Creditable Withholding Tax Rates in the Philippines: Fees and Rentals

Creditable withholding tax rates in the Philippines range from 1% to 15%, with the exact rate depending on the type of payment, whether the payee is an individual or a non-individual entity, and in some cases the payee’s gross income for the year. The authority to set these rates sits in Section 57(B) of the National Internal Revenue Code, which lets the Secretary of Finance impose withholding of between 1% and 32% on income paid to persons residing in the Philippines.¹ The working rate schedule most payors rely on today comes from Revenue Regulations No. 11-2018, as amended by RR No. 14-2018.²

Professional Fees

Professional fees paid to individuals (lawyers, doctors, engineers, consultants, and similar practitioners) are withheld at:

5% if the individual’s gross income for the current year does not exceed ₱3 million.
10% if the individual’s gross income exceeds ₱3 million, or if the individual is VAT-registered regardless of income level.²

For non-individual payees (corporations, partnerships, and associations providing professional services):

10% if the entity’s gross income for the current year does not exceed ₱720,000.
15% if gross income exceeds ₱720,000.²

The lower rate is not automatic. An individual professional expecting to earn less than ₱3 million must submit a sworn declaration (Annex B-1 of RR 11-2018) to each payor, together with a copy of the Certificate of Registration, no later than January 15 each year or before the first payment. Without that declaration, the payor withholds at 10%. Non-individual payees seeking the 10% rate must file the corresponding notarized sworn statement (Annex B-3) with each payor.³

An individual with a single payor whose annual gross receipts will not exceed ₱250,000 may qualify for full exemption from expanded withholding tax by submitting Annex B-2 of RR 11-2018 along with the Certificate of Registration.³

Contractors

Gross payments to contractors, whether individuals or corporations, are withheld at a flat 2%.⁴ The category covers general construction, janitorial, security, and similar service contracts. Where a service falls under a more specific category such as professional fees, that category’s rate governs instead.³

Rental Payments

Rental income generally carries a 5% rate under RR 11-2018 Section 2.57.2(B):

Real property: 5% of gross rental for business-use property where the payor has no equity or is not acquiring title.
Personal property: 5% when annual gross rental exceeds ₱10,000. If accumulated lease payments to the same lessor are reasonably expected to exceed ₱10,000 within the year, withholding applies to the entire amount.
Poles, satellites, and transmission facilities: 5% on gross rental.
Billboard space: 5% on gross rental for advertising in public places.
Cinematographic film rentals: 5% on gross payments to resident film owners, lessors, or distributors.⁵

Sale of Real Property as an Ordinary Asset

When a seller habitually engaged in the real estate business sells property classified as an ordinary asset, the rate is tiered based on the selling price or zonal value, whichever is higher:

1.5% if the selling price is ₱500,000 or less.
3% if the selling price is more than ₱500,000 but not more than ₱2,000,000.
5% if the selling price exceeds ₱2,000,000.⁵

Higher rates may apply where the seller is not habitually engaged in the real estate business, which follows specific BIR criteria tied to registration and transaction history. Sellers exempt from creditable withholding tax under Section 2.57.5 of RR 11-2018, such as certain government-recognized socialized housing developers, fall outside these tiers entirely. Sale of real property classified as a capital asset is a different regime: it is subject to a final withholding tax rather than the creditable withholding tax covered here.

Top Withholding Agents: Rates on Goods and Services

Entities designated by the BIR as Top Withholding Agents must withhold on all purchases from their local suppliers, even when the transaction would not otherwise fall under a specific rate category. The rates are:

1% on purchases of goods from local or resident suppliers.
2% on purchases of services from local or resident suppliers.⁶

The BIR identifies these agents based on gross sales or receipts, gross purchases, or claimed deductible itemized expenses in the preceding taxable year, with the threshold set at ₱12 million. Once designated, a company stays on the list until the BIR removes it, and the withholding obligation covers virtually every routine commercial purchase.

Payees Generally Exempt From Expanded Withholding

Not every payment triggers withholding. The following recipients are generally exempt:

The national government, its instrumentalities, and government-owned or controlled corporations.
Organizations exempt from income tax under special laws, such as certain Board of Investments-registered enterprises.
Payees that suffered net operating losses during the two immediately preceding tax years, upon application for exemption.

In most cases, the payee must furnish the payor with a BIR-issued Certificate of Exemption before withholding can be skipped. Without that certificate, the safer course is to withhold at the standard rate.

What the Rate Carries With It

Once a rate is applied, the payor must document the deduction on BIR Form 2307, the Certificate of Creditable Tax Withheld at Source. This certificate is what the payee later uses to claim the amount as a credit against income tax.⁷ The Alphanumeric Tax Code (ATC) entered on the form identifies the specific income category and the rate applied, and a wrong TIN, misspelled name, or incorrect ATC can cause the BIR to reject the credit.⁸

Remittance follows a monthly-then-quarterly cycle. For the first two months of each quarter, the withholding agent files BIR Form 0619-E; at quarter-end, Form 1601-EQ covers the third month and summarizes the entire quarter, with a Quarterly Alphalist of Payees (QAP) attached.¹³

Getting a rate wrong or missing a deadline is costly. Under Section 248 of the NIRC, the BIR imposes a 25% surcharge for failure to file and pay on time, and Section 249 adds 20% annual interest on any unpaid amount from the date the tax was due until it is fully paid.⁹ There is a further consequence many businesses overlook. Section 34(K) of the Tax Code makes a business expense deductible for income tax purposes only if the required withholding was actually deducted and remitted. A payor that skips withholding on a fee loses the deduction for the entire expense, on top of the surcharge and interest assessed on the withholding deficiency itself.

1
ChanRobles Virtual Law Library. National Internal Revenue Code of 1997 – Title X
2
Supreme Court E-Library. Revenue Regulations 14-2018 – Amending the Provisions of Revenue Regulations No 11-18
3
Bureau of Internal Revenue. Revenue Memorandum Circular No 50-2018
4
Bureau of Internal Revenue. BIR Form No 1601E – Guidelines and Instructions
5
Bureau of Internal Revenue. Revenue Regulations No 11-2018 Digest
6
Supreme Court E-Library. BIR Revenue Regulations No 14-2008
7
Bureau of Internal Revenue. BIR Forms – Certificate of Creditable Tax Withheld at Source
8
Bureau of Internal Revenue. BIR Form 2307
9
Bureau of Internal Revenue. Penalties for Late Filing of Tax Returns