12% VAT the invoice total is PHP 112,000, the payer pays PHP 107,000 to the payee and remits PHP 5,000 to the BIR.
Give the payee BIR Form 2307 within 20 days after the end of the quarter, or on request. It shows payer and payee TINs, the payment, the rate and the tax withheld.
File and pay Form 1601-EQ by the last day of the month following the quarter, for example 30 April for the first quarter, with the Quarterly Alphalist of Payees (QAP).
Legal framework
- National Internal Revenue Code of 1997 (RA 8424), Section 57.
- Revenue Regulations No. 2-98, as amended (withholding tax matrix).
- Revenue Regulations No. 11-2018 (top withholding agents) and later BIR issuances.
- Ease of Paying Taxes Act (RA 11976).
Frequently asked questions
Who is a top withholding agent?
A taxpayer the BIR designates as top withholding agent under its regulations, such as RR 11-2018 and later issuances. Designated agents withhold on more payment types than other payers. The BIR publishes the criteria and lists, so check the latest issuance.
When must I issue BIR Form 2307?
Within 20 days after the end of the quarter in which the payment was made, and on the payee's request. The payee attaches the form to the income tax return as proof of the credit.
What if the payee has no TIN?
Ask the payee for a TIN and record the payment correctly in your alphalist. Rules on payees without a TIN are in RR 2-98 and later BIR issuances, so confirm the treatment with the BIR or your accountant before withholding.
How is Form 1601-EQ different from Form 1601-FQ?
Form 1601-EQ covers expanded (creditable) withholding tax. Form 1601-FQ covers final withholding tax on items such as certain interest, royalties and dividends. Expanded withholding is credited against the payee's income tax, while final withholding settles the tax on that income.
Does 4invoices generate BIR Form 2307 or file withholding returns?
No. 4invoices does not produce Form 2307, does not file Form 1601-EQ and does not connect to the BIR. It creates an invoice with a VAT rate per line, in any currency with an exchange rate, and gives you a PDF. The 6-month trial needs no card.