Expanded Withholding Tax in the Philippines
Updated October 16, 2026
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A creditable income tax that payers withhold from certain income payments, such as professional fees, rentals and commissions, and remit to the BIR, so the payee receives the net amount and credits the tax withheld against its income tax.
What is Expanded Withholding Tax (EWT)?
Expanded Withholding Tax (EWT) is a creditable withholding tax. The payer withholds part of certain income payments and remits it to the Bureau of Internal Revenue (BIR); the payee receives the net amount and later credits the tax withheld against its own income tax. EWT covers payments such as professional and talent fees, rentals, commissions and other income payments listed in the regulations (NIRC §57(B); RR 2-98 Sec. 2.57.2, as amended by RR 11-2018).
Legal Basis and Scope
NIRC §57(B) authorizes the Secretary of Finance to require creditable withholding on income payments. Since January 1, 2019, the rates set by regulation must be between 1% and 15% of the income payment (NIRC §57(B), as amended by TRAIN). EWT is different from withholding tax on compensation, which applies to employees' wages (NIRC §79), and from final withholding taxes, which settle the payee's tax on that income in full.
EWT Rates by Category
Professional, talent and similar fees paid to individuals are subject to 5% if the payee's gross income for the year does not exceed ₱3,000,000 and the payee submits a sworn declaration, otherwise 10%. Fees paid to juridical persons are subject to 10% if the payee's gross income does not exceed ₱720,000, otherwise 15%. Rentals of real property used in business are subject to 5% (RR 2-98 Sec. 2.57.2, as amended by RR 11-2018). Interest on bank deposits (20%) and dividends from domestic corporations to individuals (10%) are not EWT; they are final taxes that the payee cannot credit.
Who Must Withhold?
Juridical persons, individuals engaged in business, and government offices act as withholding agents for the payments covered by the regulations. 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. A withholding agent that fails to withhold or remit is liable for the tax, with the 25% surcharge and 12% annual interest, and upon conviction for a penalty equal to the tax not withheld (NIRC §248, §249, §251).
Crediting and Remittance
The payee includes the income in its return and credits the tax withheld; any excess over the tax due may be refunded or carried over (NIRC §58(E)). Withholding agents remit monthly on BIR Form 0619-E by the 10th day of the following month (15th for eFPS filers) and file the quarterly return, BIR Form 1601-EQ, by the last day of the month after the quarter (RR 11-2018).
Exemptions and Special Cases
Some payments are exempt from creditable withholding under the regulations, and payees exempt from income tax are not withheld on. Individual payees with gross income of ₱3,000,000 or less get the lower 5% rate only if they give the payer a sworn declaration of gross receipts. E-marketplace operators and digital financial services providers withhold 1% on one-half of gross remittances to sellers (an effective 0.5%) under RR 16-2023.
Documentation and Compliance
Payers give payees a Certificate of Creditable Tax Withheld at Source (BIR Form 2307) within 20 days after the close of each quarter, or with the payment if the payee asks. The payee uses it to claim the credit. Withholding agents also file an annual information return of creditable taxes withheld, BIR Form 1604-E, on or before March 1 of the following year (RR 11-2018).
Source: BIR Tax Code notes on the vetoed micro-taxpayer withholding exemption.
Why it matters
EWT reduces the cash you receive for professional work, rentals and other covered payments, but it is a prepayment of your own income tax, not an extra tax. Knowing the correct rate and keeping every Form 2307 lets you claim the full credit on your return. For businesses, correct withholding and remittance avoids the surcharge, interest and penalties that fall on withholding agents.
How it works
Payer Withholds Amount
When a business pays you a professional fee, rent or another covered payment, it applies the EWT rate set in the regulations (for example 5% or 10% for professional fees paid to individuals, 5% for rent) and pays you the net amount.
Payer Remits to BIR
The payer remits the tax monthly on BIR Form 0619-E by the 10th day of the following month and quarterly on Form 1601-EQ by the last day of the month after the quarter. It gives you a Form 2307 within 20 days after the quarter ends, or with the payment if you ask.
Payee Claims Credit
You report the gross income on your quarterly and annual income tax returns and claim the tax shown on your Forms 2307 as a credit (NIRC §58(E)).
Reconciliation and Refund
If total credits exceed your tax due for the year, you may claim a refund or carry the excess over. If they are less, you pay the balance with your return.
Examples
Professional Consultant Receiving Corporate Payment
Maria Santos, a freelance tax consultant whose gross receipts are below ₱3,000,000, gives ABC Corporation a sworn declaration and invoices ₱100,000 for consulting work. ABC withholds 5% EWT (₱5,000) and pays her ₱95,000. ABC remits the ₱5,000 and gives Maria a Form 2307, which she uses as a credit on her return. Without the sworn declaration the rate would be 10% (RR 2-98 Sec. 2.57.2, as amended by RR 11-2018).
Rental Income from Commercial Property
Juan dela Cruz owns a commercial building and receives ₱50,000 monthly rent from a corporate tenant. The tenant withholds 5% EWT (₱2,500) and remits it to the BIR. Juan receives ₱47,500 and claims the ₱2,500 as a credit against his income tax.
Interest Income from Bank Deposit (Final Tax, Not EWT)
Anna Reyes earns ₱30,000 of interest on her savings account. The bank withholds the 20% final tax (₱6,000), and Anna receives ₱24,000. This is a final tax, not EWT: the interest is not reported on her income tax return and the ₱6,000 cannot be claimed as a credit (NIRC §24(B)(1)).
Dividend Income from Domestic Corporation (Final Tax, Not EWT)
Roberto Santos receives ₱200,000 in cash dividends from a domestic corporation. The corporation withholds the 10% final tax (₱20,000), and Roberto receives ₱180,000. Like deposit interest, this is a final tax that settles his tax on the dividend; it is not credited on his return (NIRC §24(B)(2)).
Micro Business Paying a Freelancer
A sole proprietor paying a freelancer must check whether the payment is subject to expanded withholding and which rate applies. Gross sales below ₱3,000,000 do not automatically exempt the proprietor from withholding; the proposed micro-taxpayer exemption was vetoed.
Common misconceptions
- Myth: EWT is an additional tax on top of my annual income tax.
- Fact: EWT is a prepayment of your income tax. The amount withheld is credited against your tax due, and you pay only the difference (NIRC §58(E)).
- Myth: If I receive a BIR Form 2307, I don't need to report that income on my tax return.
- Fact: You report the full gross income on your return and claim the EWT as a credit. A credit is allowed only when the income is declared in the return and the withholding is established (NIRC §58(E)).
- Myth: All payments to individuals are subject to EWT.
- Fact: EWT applies only to the income payments listed in the regulations, and only when the payer is a withholding agent: a juridical person, an individual engaged in business, or a government office. 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.
- Myth: I can claim a refund of EWT immediately after receiving the withholding certificate.
- Fact: You claim EWT as a credit on your quarterly and annual income tax returns. Only an excess left at year end can be refunded or carried over.
Questions people ask
What is the difference between EWT and income tax withholding on salaries?
Withholding tax on compensation (NIRC §79) applies to employees' wages and is computed with the withholding tables based on the graduated rates. EWT (NIRC §57(B)) applies to listed non-employment payments such as professional fees and rent, at fixed percentages set by regulation.
Do I claim EWT on my quarterly returns or only on my annual return?
Self-employed payees claim the tax shown on their Forms 2307 on the quarterly returns and on the annual return for the period the income is reported. Credits can be used only where the related income is declared (NIRC §58(E)).
What happens if the payer does not withhold EWT?
The payer is liable for the tax it failed to withhold, with the 25% surcharge and 12% annual interest, and upon conviction a penalty equal to the unwithheld tax (NIRC §248, §249, §251). You must still report the full income on your return and pay the tax due on it.
How do I report EWT on my annual income tax return?
Report the gross receipts in the business income part of your quarterly (Form 1701Q) and annual (Form 1701 or 1701A) return, and enter the creditable tax withheld per your Forms 2307 in the tax credits part.
Can EWT be withheld on payments to government agencies or non-profit organizations?
Payees that are exempt from income tax, such as government offices, are generally not withheld on. The payer should confirm the payee's exempt status before paying without withholding.
What is the deadline for the payer to remit EWT to the BIR?
Withholding agents remit EWT monthly on Form 0619-E by the 10th day of the following month (15th for eFPS filers) and file the quarterly Form 1601-EQ by the last day of the month after the quarter. Late remittance incurs the 25% surcharge plus 12% annual interest (NIRC §248, §249).
If I am self-employed and pay another self-employed person, do I need to withhold 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. Individuals not engaged in business are not withholding agents.
Can I request the payer to not withhold EWT?
No. Where the payer is a withholding agent and the payment is covered, withholding is required by law and cannot be waived by agreement. An individual payee with gross income of ₱3,000,000 or less can, however, obtain the lower 5% rate on professional fees by giving the payer a sworn declaration.
In practice
- Corporations and businesses must implement EWT systems in their accounting and payables processes to ensure timely and accurate withholding and remittance to the BIR.
- Freelancers, consultants, and service providers should request BIR Form 2307 from every corporate client to document withholding and claim tax credits.
- Rental property owners must coordinate with tenants to ensure proper 5% EWT withholding and obtain certificates for annual tax filing.
- Banks withhold 20% final tax on deposit interest and corporations withhold 10% final tax on dividends to individuals. These are final taxes, not EWT, and are not credited on the payee's return.
- Withholding agents that fail to withhold or remit EWT face assessment of the tax with the 25% surcharge and 12% annual interest, and a penalty equal to the unwithheld tax upon conviction (NIRC §248, §249, §251).
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Sources & References (1)
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 (expanded withholding tax): rates schedule.” bir.gov.ph. Bureau of Internal Revenue, RR 2-98 as amended (EWT). Source checked .