Withholding tax — BIR Form 2307 and 1601-EQ
How expanded withholding tax works in the Philippines: rate matrix 1-15%, the BIR Form 2307 certificate the buyer must issue and the quarterly Form 1601-EQ remittance.
The Philippines operates an Expanded Withholding Tax (EWT) system under Section 57(B) of the NIRC and Revenue Regulations No. 2-98 (as amended), under which the buyer of certain services or goods withholds a percentage of the gross payment as a creditable advance against the seller's income tax. Rates range from 1% (goods supplied by top withholding agents) to 15% (professional fees of certain self-employed individuals exceeding the threshold). The buyer issues BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to the seller, who attaches it to the quarterly income tax return to claim the credit. The buyer remits the withheld amounts quarterly via BIR Form 1601-EQ (alphalist for expanded withholding) within the deadlines set by RR 11-2018 and the Ease of Paying Taxes Act (EOPT, RA 11976).
- Section 57(B) NIRC: legal basis for creditable expanded withholding tax.
- Rates: 1% on goods, 2% on services, 5%/10%/15% on professional fees.
- BIR Form 2307: certificate the withholding agent must issue to the payee.
- BIR Form 1601-EQ: quarterly remittance with alphalist of payees.
How it works
Identify whether you are a withholding agent. All corporations, partnerships and Top Withholding Agents (TWAs) designated by the BIR under RR 11-2018 and RR 7-2019 must withhold EWT on covered payments. Individuals are generally not withholding agents except when designated. The list of TWAs is published periodically by the BIR (RMC and RR updates); inclusion typically follows gross sales/receipts above PHP 12M or top 25,000 taxpayer status.
Apply the correct rate from the RR 2-98 matrix at the moment of payment or accrual, whichever comes first. Common rates: 1% on goods (TWA buyers from non-TWA suppliers), 2% on services (TWA from non-TWA), 5% rental of real property, 5% professional fees if annual gross < PHP 3M, 10% if > PHP 3M for self-employed individuals (15% for top 20,000 individual taxpayers), 2% contractors and 1% goods for non-TWA. Wrong rate triggers deficiency assessment under Section 251.
Compute the net payable: gross price minus EWT (and minus 12% VAT if applicable, which the buyer separately claims as input VAT). Example: a PHP 100,000 service from a non-TWA professional to a TWA company at 5% EWT and 12% VAT — gross with VAT PHP 112,000, less EWT PHP 5,000 (computed on the VAT-exclusive base PHP 100,000), net cheque PHP 107,000. The PHP 5,000 EWT is the buyer's liability to the BIR, not an additional expense.
Issue BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to the payee within 20 days after the close of the quarter or upon payee request. The form lists the payor (TIN, name, address), payee (TIN, name, address), nature of income payment, gross amount, tax rate and tax withheld. Without Form 2307 the payee cannot claim the credit on their quarterly or annual income tax return.
Remit the withheld amounts to the BIR via BIR Form 1601-EQ (Quarterly Remittance Return of Creditable Income Taxes Withheld - Expanded). Under the EOPT (RA 11976) the deadline is the last day of the month following the close of the quarter — e.g. Q1 due 30 April. Pair with the Quarterly Alphalist of Payees (QAP) submitted electronically. Late remittance attracts 25% surcharge plus 12% per annum interest plus PHP 1,000-25,000 compromise penalty under RMO 7-2015.
Legal framework
- National Internal Revenue Code of 1997 (RA 8424) — Section 57 and 58.
- Revenue Regulations No. 2-98 (as amended) — withholding tax matrix.
- Revenue Regulations No. 11-2018 and RR 7-2019 — Top Withholding Agents.
- Ease of Paying Taxes Act (RA 11976, 2024) — quarterly remittance schedule.
Frequently asked questions
Who is a Top Withholding Agent and why does it matter?
A Top Withholding Agent (TWA) is a taxpayer designated by the BIR under RR 11-2018 (further refined by RR 7-2019, RR 31-2020 and successor circulars). Designation is based on gross sales/receipts, net taxable income or being among the top 25,000 individual or 25,000 non-individual taxpayers nationwide. TWAs withhold 1% on goods and 2% on services from their supplier payments — non-TWAs withhold only on specific payment types (rentals, professional fees, etc.).
When must I issue BIR Form 2307?
Within 20 calendar days after the close of the taxable quarter in which the income payment was made (RR 2-98 Section 2.58(B)(1)), or upon the request of the payee at any time. Form 2307 must include the BIR control number, payor and payee TINs, the income payment classification (ATC code), the gross amount and the tax withheld. The payee attaches it to their quarterly income tax return (BIR Form 1701Q / 1702Q) as proof of the creditable withholding.
What if the payee does not provide a TIN?
Withhold at the higher rate. Section 251 NIRC and RR 14-2008 require the withholding agent to withhold at the highest applicable rate (often 15%) and remit on the unidentified payee. The transaction is also flagged in the alphalist as 'TIN not available' — repeated occurrences trigger BIR audit. From the payer's perspective the expense is still deductible if substantiated by other documents, but the payee loses the ability to claim the credit until the TIN is reconciled.
How is Form 1601-EQ different from Form 1601-FQ?
Form 1601-EQ is the quarterly remittance return for creditable Expanded withholding (EWT) — Section 57(B) NIRC. Form 1601-FQ is the quarterly remittance for Final withholding taxes — Section 57(A), 24(B), 25(A) — on items like interest, royalties and dividends taxed at fixed rates with no further income tax to the payee. EWT is creditable against the payee's income tax; FWT is final. Different alphalists (QAP for EWT, none for FWT). Both due last day of month after quarter end under EOPT.
Can withholding tax certificates be issued electronically?
Yes. RMC 18-2023 and subsequent circulars allow BIR Form 2307 to be generated and transmitted electronically — including PDF with electronic signature — provided the format matches the BIR-prescribed template and is accessible to BIR auditors. The Ease of Paying Taxes Act (RA 11976) further promotes electronic filing and substantiation. The payee can use the electronic 2307 to support the income tax return without printing if the system meets BIR specifications.