Withholding tax in the Philippines: a complete guide

Expanded withholding tax (EWT) — formally creditable withholding tax — is a system where the payor of certain income deducts a portion of the payment and remits it to the Bureau of Internal Revenue on the payee's behalf. It is not a separate, final tax: it is an advance instalment on the payee's own income tax, governed by Revenue Regulations No. 2-98 §2.58 as amended and expanded by RR 11-2018.

The key word is creditable. When the payee files its quarterly or annual income tax return, the EWT already withheld is credited against the income tax due, peso for peso. If more was withheld than the final tax owed, the difference becomes a refundable or carried-over credit. This is what separates EWT from final withholding tax — where the tax withheld is the full and final liability and the income is no longer reported on the payee's return.

The mechanism exists so the BIR collects income tax steadily through the year, at source, instead of waiting for a single annual payment. The payor becomes a withholding agent: legally responsible for deducting the correct amount, remitting it on time, and issuing proof of the deduction to the payee.

The rate depends on the nature of the payment and whether the payee is an individual or a corporation. Individual payees use WI ATC codes; corporate payees use WC codes. Getting the rate and the code right matters: an under-withholding exposes the payor to a deficiency assessment, while the wrong ATC misroutes the credit and can cause the payee's Form 2307 to fail to match.

Professional and talent fees carry the widest spread. For individual professionals the rate is 5% or 10% depending on the gross income threshold and the sworn declaration on file; for corporate professionals it is 10% or 15%. Rentals of real or personal property are withheld at 5%. Contractors and subcontractors are at 2%. Government money payments include a 5% creditable VAT withholding on top of any EWT.

RR 11-2018 introduced the Top Withholding Agent (TWA) regime: taxpayers the BIR designates must withhold on their regular purchases — 1% on purchases of goods and 2% on purchases of services — regardless of who the supplier is. The BIR publishes the list of TWAs, and being on it is a compliance obligation, not optional.

The single most common error here is the ATC code. For PRIVATE top withholding agents under RR 11-2018, goods are coded WI158 (individual supplier) or WC158 (corporate supplier) at 1%, and services are coded WI160 or WC160 at 2%. The codes WI640/WC640 and WI157/WC157 are the LEGACY codes for GOVERNMENT purchases — they are not the private-TWA codes and must never be used for a private company's regular purchases. Filing a private TWA's goods purchase under WI640/WC640 is a classic alphalist mismatch that triggers BIR notices.

Get the code wrong and two things break: your alphalist of payees fails validation, and your supplier's Form 2307 carries the wrong ATC, so the credit they try to claim does not reconcile against what you reported. Both are avoidable by mapping each payment type to its correct ATC once and locking it into your withholding workflow.

Private TWA ATC codes — use these, not the government ones

• Goods, 1% — WI158 (individual supplier) / WC158 (corporate supplier)
• Services, 2% — WI160 (individual supplier) / WC160 (corporate supplier)
• WI640 / WC640 — LEGACY government-purchase goods code; do NOT use for private TWAs
• WI157 / WC157 — LEGACY government-purchase services code; do NOT use for private TWAs

EWT runs on a monthly-remit, quarterly-reconcile rhythm. Each month you remit what you withheld using BIR Form 0619E (the monthly remittance form for creditable income taxes withheld — expanded). At the end of each quarter you file Form 1601-EQ, the quarterly remittance return, accompanied by the QAP (Quarterly Alphalist of Payees), which lists every payee, the income paid, the ATC, and the tax withheld.

Separately, you must issue Form 2307 — the Certificate of Creditable Tax Withheld at Source — to each payee. This is the document the payee uses to claim the credit on its own return, so it has to be accurate and on time. Form 2307 is due to the payee on or before the 20th day of the month following the close of the taxable quarter (or upon request, and upon payment when there is no further withholding).

Treat these three as one chain: 0619E moves the cash to the BIR monthly, 1601-EQ + QAP reconcile and report the quarter, and 2307 hands the payee the receipt it needs to claim the credit. A break anywhere in the chain — a late 0619E, a QAP that does not match the alphalist, or a missing 2307 — surfaces as a deficiency notice or a rejected credit downstream.

Suppose your company engages an individual consultant whose annual gross receipts exceed the lower-rate threshold and who has no sworn declaration for the 5% rate on file, so the 10% individual professional-fee rate applies. The consultant bills ₱100,000 for the engagement.

You withhold 10% — ₱10,000 — and pay the consultant the net ₱90,000. You remit the ₱10,000 to the BIR via Form 0619E for that month, and the ATC on the consultant's record is WI010-family (individual professional fees). At quarter-end you file Form 1601-EQ with the QAP listing this payee, the ₱100,000 income, the ATC, and the ₱10,000 withheld.

You then issue Form 2307 to the consultant showing ₱100,000 income and ₱10,000 creditable tax withheld — due on or before the 20th day of the month following the close of that quarter. When the consultant files their own income tax return, that ₱10,000 is credited against the income tax due. If their final tax on the engagement works out to less than ₱10,000, the excess is a refundable or carried-over credit — which is exactly what makes EWT creditable rather than final.

If instead the supplier were a corporation you are buying goods from as a designated top withholding agent, the rate would be 1% and the ATC would be WC158 — not WI640/WC640 — and the same 0619E → 1601-EQ + QAP → 2307 chain would apply.

If you are on the receiving end — a professional, lessor, contractor, or supplier — the EWT withheld from your invoices is your money, advanced to the BIR in your name. You claim it back as a credit, so the practical task is collecting and reconciling your Form 2307 certificates.

Collect a Form 2307 from every client that withheld, for every quarter. Match each certificate to the corresponding invoice and confirm the income figure, the ATC, and the tax withheld are correct — a 2307 with the wrong ATC or a figure that does not tie to your books is the most common reason a credit is later disallowed. Total the creditable tax across all your 2307s for the period.

On your quarterly and annual income tax returns, claim the aggregated creditable withholding tax against the income tax due and attach or list the supporting 2307s as required by the filing channel. If withholding exceeded your tax due, you carry the excess forward or apply for a refund. Keep every 2307 — it is the documentary proof the BIR will ask for if the credit is examined.

Payee checklist for claiming creditable withholding tax

• Request a Form 2307 from each withholding client, per quarter
• Reconcile each 2307 to the matching invoice — income, ATC, and tax withheld
• Total the creditable tax across all 2307s for the period
• Claim the total against income tax due on the quarterly/annual ITR
• Carry forward or refund any excess; retain all 2307s for audit