BIR Form 2307 for Aircon and HVAC Repair and Maintenance Contractors
A business that pays an aircon or HVAC repair and maintenance contractor to clean, service, or repair its air-conditioning units — whether under a one-time repair call or a recurring preventive maintenance contract — generally withholds 2% expanded withholding tax (EWT) under RR No. 2-98, Section 2.57.2(E), and issues BIR Form 2307. Because the same invoice often bundles replacement parts with labor, the parts-versus-labor question matters just as much as the base rate.
This guide is part of the BIR Form 2307 series. It covers who withholds on an aircon/HVAC service payment, the applicable ATC codes, how a bundled parts-and-labor invoice is treated, and a worked commercial building maintenance contract example.
Generate Your HVAC Contractor's BIR Form 2307 FREE →Who withholds on an aircon or HVAC maintenance payment? #
The obligation follows the same payor-status test this series applies to every business-service supplier: a corporation or business-connected individual withholds, a private homeowner generally does not. RR No. 2-98 sets the test this way:
“(A) In general, any juridical person, whether or not engaged in trade or business; (B) An individual, with respect to payments made in connection with his trade or business…”
— RR No. 2-98, Section 2.57.3(A)–(B)
A commercial building administrator paying an HVAC contractor for scheduled preventive maintenance across its floors, or a manufacturing plant paying an aircon technician to repair a broken compressor unit, is a withholding agent under clause (A) or (B). A homeowner paying for a one-time aircon cleaning at a private residence falls outside the rule.
What EWT rate and ATC code apply? #
Aircon and HVAC repair and maintenance are not named as their own separate line item in RR No. 2-98 — they fall under the same flat 2% general contractor/business-services catch-all covered in BIR Form 2307 for Contractors and Subcontractors, the bracket this series also applies to IT equipment repair and maintenance and swimming pool maintenance and water treatment contracts.
| Payee | ATC | Rate |
|---|---|---|
| Aircon/HVAC contractor, individually owned | WI120 | 2% |
| Aircon/HVAC contractor, organized as a corporation | WC120 | 2% |
The rate applies the same way whether the job is a single emergency repair call or a recurring quarterly or annual preventive maintenance retainer — the service, not the billing frequency, determines the bracket.
Does a bundled parts-and-labor invoice change the withholding? #
Most HVAC contractors bill replacement parts and service labor together on one invoice, and the combined amount is generally withheld in full at 2% as a service payment — the same treatment this series applies to a combined parts-and-labor bill in BIR Form 2307 for IT Equipment Repair and Maintenance Contracts. A technician who replaces a capacitor, tops up refrigerant, or installs a new compressor as part of a service call is still performing a repair service on equipment the client already owns, not making a separate retail sale of parts.
Itemizing the compressor, capacitor, or refrigerant line separately on the invoice does not, by itself, shift that portion to the 1% goods rate. That would require the parts to be billed and documented as a genuinely distinct sale — for example, a separate supplier invoice for a replacement unit bought outright, apart from the service contractor’s repair billing.
Worked example: a commercial building’s quarterly HVAC maintenance contract #
Meridian Business Tower Corp. contracts CoolAir HVAC Services Inc., organized as a corporation, for quarterly preventive maintenance of its central air-conditioning system, billed as ₱50,000 for the scheduled service call plus ₱20,000 for replacement parts (a compressor capacitor and filters) used during that visit — ₱70,000 total on one invoice.
| Item | Amount |
|---|---|
| Quarterly preventive maintenance service fee (VAT-exclusive) | ₱50,000.00 |
| Replacement parts used during the service call, billed on the same invoice (VAT-exclusive) | ₱20,000.00 |
| Total withholding base (service treated as a single bundled invoice) | ₱70,000.00 |
| EWT withheld (2%, ATC WC120) | ₱1,400.00 |
| VAT (12% on ₱70,000) | ₱8,400.00 |
| Net cash to CoolAir HVAC Services Inc. (fee + parts + VAT − EWT) | ₱77,000.00 |
Because CoolAir billed the parts and labor on the same service invoice for one maintenance visit, Meridian withholds 2% on the full ₱70,000, not just the ₱50,000 labor component. Meridian remits the ₱1,400 through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues CoolAir a BIR Form 2307 each quarter reflecting the cumulative service payments and ATC WC120. If Meridian had instead bought a replacement condenser unit outright from a separate equipment supplier — unrelated to this maintenance contract — that purchase would be a straight goods transaction evaluated on its own, not folded into this 2% service computation.
Frequently asked questions #
Does a business have to withhold tax when paying an aircon or HVAC maintenance contractor? #
Yes, if the payor is a corporation or a business-registered individual. A business paying an aircon or HVAC repair and maintenance company to clean, service, or repair its air-conditioning units is a withholding agent under RR No. 2-98, Section 2.57.3(A)-(B), and must withhold expanded withholding tax and issue BIR Form 2307.
What withholding tax rate and ATC code apply to aircon and HVAC maintenance fees? #
Aircon and HVAC repair and maintenance services generally fall under the 2% general contractor/business-services bracket under RR No. 2-98, Section 2.57.2(E), as amended by RR No. 11-2018 — ATC WI120 for an individually run service provider or WC120 for one organized as a corporation.
Does withholding on a bundled invoice with both replacement parts and service labor change if parts are itemized separately? #
Generally no. Most HVAC contractors bill parts (a compressor, a capacitor, refrigerant) and labor together as a single service invoice, and the full amount is withheld at 2% as a service payment. Itemizing parts separately on the invoice does not, by itself, move that portion to the 1% goods rate unless the parts are billed and documented as a distinct sale apart from the repair job.
Does a recurring quarterly preventive maintenance contract get withheld differently from a one-time repair call? #
No. Whether billed as a one-time repair call or a recurring quarterly or annual preventive maintenance retainer, the service remains a 2% withholdable payment under RR No. 2-98, Section 2.57.2(E). On a recurring contract, each period’s fee is withheld as it is paid, accrued, or invoiced under Section 2.57.4, the same timing rule applied to any other recurring service contract in this series.
Does a homeowner paying for aircon cleaning or repair at home need to withhold tax? #
No. Under RR No. 2-98, Section 2.57.3(B), withholding applies only to payments connected to a trade or business. A homeowner paying an aircon technician to clean or repair a unit at a private residence is not a withholding agent, and the technician does not receive a BIR Form 2307 for that payment.
Summary #
Aircon and HVAC repair and preventive maintenance contracts sit in the flat 2% general business-services bracket (ATC WI120/WC120) under RR No. 2-98, Section 2.57.2(E) — the same bracket this series applies to IT equipment repair, pool maintenance, and other recurring building-service contracts. A bundled invoice combining service labor with replacement parts used during that same call is generally withheld in full at 2%, not split into separate goods and service rates. See BIR Form 2307 for Contractors and Subcontractors for the general 2% bracket this rate draws from, and BIR Form 2307 for IT Equipment Repair and Maintenance Contracts for the parallel parts-vs-labor treatment on another equipment-service contract.