BIR Form 2307: Certificate of Creditable Tax Withheld at Source

BIR Form 2307 is the Certificate of Creditable Tax Withheld at Source. When a business pays certain suppliers — a consultant, a landlord, a contractor — the law often requires it to withhold a slice of the payment and remit that to the Bureau of Internal Revenue (BIR) on the payee's behalf. Form 2307 is the receipt for that withheld amount.

The tax it documents is creditable, not final. That single word is the whole point. Because the EWT is only an advance against the payee's eventual income tax, the payee is entitled to subtract it from the income tax it computes at quarter-end and year-end. Form 2307 is the proof the BIR requires before it will let the payee take that credit.

For the payee, a missing 2307 is money lost: without the certificate you generally cannot claim the credit, so you end up effectively paying the same tax twice. For the payor, issuing 2307 correctly — right amount, right ATC code, on time — is a withholding-agent obligation under the regulations, not a courtesy.

Expanded withholding tax works as a pay-as-you-go mechanism. The payor deducts a fixed percentage of the gross payment, hands the net to the supplier, and remits the withheld portion to the BIR. The supplier has received less cash now, but holds a credit it can use later.

Form 2307 is the bridge between those two facts. The payor records the gross amount, the income-payment type (its alphanumeric tax code, or ATC), and the tax withheld, then certifies it on the form. The payee files the form with its income tax return and deducts the certified amount from the tax it owes.

The arithmetic is simple but unforgiving: the credit you can claim is exactly the amount on the certificates you actually hold. If a payor withheld but never issued a 2307, or issued one with the wrong ATC and rate, the payee's claim is exposed on audit.

Every income payment on Form 2307 carries an alphanumeric tax code (ATC) that fixes both the nature of the payment and its rate. The first two letters are not decoration — they encode who the payee is. WI means the payee is an individual; WC means the payee is a corporation or other juridical entity. Choosing the wrong prefix is one of the most common 2307 errors.

Professional fees are the classic trap. Fees paid to an individual professional use WI010 or WI011 — never WC010. The corporate code WC010 applies only when the professional you are paying is itself a corporation or partnership. Rentals follow the same logic: WI100 for an individual lessor, WC100 for a corporate lessor.

The rate then depends on the payment type and, for professionals, on the payee's gross income and a sworn declaration. Under RR 11-2018, professional fees to an individual are withheld at 5% if the individual's gross income for the year will not exceed ₱3,000,000 and a sworn declaration is filed with the payor on or before 15 January (or before the first payment); otherwise the rate is 10%. Corporate professional fees are 10% if the payee's gross income does not exceed ₱720,000 for the year, and 15% if it does.

Suppose your company hires an individual consultant — a sole practitioner — who has filed the sworn declaration confirming her annual gross income will not exceed ₱3,000,000. Her professional fee for the quarter is ₱100,000. Because she is an individual who has filed the declaration, the correct code is WI010 and the rate is 5%.

You withhold ₱5,000 (5% of ₱100,000) and pay her the net ₱95,000. You remit the ₱5,000 to the BIR and issue her a Form 2307 showing gross income ₱100,000, ATC WI010, and tax withheld ₱5,000. When she computes her own income tax for the period, she attaches that 2307 and deducts the ₱5,000 from the tax she owes.

Now change one fact. If she had not filed the sworn declaration — or her gross income for the year will exceed ₱3,000,000 — the rate is 10%, so you would withhold ₱10,000 and certify that figure on the 2307 instead. And if the consultant were a corporation rather than an individual, the code would be WC010, not WI010, with a 10% rate up to ₱720,000 of gross income and 15% above it.

The consultant example, step by step

1. Gross professional fee: ₱100,000
2. Payee is an individual with a sworn declaration on file → ATC WI010, rate 5%
3. Tax withheld: ₱5,000; net paid to consultant: ₱95,000
4. Payor remits ₱5,000 to the BIR and issues Form 2307 (gross ₱100,000, WI010, ₱5,000 withheld)
5. Payee attaches the 2307 to her return and credits ₱5,000 against her income tax due

The general rule under RR 2-98 §2.58 (as amended) is that the withholding agent must issue Form 2307 on or before the 20th day of the month following the close of the taxable quarter in which the income payment was made. So for the quarter ending 31 March, the certificates are due on or before 20 April.

There is an important exception in the payee's favour. Upon the payee's written request, the payor must furnish the certificate simultaneously with the income payment. Suppliers who need the 2307 sooner — to support their own quarterly returns — routinely invoke this and ask for the certificate at the time they are paid.

Because the credit is only as good as the paperwork behind it, both sides should treat the deadline as hard. Payees should chase missing certificates well before their own income tax filing; payors who fail to issue can be assessed as withholding agents.

Holding the certificate is not enough; the payee must report it to the BIR. The mechanism is the Summary Alphalist of Withholding Taxes (SAWT) under RR 2-2006 — an electronic list of every 2307 the payee is claiming, generated through the BIR's data-entry module and submitted alongside the income tax or percentage-tax return.

In practice the payee compiles each 2307 it received during the period, enters the payor's details, the ATC, the gross amount, and the tax withheld into the SAWT, and files it with the relevant return. The total creditable tax in the SAWT is what reduces the income tax payable; the underlying 2307s are retained as supporting proof.

This is where careful record-keeping pays off. A payee that loses certificates, or whose payors used the wrong ATC, will find the SAWT total does not match what it actually withheld — and the gap is a credit it cannot claim. Reconciling 2307s to the SAWT every quarter, rather than scrambling at year-end, is the discipline that protects the credit.

To claim the creditable tax, the payee:

1. Collects every Form 2307 received for the period
2. Enters each certificate into the SAWT (RR 2-2006) via the BIR data-entry module
3. Files the SAWT together with the income tax or percentage-tax return
4. Deducts the total creditable tax from the income tax due
5. Retains the original 2307s as supporting documents for audit