What Is BIR Form 2304? The Certificate for Income Payments Not Subject to Withholding Tax
BIR Form 2304, the Certificate of Income Payment Not Subject to Withholding Tax (Excluding Compensation Income), is issued by a withholding agent to a payee when an income payment was made without withholding tax deducted. It is the mirror image of BIR Form 2307, which certifies tax that was withheld, and has nothing to do with BIR Form 2316, which covers compensation income only. Form 2304 documents why no tax was withheld — it does not mean the income itself is tax-exempt.
Generate the certificates you DO need — BIR Form 2307 and 2316 — FREE →BIR Form 2304 vs BIR Form 2307 vs BIR Form 2316 #
These three certificates look similar on a shelf of BIR paperwork but certify opposite or unrelated facts. Confusing them leads payees to assume income was withheld when it wasn’t, or to misfile a certificate meant for compensation as if it covered a business payment.
| Form | What it certifies | Who receives it |
|---|---|---|
| BIR Form 2304 | Income payment made without withholding tax deducted | A payee whose payment was not subjected to withholding |
| BIR Form 2307 | Income payment made with creditable withholding tax deducted | A payee whose payor withheld tax at source |
| BIR Form 2316 | Compensation income and the tax withheld on it for the calendar year | An employee, from their employer |
The BIR titles the form plainly:
“Certificate of Income Payment Not Subject to Withholding Tax (Excluding Compensation Income)”
That title does two things at once: it excludes compensation (which belongs on BIR Form 2316 instead), and it limits the certificate strictly to payments where withholding tax did not apply — not payments that are exempt from income tax altogether.
When does a payor issue BIR Form 2304 instead of withholding? #
A withholding agent only skips withholding, and issues BIR Form 2304 in its place, in narrow, documented situations — never simply because a payee asks. The two most common triggers are a qualifying lone-payor declaration under the expanded withholding tax rules, and a payee presenting a valid BIR exemption certificate or ruling.
1. Lone income payor below the individual payee’s reporting threshold. Under Section 2.57.2 (and the related Section 2.79 withholding regulations), as amended following the TRAIN Law (Republic Act No. 10963), an individual payee who earns from only one income payor, and whose total income from that single payor does not exceed a set annual threshold (commonly cited at ₱250,000), can submit a sworn declaration — the BIR’s prescribed “Income Payee’s Sworn Declaration of Gross Receipts/Sales” (the Annex B-series forms) — so that payor does not withhold tax on the payment. The payor then issues BIR Form 2304 to document that the payment was not subjected to withholding, and separately files its own sworn declaration and payee listing with the BIR as proof it complied with the rule rather than simply skipping withholding on its own judgment.
2. Payee holds a valid exemption certificate or ruling. Some payees are exempt from withholding tax by law, a specific BIR ruling, or a tax exemption certificate (for example, certain accredited non-stock, non-profit organizations). If the payee presents that certificate or ruling to the payor before payment, the payor issues BIR Form 2304 instead of withholding. If the payee cannot present it, the payor is required to withhold anyway — the burden of proof sits with the payee, not the payor’s discretion.
Because both of these thresholds and sworn-declaration mechanics sit inside withholding tax regulations that the BIR periodically amends, confirm the current peso threshold and the latest version of the sworn declaration form directly against the BIR’s published issuances before relying on a specific number.
The income is still taxable — withholding and income tax are separate #
Not being subject to withholding is frequently misread as not being subject to tax at all, and that misunderstanding is the single most consequential mistake tied to this form. BIR Form 2304 only certifies that no tax was deducted at the point of payment — it says nothing about the payee’s own income tax liability on that amount.
A payee who receives BIR Form 2304 instead of BIR Form 2307 must still declare that income on their own income tax return and pay whatever income tax is due on it — there is simply no advance credit sitting against it the way a BIR Form 2307 certificate would provide. Treating a BIR Form 2304 payment as “already settled” because no tax was withheld is a common and costly error for freelancers and sole proprietors who later face an assessment for undeclared income.
Worked example: a freelance designer under the lone-payor threshold #
Concrete numbers make the mechanics clearer than the rule alone. Consider a freelance graphic designer who works exclusively for one client all year and earns ₱180,000 in total fees — below the commonly cited ₱250,000 lone-payor threshold, and from a single income payor.
- Before the client processes payment, the designer submits a sworn declaration (the BIR’s Income Payee’s Sworn Declaration form) stating that this client is her only income payor for the year and that her total expected income from this source will not exceed the threshold.
- The client, now holding that sworn declaration, does not withhold the standard expanded withholding tax rate on the designer’s professional fees.
- At year-end (or per payment, depending on the client’s practice), the client issues BIR Form 2304 to the designer instead of BIR Form 2307 — documenting that ₱180,000 was paid without withholding, under the sworn-declaration exception.
- The client separately files its own sworn declaration and payee list with the BIR, as its proof that skipping withholding was compliant, not an oversight.
- Critically, the designer still reports the full ₱180,000 as gross income on her own annual income tax return and pays whatever income tax is due — BIR Form 2304 gave her no advance tax credit, because no tax was withheld to credit.
If the same designer had picked up a second client mid-year, she would no longer qualify as having a single lone payor, and any payor relying on the earlier sworn declaration without an updated one would risk being assessed for the tax it should have withheld. Reconfirm the exact current threshold and the latest Annex B sworn-declaration form against BIR issuances before applying this to a real engagement — the ₱250,000 figure above should be treated as a planning reference pending that check, not a guaranteed current number.
Deadline and e-signature rules #
BIR Form 2304 follows the same general certificate-issuance cycle as BIR Forms 2306 and 2307: payors are expected to issue it to payees on or before January 31 of the year following the year the income payment was made, so payees have it in hand before their own income tax return is due.
Signature requirements were eased during the shift to remote work. Revenue Memorandum Circular No. 29-2021 (published March 1, 2021) allows withholding agents to sign BIR Form 2304 — along with BIR Forms 2306, 2307, and 2316 — electronically, even without securing prior BIR approval for the e-signature, in addition to the traditional wet (ink) signature option. For a payor and payee working remotely, this removes the need to physically route a paper certificate just to get a signature on file.
Download the current form before relying on field-by-field details #
This overview explains what BIR Form 2304 is for and when it applies, but it is not a substitute for the form itself. Download the current BIR Form 2304 and its instructions directly from bir.gov.ph to confirm the exact fields, box numbers, and any recent revisions before preparing or issuing one — form revisions and threshold amendments happen on a schedule independent of this guide.
If your business issues withholding certificates at all, the more common year-end bottleneck isn’t BIR Form 2304 — it’s generating accurate BIR Form 2307 certificates for everyone you did withhold from, and BIR Form 2316 for every employee, without scrambling in January. For the mechanics of those two forms and how they interact with each payee’s own return, see What Is BIR Form 2316 and When Must You Issue It? and the BIR Form 2307 hub, which indexes scenario-specific guides across dozens of industries and payment types.
Summary #
BIR Form 2304 certifies that a specific income payment was not subjected to withholding tax — the opposite of BIR Form 2307, and unrelated to BIR Form 2316’s compensation-only scope. Payors issue it mainly in two situations: a lone-payor sworn declaration under the expanded withholding tax rules (commonly referenced at a ₱250,000 annual threshold, pending reconfirmation against current regulations), or a payee presenting a valid BIR exemption certificate or ruling. In either case, the underlying income remains taxable — the payee must still declare it and pay any income tax due, since no withholding credit was created. Payors should issue the certificate by January 31 of the following year, may sign it electronically under Revenue Memorandum Circular No. 29-2021, and should always confirm the current form version and thresholds directly against BIR’s published issuances before filing.