Creditable Withholding Tax and EWT
Updated October 16, 2026
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Definition
Creditable withholding tax (also called Expanded Withholding Tax or EWT) is income tax withheld at source from income payments to individuals or businesses that can be credited against their income tax due. Unlike final tax, EWT is not the final settlement; it is an advance payment that reduces what you owe when filing your return.
Under NIRC Sec. 57(B) and Revenue Regulations No. 2-98 as amended, creditable withholding tax is a collection mechanism in which the payor withholds a percentage of certain income payments and remits it to the BIR for the payee. The withheld amount appears on BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) and is claimed as a credit on returns such as BIR Form 1701Q, 1701 or 1701A. Since 2019, creditable withholding rates set by regulation must be between 1% and 15% of the income payment. Professional fees paid to individuals are withheld at 5% or 10%, fees to juridical persons at 10% or 15%, and rentals of real property used in business at 5%. Tax on employees' salaries is a separate system, withholding on compensation.
Detailed explanation
What is Creditable Withholding Tax?
Creditable Withholding Tax (CWT), commonly called Expanded Withholding Tax (EWT), is income tax collected at the source of payment and remitted to the Bureau of Internal Revenue (BIR) for the payee. Unlike final withholding tax, CWT is not the final settlement of the tax. It is an advance payment that reduces the income tax the payee owes when filing a return.
Under NIRC Sec. 57(B) and Revenue Regulations No. 2-98 as amended, EWT applies to income payments listed in the regulations, including professional and talent fees, commissions, rentals, payments to contractors, and purchases by top withholding agents and government offices. The withholding agent deducts the tax, remits it to the BIR, and issues BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to the payee.
Key Characteristics of Creditable Withholding Tax
Advance Payment Nature
CWT works as an advance installment of the payee's income tax. On the quarterly and annual returns, the total CWT withheld is credited against the computed tax. If the amount withheld exceeds the tax due, the excess is refundable or can be credited in a later period, provided the income was declared (NIRC Sec. 58(E), as amended by RA 11976).
Withholding Rates
Since 2019, creditable withholding rates set by regulation must be between 1% and 15% of the income payment (NIRC Sec. 57(B), as amended by RA 10963). Under RR 2-98 as amended by RR 11-2018: professional fees, talent fees and commissions paid to individuals are withheld at 5% if gross income does not exceed ₱3,000,000 and the payee gave a sworn declaration, otherwise 10%; paid to juridical persons, 10% if gross income does not exceed ₱720,000, otherwise 15%; rentals of real property used in business 5%; payments to contractors 2%; and purchases by top withholding agents and government offices 1% for goods and 2% for services. Salaries and wages are not subject to EWT; employers withhold tax on compensation using the withholding tables (NIRC Sec. 79).
Withholding Agent Responsibility
Corporations, government offices, individuals engaged in business or a profession, and other payors designated as withholding agents must deduct CWT at the prescribed rate, remit it monthly on BIR Form 0619-E and quarterly on BIR Form 1601-EQ, and issue Form 2307 within 20 days after the close of each quarter (RR 11-2018). Micro-taxpayer status alone does not exempt a payor from creditable withholding: the proposed exemption was vetoed. Apply the withholding rules for the payment and payor concerned. Failure to withhold or remit results in surcharge and interest (NIRC Sec. 248 and 249).
Creditable vs. Final Withholding Tax
Creditable withholding tax is credited against the payee's income tax and can lead to a refund if over-withheld. Final withholding tax, such as the 20% tax on bank deposit interest or the 10% tax on dividends received by citizens and resident aliens, fully settles the tax on that income, with no further reporting and no credit against other income (NIRC Sec. 57(A) and 57(B)).
Compliance and Documentation
Payees should keep all Forms 2307 received during the year and report the total CWT on their returns. Withholding agents file a Quarterly Alphabetical List of Payees with each Form 1601-EQ and an annual alphalist with Form 1604-E, which the BIR uses to check the credits claimed (RR 11-2018).
Impact of TRAIN Law and Recent Amendments
The TRAIN Law (RA 10963) set the 1% to 15% band for creditable withholding rates from 2019. Micro-taxpayer status does not by itself remove the duty to withhold creditable tax. The proposed exemption in RA 11976 was vetoed; check whether the payment and payor are covered by the withholding rules. The creditable nature of EWT is unchanged.
Source: BIR Tax Code notes on the vetoed micro-taxpayer withholding exemption.
Why it matters
Creditable withholding tax directly reduces the income tax you owe. Understanding EWT rates, withholding obligations, and how to claim credits on your return helps you avoid overpaying or missing refunds. For businesses that pay suppliers, professionals and lessors, proper EWT compliance avoids BIR penalties.
How it works
Withholding Agent Deducts Tax at Source
When you receive income subject to EWT, such as professional fees, commissions, rentals or contractor payments, the payor deducts the prescribed rate and remits it to the BIR. You receive the net amount and a BIR Form 2307 showing the tax withheld.
Withholding Agent Remits to BIR
The payor remits EWT for the first two months of each quarter on BIR Form 0619-E and files the quarterly EWT return, BIR Form 1601-EQ, by the last day of the month after the quarter, with a list of payees and their TINs (RR 11-2018).
You Claim Credit on Your Return
On your quarterly and annual income tax returns, you report the income and claim the tax shown on your Forms 2307 as a credit against your income tax due. If the tax withheld exceeds the tax due, you claim a refund or carry the excess over.
BIR Reconciles and Issues Refund or Assessment
The BIR matches the credits you claim against the withholding agents' returns and lists of payees. Credits are allowed when the income was declared in your return and the withholding is established; if you underpaid, you owe the difference plus interest and possible penalties (NIRC Sec. 58(E)).
Examples
Salaried Employee at ₱60,000 Monthly
Maria's salary gives her ₱60,000 a month of taxable compensation, or ₱720,000 a year. Her employer does not apply EWT; it withholds tax on compensation using the withholding tables, totaling ₱22,500 + 20% × ₱320,000 = ₱86,500 for the year. She receives BIR Form 2316, not Form 2307 (NIRC Sec. 79).
Freelance Consultant Receiving Professional Fees
Juan, a consultant on the 8% option, bills ₱500,000 in professional fees during the year. Having given his clients a sworn declaration that his gross receipts will not exceed ₱3,000,000, his clients withhold 5%, or ₱25,000. His tax is 8% × (₱500,000 minus ₱250,000) = ₱20,000, so he has ₱5,000 of excess credits to refund or carry over (RR 11-2018).
Property Owner Receiving Rental Income
Anna leases a commercial space to a company for ₱50,000 a month (₱600,000 a year). The tenant withholds 5% EWT, or ₱30,000 for the year. On the 8% option her tax is 8% × (₱600,000 minus ₱250,000) = ₱28,000. She credits the ₱30,000 withheld and has a ₱2,000 excess (RR 2-98, Sec. 2.57.2(B), as amended).
Employee with a Side Professional Practice
Roberto has ₱800,000 of taxable compensation, with ₱102,500 withheld by his employer, and ₱200,000 in professional fees, with ₱10,000 of EWT withheld at 5%. Electing 8% on the business part without the ₱250,000 reduction, his business tax is ₱16,000. Total tax is ₱118,500 against ₱112,500 of credits, so he pays ₱6,000 on his annual Form 1701.
Over-Withheld Scenario with Refund
Carla earned ₱400,000 in consulting fees with ₱20,000 EWT withheld at 5%. On the 8% option her tax is 8% × (₱400,000 minus ₱250,000) = ₱12,000. She credits ₱20,000 against ₱12,000 and claims the ₱8,000 excess as a refund or a credit for the next year (NIRC Sec. 58(E)).
Common misconceptions
- Myth: Creditable withholding tax is the final settlement of my tax obligation, like final tax.
- Fact: CWT is an advance payment only. You report the income on your return and credit the tax withheld. Final tax, such as the 20% tax on bank deposit interest, is the complete settlement for that income (NIRC Sec. 57(A) and 57(B)).
- Myth: If my clients withhold EWT, I don't need to file an income tax return.
- Fact: Self-employed individuals and professionals file returns regardless of the amount of gross income, and the EWT is claimed on those returns as a credit (NIRC Sec. 51(A)(2)(a)).
- Myth: I can claim CWT credit even without proof of withholding.
- Fact: A credit is given due course only when the income is declared in your return and the fact of withholding is established, usually with BIR Form 2307 (NIRC Sec. 58(E)). Keep every certificate.
- Myth: EWT rates are the same for all types of income.
- Fact: EWT rates vary by income type and payee: professional fees 5% or 10% for individuals and 10% or 15% for juridical persons, rentals 5%, contractors 2%, and purchases by top withholding agents 1% for goods and 2% for services. Salaries are not under EWT, and bank deposit interest is subject to final tax (RR 2-98 as amended).
- Myth: If I'm over-withheld, I automatically get a refund.
- Fact: You claim the excess on your return, either as a refund or as a credit against a later year's tax. The BIR grants the refund after verifying the claim (NIRC Sec. 58(E) and 204).
Questions people ask
What is the difference between creditable withholding tax and final withholding tax?
Creditable withholding tax is an advance payment credited against the income tax on your return, and any excess can be refunded. Final withholding tax, such as the 20% tax on bank deposit interest, fully settles the tax on that income; the income is not reported again and the tax is not credited against other income (NIRC Sec. 57(A) and 57(B)).
Do I need to file an income tax return if EWT was withheld from my income?
Yes. Self-employed individuals and professionals file quarterly and annual returns regardless of the amount of gross income, and claim the EWT as a credit (NIRC Sec. 51(A)(2)(a), as amended by RA 10963). Withholding does not remove the filing requirement.
What should I do if I don't receive a BIR Form 2307 from my payor?
Ask the payor for it. Payors must furnish Form 2307 within 20 days after the close of each quarter, or with the payment if you request it (RR 11-2018). A credit is allowed only when the income is declared in your return and the fact of withholding is established, so keep every Form 2307 (NIRC Sec. 58(E)).
Can I claim a refund if I was over-withheld on creditable withholding tax?
Yes. If the creditable tax withheld exceeds the tax due on your return, the excess is refundable, and credits from a previous period can be used in a later year as long as the related income was declared (NIRC Sec. 58(E), as amended by RA 11976).
What are the current EWT rates for different types of income?
Under RR 2-98 as amended by RR 11-2018: professional fees, talent fees and commissions paid to individuals are withheld at 5% (gross income up to ₱3,000,000, with a sworn declaration) or 10%; paid to juridical persons, 10% (gross income up to ₱720,000) or 15%; rentals of real property used in business 5%; payments to contractors 2%; and purchases by top withholding agents and government offices 1% for goods and 2% for services. Interest on bank deposits is subject to final tax, not EWT. Salaries are not covered by EWT; employers withhold tax on compensation using the withholding tables.
What happens if my payor fails to withhold or remit EWT?
The withholding agent is liable for the tax it should have withheld, plus surcharge and interest (NIRC Sec. 248 and 249). You still owe the full tax on your income, so without a Form 2307 you pay the tax yourself when you file.
As a self-employed person, do I need to withhold EWT when I pay sub-contractors?
Individuals engaged in business or the practice of a profession are withholding agents for payments covered by the regulations, such as professional fees and rentals. Micro-taxpayer status alone does not exempt a payor from creditable withholding: the proposed exemption was vetoed. Apply the withholding rules for the payment and payor concerned.
In practice
- Withholding agents remit EWT monthly on BIR Form 0619-E for the first two months of each quarter and file BIR Form 1601-EQ for the quarter, separate from the BIR Form 1601-C used for tax withheld on employees' compensation.
- Freelancers and professionals receiving income from multiple clients collect all Forms 2307 and claim them on their quarterly and annual returns; credits that do not match the payors' lists of payees draw BIR inquiries.
- Individuals with excess CWT can claim a refund on their annual return or carry the excess over to offset a later year's tax.
- Payments to nonresident aliens and foreign corporations not engaged in business in the Philippines are generally subject to final withholding tax rather than EWT.
- Micro-taxpayer status does not by itself remove the duty to withhold creditable tax. The proposed exemption in RA 11976 was vetoed; check whether the payment and payor are covered by the withholding rules.
Next steps
Learn more
Philippines Tax Calculator
Calculate your annual income tax and see how EWT affects your liability
BIR Form 2307 Guide
Complete guide to Certificate of Creditable Tax Withheld at Source
Quarterly Tax Calculator
Compute quarterly installments considering EWT credits
Withholding Tax Rates 2026
Current EWT rates for different transaction types
Annual Tax Return Filing Guide
How to properly claim EWT credits on BIR Forms 1701/1701A
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- Bureau of Internal Revenue. “BIR RR 2-98 as amended by RR 11-2018: expanded/creditable withholding rates.” bir.gov.ph. Bureau of Internal Revenue, RR 2-98 as amended (EWT). Source checked .
- LawPhil Project (Arellano Law Foundation). “NIRC §57(B), §58 (creditable withholding at source): full text.” lawphil.net. NIRC of 1997 (RA 8424), Sec. 57(B)/58. Source checked .