BIR Form 2307 for Contractors and Subcontractors: 2% EWT Rate and ATC Codes

Income payments to certain contractors and subcontractors are subject to two percent (2%) expanded withholding tax (EWT) under Revenue Regulations (RR) No. 11-2018, which amended RR No. 2-98 to implement TRAIN Law withholding rates. The payor withholds 2% of the gross payment (generally excluding VAT), remits it with the agent’s other EWT, and issues BIR Form 2307 to the contractor as proof of tax withheld — using ATC WI120 for an individual payee or WC120 for a corporate payee.

This guide is part of the BIR Form 2307 series. It covers who falls under the contractor category, the ATC codes, how the 2% base interacts with VAT, and a worked construction progress-billing example.

Who must withhold 2% on contractor payments? #

Any withholding agent that pays a covered contractor or subcontractor for contracting work must withhold 2% EWT before (or upon) payment and issue BIR Form 2307. The obligation sits with the income payor — a property owner paying a general contractor, a main contractor paying a specialty subcontractor, or a business paying a janitorial or security agency — not with the contractor to self-withhold.

If the same payee is instead paid for professional services (for example, a licensed engineer billing design fees rather than contracting construction), the professional-fee rates and ATCs may apply instead. Classify the payment by what was actually paid for, not by the payee’s trade name alone.

Which contractors does RR No. 11-2018 cover? #

RR No. 11-2018 Section 2.57.2(C) lists the contractors whose gross payments are subject to the flat 2% rate — whether the payee is an individual or a corporation. Coverage includes:

1. General engineering contractors — fixed works needing specialized engineering skill (roads, bridges, railroads, harbors, dams, airports, water supply, irrigation, flood control, docks, power systems, and related works listed in the regulation)
2. General building contractors — structures built for shelter or enclosure of persons, animals, or property, including many industrial and utility plants
3. Specialty contractors — construction work requiring specialized building trades or crafts
4. Other contractors, including among others:
   • Filling, demolition, and salvage work; mine drilling operators
   • Operators of stevedoring, warehousing, and forwarding establishments
   • Transportation contractors / common carriers for goods by land, air, or water, where gross payments by the payor to the same payee amount to at least ₱2,000 per month
   • Messengerial, janitorial, private detective and/or security agencies, and credit/collection agencies
   • Labor recruiting agencies and labor-only contractors (as defined in the regulation)

Always check the current text of RR No. 11-2018 (and later amendments) for the full enumeration before treating an unusual service as contractor withholding.

Which ATC code goes on BIR Form 2307? #

Contractor payments use ATC WI120 for individual payees and WC120 for corporate payees — both at 2%. These codes are distinct from Top Withholding Agent service codes (WI160/WC160) and from professional-fee codes (WI010/WI011/WC010/WC011). Using a TWA or professional ATC on a true contractor billing misstates the payment category the BIR expects to see on the Quarterly Alphalist of Payees — see the ATC codes guide for BIR Form 2307.

Worked example: ₱500,000 construction progress billing #

A corporate general contractor’s progress billing of ₱500,000 (VAT-exclusive) triggers ₱10,000 EWT at 2% under ATC WC120, and the owner issues BIR Form 2307 for that amount.

A manufacturing company engages BuildRight Construction Corp. for a plant expansion. BuildRight submits Progress Billing No. 3 for ₱500,000 (exclusive of 12% VAT). Because BuildRight is a corporation performing covered building-contractor work, ATC WC120 at 2% applies:

The company remits the ₱10,000 with its monthly BIR Form 0619-E / quarterly BIR Form 1601-EQ filings, lists BuildRight on its QAP, and issues a BIR Form 2307 showing ₱500,000 income payment, ATC WC120, and ₱10,000 tax withheld. BuildRight credits the ₱10,000 against its own income tax when filing, supported by the certificate (and SAWT where required).

If the same ₱500,000 had been billed by an individual specialty contractor instead of a corporation, the rate would still be 2%, but the ATC on BIR Form 2307 would be WI120 rather than WC120.

Frequently asked questions #

What is the withholding tax rate on contractors and subcontractors in the Philippines? #

Gross payments to certain contractors and subcontractors — whether individual or corporate — are subject to two percent (2%) expanded withholding tax under Revenue Regulations No. 11-2018 amending RR No. 2-98. The payor withholds 2% of the income payment (generally excluding VAT) and issues BIR Form 2307 to the contractor.

Which ATC codes apply to contractor payments on BIR Form 2307? #

ATC WI120 applies when the contractor payee is an individual, and ATC WC120 applies when the contractor payee is a corporation or other non-individual. Both codes carry the same 2% rate; the letter prefix encodes the payee type the BIR expects to match on the withholding agent’s alphalist.

Which kinds of contractors are covered by the 2% EWT rule? #

RR No. 11-2018 covers general engineering contractors, general building contractors, specialty contractors, and a long list of other contractors — including filling and demolition, janitorial and security agencies, labor-only contractors, and transportation contractors for carriage of goods when monthly gross payments to the same payee reach at least ₱2,000, among others listed in the regulation.

Does the 2% contractor rate apply to subcontractors as well as prime contractors? #

Yes. Income payments to certain contractors under RR No. 11-2018 include subcontractors performing covered contracting work. A main contractor that pays a subcontractor on a covered project withholds 2% and issues BIR Form 2307 to that subcontractor using WI120 or WC120.

How is the 2% EWT base computed when the contractor’s billing includes VAT? #

Expanded withholding tax is generally computed on the gross income payment excluding VAT. If a contractor bills ₱560,000 inclusive of 12% VAT, the 2% EWT applies to the ₱500,000 VAT-exclusive base (₱10,000 withheld), not to the VAT-inclusive total.

Summary #

Contractor and subcontractor payments under RR No. 11-2018 are withheld at a flat 2%, with WI120 for individuals and WC120 for corporations on BIR Form 2307 — a different scheme from the tiered professional-fee rates. Confirm the payee falls within the regulation’s contractor list, compute EWT on the VAT-exclusive base, and keep the certificate aligned with your QAP. For related payment types, see BIR Form 2307 for Professional Fees and What Is BIR Form 2307.