BIR Form 2306 vs BIR Form 2307: Final vs Creditable Withholding Certificates

BIR Form 2306 and BIR Form 2307 look alike but do opposite jobs: Form 2306 certifies a FINAL tax that already, fully settles the payee’s income tax on that income, while Form 2307 certifies a CREDITABLE tax the payee claims as a credit against the income tax it still has to compute. Knowing which one you hold decides whether you report the income again and whether you can offset the tax withheld.

The core distinction: final vs creditable #

BIR Form 2306 is the “Certificate of Final Tax Withheld at Source” and BIR Form 2307 is the “Certificate of Creditable Tax Withheld at Source” — the words “final” and “creditable” are the whole difference. Revenue Regulations (RR) No. 2-98 defines the two withholding systems in Section 2.57. Under the final withholding tax system:

“Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent… the payee is not required to file an income tax return for the particular income.”

— RR No. 2-98, Section 2.57(A)

Under the creditable withholding tax system, by contrast, the tax withheld only approximates the tax due; the payee still files a return, reports the income, and credits the tax withheld against the tax computed, paying the difference or claiming any excess. That is the tax certified on BIR Form 2307. For the conceptual background, see Final Withholding Tax vs Creditable Withholding Tax.

What each certificate covers #

BIR Form 2306 covers income subjected to final withholding — such as dividends to individuals, interest on deposits, royalties, and prizes — while BIR Form 2307 covers income subjected to expanded/creditable withholding — such as professional fees, rentals, contractor payments, and commissions. The type of income, fixed by the withholding regulations, determines which system applies and therefore which certificate the agent issues.

For the definitional side of Form 2306, see What Is BIR Form 2306?; for Form 2307, see What Is BIR Form 2307 and When Must You Issue It?.

A payment can go on either form — the classic case is dividends #

Whether a payment lands on Form 2306 or Form 2307 depends on how the law classifies the income, and dividends are the cleanest illustration: a cash dividend to an individual is a final tax on Form 2306, not a creditable tax on Form 2307. This trips up many first-time filers who assume every withholding certificate is a 2307. It is not — the income’s tax character controls. This exact scenario is worked through in the 2307 series post Is a Dividend Payment Subject to BIR Form 2307 or Form 2306?.

Worked example: same payee, two certificates #

Suppose a consultant who is also a shareholder receives, from the same company in one year, a ₱200,000 consultancy fee and a ₱50,000 cash dividend. The two payments produce two different certificates and two different outcomes.

The consultant claims the ₱20,000 on Form 2307 through the SAWT filed with the income tax return, but does nothing further with the ₱5,000 on Form 2306 — it is already final. Mixing the two up, and trying to credit the dividend’s final tax, is a common error that a return review will reject.

Frequently asked questions #

What is the difference between BIR Form 2306 and BIR Form 2307? #

BIR Form 2306 is the Certificate of Final Tax Withheld at Source — it evidences final withholding tax that fully and finally settles the payee’s income tax on that income. BIR Form 2307 is the Certificate of Creditable Tax Withheld at Source — it evidences creditable (expanded) withholding tax that the payee claims as a credit against its income tax due.

Can I claim BIR Form 2306 as a tax credit? #

No. The tax on a BIR Form 2306 is a final tax already settled at source, so the payee neither reports the income again nor claims the amount as a credit. Only creditable withholding tax on BIR Form 2307 can be claimed as a credit against income tax due on the annual or quarterly return.

Does the payee still report income covered by BIR Form 2307? #

Yes. Creditable withholding tax on BIR Form 2307 is only an advance payment approximating the tax due, so the payee still reports the income on its income tax return, computes the full tax, and credits the withheld amount, paying any balance or claiming any excess.

Which certificate supports the SAWT? #

BIR Form 2307. The creditable taxes it certifies are summarized in the Summary Alphalist of Withholding Taxes (SAWT) attached to the income tax or percentage tax return. BIR Form 2306 evidences final taxes and is not claimed through the SAWT.

When must each certificate be issued? #

BIR Form 2307 is generally furnished to the payee within 20 days following the close of the taxable quarter, or upon the payee’s request. BIR Form 2306 for final taxes is furnished on or before the deadline set in the withholding regulations for the type of income, or on the payee’s request.

Summary #

The label on the certificate tells you what to do with it. BIR Form 2306 certifies a final tax — the income is settled, not reported again, and nothing is credited. BIR Form 2307 certifies a creditable tax — the income is reported, the full tax computed, and the withheld amount claimed as a credit through the SAWT. When the two arrive from the same payer, treat them separately, and confirm the withholding classification for any unusual income against RR No. 2-98 and the BIR website before filing.