If your Philippine company pays rent, engages contractors, compensates professionals, or remits passive income to foreign parties, you are acting as a withholding agent — required to deduct tax at source, remit it to the BIR, and file the corresponding returns. Getting this right protects both your company and the payees.
Expanded Withholding Tax (EWT)
EWT applies to a defined list of business-to-business payments. The withholding agent (your company) deducts the tax, remits it to the BIR by the 10th of the following month (or 15th for non-large taxpayers using eFPS), and issues BIR Form 2307 to the payee as proof. The payee then credits the withheld amount against their annual income tax.
Common EWT rates in 2026:
- Professional fees — 5% if the professional’s annual income is ₱3 million or below; 10% if above
- Rent — 5% on real property rental payments
- Contractor / sub-contractor payments — 2% for payments to a domestic corporation; 1% for goods purchases from domestic corporations in certain categories
- Commission payments — typically 10–15% depending on the nature of the arrangement
The EOPT Act (RA 11976, 2024) amended the deductibility rules: the prior requirement that withholding must have been made as a condition for expense deductibility was removed. However, withholding obligations themselves remain fully intact — failure to withhold still exposes the withholding agent to penalties and assessments.
Final Withholding Tax (FWT)
FWT closes the tax loop on passive income — the recipient owes no further income tax on those amounts. Key FWT rates relevant to foreign-owned companies:
- Interest on Philippine peso deposits — 20% FWT
- Dividends from a domestic subsidiary to a non-resident foreign corporation (NRFC) — 25% FWT (reducible to 15% under the tax sparing rule or an applicable tax treaty)
- Royalties paid to NRFCs — 25% FWT (reducible by treaty)
- Interest paid to NRFCs — 20% FWT on certain instruments; 25% on others (treaty-dependent)
For dividends flowing to a foreign parent, check whether a tax treaty applies before remitting — claiming treaty relief requires filing a BIR Form 0901 (Tax Treaty Relief Application) or meeting the conditions of Revenue Memorandum Order 14-2021 for the simplified process.
Filing Calendar
Withholding tax remittance is a monthly obligation. The annual BIR Form 1604-E (summary of EWT) and 1604-F (summary of FWT) are due January 31 of the following year. Late filing carries a 25% surcharge plus 12% annual interest on unpaid amounts.
How Chamberlain Helps
Chamberlain tracks all your supplier and service-provider payments, computes the correct withholding rates, prepares monthly remittance returns, and issues 2307 certificates to payees. We also manage annual alphalist submissions and treaty relief documentation for cross-border payments. See pricing or contact us to scope your monthly compliance load.
Frequently asked questions
What is the difference between expanded and final withholding tax?
Expanded withholding tax (EWT) is withheld at source on certain business payments (rent, professional fees, contractors) and is creditable against the payee's income tax. Final withholding tax (FWT) is the full and final settlement of income tax on specific passive income items — the payee owes no further tax on that income.
What are common expanded withholding tax rates?
Rates vary by payment type: 5% on professional fees to individuals earning below ₱3 million; 10% on professional fees above that threshold; 5% on rental payments; 1–2% on purchases of goods from certain suppliers; and various rates on contractor payments. The BIR publishes the full rate schedule.
What final withholding tax rates apply to foreign companies?
Dividends paid to a non-resident foreign corporation (NRFC) are subject to 25% FWT, which may be reduced to 15% under the tax sparing rule or a tax treaty. Interest and royalties paid to NRFCs are generally subject to 25% FWT, also reducible by treaty.