The BIR Form 2307, known as the Certificate of Creditable Tax Withheld at Source, is a certificate that is accomplished and issued to recipients of income subject to expanded withholding tax. It’s one of the most common BIR forms used by businesses of all sizes from multinational corporations to freelancers.
Here are the key points in this article:
Given its importance, this is definitely something you need to familiarize yourself with if you want to avoid issues later.
So let’s break it down.
A good way to understand the form 2307 is to look at it from two different perspectives:
- As the withholding agent or the issuer of the certificate
- As the recipient of the certificate
But first, what in the world is withholding tax?
Withholding tax is a tax on income that is withheld by the payor and is remitted to the government on behalf of the payee.
The most common example of this is in the employer-employee relationship where the company withholds a portion of the employee’s salary or income. The company then remits this to the BIR on behalf of the employee.
From a business perspective, if you have suppliers, then you’d most likely issue 2307 to them. If you are a supplier or providing goods and services to other business, they will most likely issue you a 2307.
Why this form matters?
Form 2307 functions as an income tax credit to the recipient. Meaning, it is a “legal” way to lessen the taxes you pay to the BIR.
Technically speaking, you already paid for it in advance. Remember the concept of withholding tax above? The company who is supposed to pay you (which would then be subject to income tax) already withheld a certain portion and paid it in advance to the BIR on your behalf.
For example, the company who is supposed to pay you, let’s say, for PhP 50,000 only paid you PhP 49,000 in cash, while the PhP 1,000 is via the BIR form 2307.
While you still report the total sales in your returns, you will be able to deduct the 1,000 in your income tax payable.
Who should fill up this form?
The withholding agent is the one who will always fill out the BIR 2307.
Depending on your business, you may either be the issuer or recipient of this form.
A Certificate to be accomplished and issued to recipients of income subject to expanded withholding tax paid by a Payor/Withholding Agent including government money payments made by a government office showing therein the monthly breakdown of the total income payments made and the total taxes withheld and remitted during the quarter/period.
Bottom line: if the payment is subjected to expanded withholding tax, you should issue this certificate.
Who should not fill out this form?
If the payment is not subject to expanded withholding tax, like payment to general professional partnership, then this is not the form to be used.
If you are the issuer or withholding agent
As the issuer of the income tax certificate, here’s what you need to know:
How to fill out the BIR form 2307
- Download the Excel or PDF file from the BIR website
- Fill out the following information:
- Part 1 – Payee Information
- Part 2 – Payer Information
- Details of Monthly Income Payments and Taxes Withheld
- Printed Name of the Payor/Authorized Representative
- Printed Name of the Payee/Authorized Representative
Deadlines for issuing the certificate and payment
The BIR Form 2307 should be issued to the payee on or before the 20th day of the month following the close of the taxable quarter when the accrual or payment was made, which ever came first. Upon request of the payee, however, the payor must furnish such statement to the payee simultaneously with the income payment.
For example, Company A has acquired the professional services of Mr. CPA during June 15, 2020. Mr. CPA sent the billing to Company A on June 25 after completion of the service. Mr. CPA allows Company A to pay him in 30 days after the billing date. Hence, Company A has a liability to Mr. CPA as of June 30 payable in July 25.
In this case, the 2307 must be issued on July 20 (20 days close of the quarter when the accrual was made)
Important notes and reminders
As the payor or issuer of the certificate, you need to summarize the details of all 2307 issued for the quarter and must tally to the 1601EQ and QAP (Quarterly Alphalist of Payees).
You should also keep your copy of your form 2307 for reference.
As for the payment of the taxes withheld, you do this using the BIR Form 0619E.
Lastly, you should also include the details in your VAT Summary List of Purchases (SLP) and reconcile as needed.
If you are the recipient
As the recipient of this income tax certificate, you have to remember the following:
- Keep and attach this form to Quarterly Income Tax Returns and Annual Income Tax Returns
- Deduct the tax withheld in the proper period
- Include the details in summary alphalist of withholding taxes (SAWT)
- Include the details in VAT Summary List of Sales (SLS), reconcile as needed
In case you need a copy of the form, you can download it directly from the BIR website. You can find both a PDF and Excel version there.
But for 90% of businesses, you shouldn’t need this 90% of the time. Use the eBIRForms instead.
Other relevant reading
- RMC 50-2018
- RR 2-1998
- RR 11-2018
- RMC 10-2018
Have other concerns about the BIR form 2307? Let us know in the comments below.