Is a Dividend Payment Subject to BIR Form 2307 or Form 2306?

A dividend paid by a domestic corporation to an individual is not reported on BIR Form 2307 — it’s a final withholding tax, certified instead on BIR Form 2306. The two certificates look similar and are often confused because both document tax withheld at source, but they represent fundamentally different tax treatments: one is a credit the payee still applies against their own return, the other already settles the tax in full.

This guide is part of the BIR Form 2307 series and explains why dividends fall outside it, what the correct certificate is, and where an exception applies.

Why isn’t a dividend subject to BIR Form 2307? #

BIR Form 2307 certifies creditable withholding tax (CWT) — an advance, partial collection of tax that the payee later credits against their own income tax liability when filing a return. A dividend paid by a domestic corporation to a resident citizen or resident alien individual, however, is subject to final withholding tax (FWT) under NIRC Section 24(B)(2), as amended — the withheld amount fully satisfies the tax due on that dividend, and the recipient reports nothing further about it on their own return. Because BIR Form 2307 exists specifically to document an amount the payee will later credit, and a dividend leaves nothing left to credit, it doesn’t belong on that form.

What’s the difference between BIR Form 2307 and BIR Form 2306? #

What rate applies to a dividend paid to an individual? #

A cash or property dividend paid by a domestic corporation to a resident citizen or resident alien individual is subject to a 10% final withholding tax under NIRC Section 24(B)(2), as amended by the TRAIN Law. Because it’s final, the corporation withholds and remits the 10%, issues BIR Form 2306 to the individual shareholder, and that dividend income is not added back into the shareholder’s regular income tax computation.

A worked example: A domestic corporation declares a P200,000 cash dividend to an individual shareholder. It withholds P20,000 (10%) as final tax, remits that to the BIR, and issues the shareholder a BIR Form 2306 for P20,000 — not a Form 2307. The shareholder doesn’t include the P200,000 dividend or the P20,000 withheld amount in their own income tax return computation, since the tax on it is already fully settled.

Does the same rule apply to dividends between two corporations? #

No — dividends paid by one domestic corporation to another domestic corporation are generally not subject to tax at all under the NIRC’s intercorporate dividend rules, so no withholding certificate — neither 2307 nor 2306 — is issued for that payment. This exemption exists to avoid taxing the same corporate earnings multiple times as they move between related domestic entities.

For a nonresident foreign corporation shareholder, the treatment shifts again: dividends are generally subject to final withholding tax, with a reduced 15% rate available if the recipient’s home country allows a tax-sparing credit for the tax deemed paid in the Philippines; absent that, a higher general rate applies, subject to any tax treaty the Philippines has with that country.

Frequently asked questions #

Is a dividend payment reported on BIR Form 2307? #

No. A cash or property dividend paid by a domestic corporation to an individual is subject to final withholding tax under NIRC Section 24(B)(2), not creditable withholding tax, so it is certified on BIR Form 2306 (Certificate of Final Tax Withheld at Source), not BIR Form 2307.

What’s the difference between BIR Form 2307 and BIR Form 2306? #

BIR Form 2307 certifies creditable withholding tax — an advance payment the payee later credits against their own income tax return. BIR Form 2306 certifies final withholding tax, where the amount withheld fully satisfies the tax due on that income and there is nothing left for the payee to credit or report further.

What withholding tax rate applies to a dividend paid to an individual? #

A cash or property dividend paid by a domestic corporation to a resident citizen or resident alien individual is subject to a 10% final withholding tax under NIRC Section 24(B)(2), as amended.

Are dividends between two domestic corporations subject to withholding tax? #

Generally no. Dividends received by a domestic corporation from another domestic corporation are not subject to tax under the NIRC’s intercorporate dividend rules, so no withholding certificate is required for that payment.

What withholding tax applies to a dividend paid to a nonresident foreign corporation? #

A dividend paid by a domestic corporation to a nonresident foreign corporation is generally subject to a final withholding tax, with a reduced 15% rate available if the recipient’s country of domicile allows a tax-sparing credit against the tax deemed paid in the Philippines; otherwise a higher general rate applies, subject to any applicable tax treaty.

Summary #

A dividend paid to an individual shareholder is final withholding tax under NIRC Section 24(B)(2), so it belongs on BIR Form 2306, not BIR Form 2307 — the two forms exist for fundamentally different tax treatments, and mixing them up misrepresents whether the payee has anything left to credit. Dividends between domestic corporations are generally untaxed and need no certificate at all, while dividends to nonresident foreign corporations follow their own final-tax rate structure. For payments that genuinely belong on Form 2307, see What Is BIR Form 2307 and When Must You Issue It?, and for a walkthrough of building one correctly, see How to Generate a Single BIR Form 2307 PDF.