One of the tax forms that businesses often encounter is the Bureau of Internal Revenue (BIR) Form 2307. However, it's all too common for taxpayers to overlook the significance of this form.
In this blog, we will provide a comprehensive guide to help you have a clearer understanding of BIR Form 2307; why this form matters and how to fill it out correctly.
What is BIR Form 2307?
The BIR Form 2307 or the Certificate of Creditable Tax Withheld at Source or also known as CWT, is a form used by the withholding agents to document the Expanded Withholding Tax (EWT) deducted from certain income payments made to a payee.
Here are some key concepts associated with the BIR Form 2307:
Withholding Agent - This is the individual or business responsible for withholding the EWT; the payor of the income subject to EWT.
Payee - The individual or business for whom the tax is being withheld. This is typically the person providing goods or services e.g., vendor, consultant, lessor, etc.
Income Payment Subject to EWT - This refers to the transaction that is subject to the EWT. It can be payments made for professional fees, rents, or other types of transactions where another individual or business earns an income.
Expanded Withholding Tax (EWT) - This is the amount of tax withheld by the withholding agent. It is calculated based on a percentage of the income subject to EWT. Read more about EWT and how to compute it through our practical guide.
Why does this form matter to you?
BIR Form 2307 serves two purposes:
1. Tax Credit - It can be used to reduce a taxpayer's income tax liability. This form is used as evidence of tax credit and reported in the income tax returns (BIR Forms 1701 or1702) of the payee. Remember that without this form you cannot claim a tax credit.
2. Compliance - It serves as the withholding agent’s proof of compliance with BIR’s withholding tax regulations. It demonstrates that the taxes were duly withheld from income earners (the payees) and with the BIR Form 0619E/1601EQ, the taxes were remitted timely to the BIR.
What should you do if you receive a BIR Form 2307?
1. Secure a signed copy of the form.
2. Upon computation of your income tax liability, deduct the total amount supported by your BIR Forms 2307 to get your income tax payable.
3. Attach scanned copies of all your BIR Forms 2307 in your Quarterly Income Tax Returns and Annual Income Tax Returns (BIR Forms 1701 or 1702).
What should you do if you are the withholding agent or issuer of BIR Form 2307?
1. Get the latest format of BIR Form 2307 - You can download and print the latest version of the form from the official website of the BIR via this link . You can also visit your local BIR office to collect a physical copy.
2. Properly fill out the form (see guide below).
3. Issue the Form to the payee- Provide the completed BIR Form 2307 to the payee then request a copy of the form signed by the payee. Remember to keep a copy for your records; maintaining accurate records of all transactions where tax was withheld is essential.
Take note: BIR Form 2307 must be issued on or before the 20th of the month after the taxable quarter when the payment was made. However, this form can be issued upon the request of the payee at the same time when the income payment was made.
4. Pay the Withheld Taxes to the BIR - As the withholding agent, you are responsible for remitting the withheld taxes. Always make sure that you make the necessary tax payments in a timely manner and that the amount of tax withheld indicated in the issued BIR Form 2307 matches the amount you will report to the BIR.
As the issuer of the BIR 2307, these are the forms that you are required to submit to the BIR:
BIR Form 0619E – Monthly Remittance of Creditable Income Tax Withheld
BIR Form 1601EQ – Quarterly Remittance Return of Creditable Income Taxes Withheld
Required Attachment – Quarterly Alphalist of Payees (QAP)
BIR Form 1604E – Annual Information Return of Creditable Income Tax Withheld (Expanded)
Required Attachment: Alphalist of Payees
How do you fill out the BIR Form 2307?
Step 1 - On the top portion of the form, indicate the applicable period when the income payment was made.
Step 2 - On Part I – Payee Information of the form, enter the Tax Identification Number (TIN), registered name, and address of the payee who received the income subject to withholding tax.
Step 3 - Fill in your TIN, registered name, address, and ZIP Code on Part II – Payor Information.
Step 4 - On the Part III – Details of Monthly Income Payments and Taxes Withheld, you will need to provide details about the income payment. Indicate the applicable tax rate and Alphanumeric Tax Code (ATC) provided by the BIR to classify the income payments that are subject to withholding tax.
Step 5 - Double-check all the information you have provided to ensure accuracy and completeness. Once verified, your authorized signatory should affix his/her signature on the designated space; indicate his/her title/designation and personal TIN.
See our example below on how to apply steps in filling out BIR Form 2307.
Example:
Business A, a MSME, started renting a commercial space to Business B in September 2023. The monthly rent amounts to P20,000. Business A paid the rent and deducted the applicable withholding tax to its payment to Business B last September 15, 2023.
Step 1 - Business A paid the rent on September 15; thus, the applicable period to be indicated in the form shall be 09/01/2023 to 09/30/2023. Note that the obligation to deduct and withhold the taxes arises at the time when an income is paid.
Step 2 - Business A will need to input the correct information of Business B. Business A may ask Business B for their BIR Form 2303 (Certificate of Registration) to ensure that accurate information will be indicated.
Step 3 - Business A should indicate its TIN, Registered Name and Address.
Step 4 - Since the payment to Business B is rent, Business A should indicate this in the 1st column of the Part III of the form. Next, the ATC will be “WC100” with an EWT rate of 5%. Business A shall then fill in the applicable quarter the total amount of income payments received by Business B which is Php 20,000 and indicate the total tax withheld for the quarter amounting to Php 1,000 (20,000 x 5%). You may refer to this list provided by the BIR or at the back portion of your copy of BIR 2307 for your reference on the tax rates and ATCs.
Step 5 - The Authorized Representative of Business A shall fill out and affix his/her signature over the printed name, title/designation and TIN.
Finally! Business A may now issue the form and request a signed copy from Business B. You may refer below for the accomplished BIR Form 2307 from our example:
There you go! With proper guidance and understanding of this form, you can ensure that your tax obligations are met to avoid penalties and claim tax credits when applicable.
It's essential to ensure the accuracy of the information provided, as any discrepancies or errors may lead to potential issues in the future. If you are still uncertain about how to fill out BIR Form 2307, it's advisable to consult with a professional.
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Disclaimer: Numbers that Matter Inc. aims to curate topics that are simplified and easily digestible for micro, small and medium enterprises, by balancing our technical know-hows as accounting professionals and the practical experiences of our team working on ground with our clients. There may be technicalities intentionally omitted from our content to preserve its simplicity. Any practical tip is purely the opinion of the team and is merely informal advice, and thus, should not be taken as a definitive rule. Should you have any specific questions, feel free to message the team at consult@numbersthatmatterph.com and we’d be happy to discuss with you further.