Does a Client Still Withhold Tax on Your Fee If You Chose the 8% Income Tax Rate? BIR Form 2307 Explained

Electing the 8% income tax rate changes how a self-employed professional computes their own income tax — it does not change what a client withholds at the point of payment. Under NIRC Section 24(A)(2)(b), the 8% option stands “in lieu of the graduated income tax rates” and “the percentage tax under Section 116” only. It says nothing about the creditable withholding tax rules in Sections 57–58 of the Tax Code, so a corporate or top-withholding-agent client paying a professional, talent, or commission fee to an 8%-electing individual still withholds at the usual rate and still issues BIR Form 2307.

This post is part of the BIR Form 2307 series. For the underlying rate table, see BIR Form 2307 for Professional Fees; for how the rate itself is set, see BIR Sworn Declaration for Lower Withholding.

Why doesn’t the 8% option remove withholding? #

The 8% income tax option and creditable withholding tax operate under two different chapters of the Tax Code, and the law that created the option only lists two things it replaces. NIRC Section 24(A)(2)(b), as amended by the TRAIN Law (Republic Act No. 10963), grants self-employed individuals and professionals the option to pay 8% of gross sales/receipts and other non-operating income in excess of ₱250,000, instead of two specific taxes — nothing more. The statute reads:

“…self-employed individuals and/or professionals… shall have the option to avail of an eight percent (8%) tax on gross sales or gross receipts and other non-operating income in excess of Two hundred fifty thousand pesos (₱250,000) in lieu of the graduated income tax rates under Subsection (A) hereof and the percentage tax under Section 116 of this Code.”

— National Internal Revenue Code, Section 24(A)(2)(b), as amended by RA No. 10963 (TRAIN Law)

Notice what is on that list and what is not: the graduated income tax rate table, and the Section 116 percentage tax. Creditable withholding tax lives in a separate part of the Code — Sections 57 and 58 — and Revenue Regulations No. 8-2018 and No. 11-2018, which implemented the TRAIN Law’s 8% option, never suspended those provisions. A client’s duty to withhold on a covered income payment doesn’t ask which income tax regime the payee elected; it asks what kind of payment is being made and how much the payee has declared in gross receipts.

Which BIR Form 2307 rate still applies? #

An 8%-electing professional is withheld upon at exactly the same rate a graduated-rate professional would face for the same type of payment — the sworn declaration mechanism under RR No. 11-2018, not the income tax election, decides the rate. A client paying a professional, talent, commission, or similar covered fee applies:

Whether that same individual separately checked the “8%” box on BIR Form 1905 or BIR Form 1701Q has no bearing on this table. See How to Elect the 8% Income Tax Rate for the mechanics of the election itself, which is a completely separate filing from the sworn declaration that sets the withholding rate.

Worked example: crediting BIR Form 2307 against the 8% tax due #

An 8%-electing consultant doesn’t lose the tax a client withholds — it simply flows through as a credit against the 8% tax computed at quarter- and year-end, the same way it would under the graduated rates.

A marketing consultant, non-VAT-registered, elected the 8% income tax rate for the year on BIR Form 1701Q and filed an Annex B-1 sworn declaration with her only corporate client, projecting gross receipts of ₱1,200,000 — comfortably under the ₱3,000,000 threshold. She bills the client a flat ₱100,000 monthly retainer.

Per invoice:

For the full year:

The ₱60,000 already withheld doesn’t disappear because she chose 8% over the graduated rates — it reduces the balance she owes on BIR Form 1701A the way any creditable withholding tax would. Skipping this credit, or assuming the certificates no longer matter once 8% is elected, means overpaying tax that was already collected on her behalf.

What if a client stops withholding, assuming 8% means no more withholding? #

A client who stops withholding because a payee mentioned the 8% option is exposed, not the payee — the withholding obligation belongs to the payor, and NIRC Section 251 penalizes a withholding agent who fails to withhold regardless of why. If a payee believes their client has stopped issuing BIR Form 2307 on this mistaken basis, the fix is the same as any missing-certificate situation: point the client to Revenue Regulations No. 11-2018’s sworn-declaration rate table above, which makes clear the 8% election is irrelevant to whether withholding applies. See What to Do If a Client Won’t Give You Your BIR Form 2307 for the escalation steps if the client still declines.

Frequently asked questions #

Does electing the 8% income tax rate exempt a professional from withholding tax? #

No. The 8% income tax option under NIRC Section 24(A)(2)(b) replaces the graduated income tax rates and the percentage tax under Section 116 — it does not mention, and does not remove, the creditable withholding tax rules under Sections 57 and 58 of the Tax Code. A client paying a professional, talent, or commission fee to an 8%-electing individual still withholds and still issues BIR Form 2307.

What withholding tax rate applies to an 8%-electing professional’s fee? #

The same rate that would apply if the payee had stayed on the graduated rates: 5% if the payee submits an Annex B-1 sworn declaration showing gross receipts for the year will not exceed ₱3,000,000, or 10% if the payee is VAT-registered, exceeds that threshold, or never files the declaration, under Revenue Regulations No. 11-2018. Choosing the 8% income tax option has no effect on this rate.

How does an 8%-electing taxpayer use the BIR Form 2307 they receive? #

The taxpayer totals the creditable withholding tax shown on all BIR Form 2307 certificates received during the year and deducts that total from the 8% tax computed on gross sales/receipts and other non-operating income in excess of ₱250,000, on the applicable BIR Form 1701Q (quarterly) and BIR Form 1701A or 1701 (annual).

Can a payee ask a client to stop withholding because they chose the 8% rate? #

No. The client’s obligation to withhold is independent of the payee’s income tax regime election. A withholding agent that stops withholding based on a payee’s claim about the 8% option is still liable for the tax that should have been withheld, plus penalties, under NIRC Section 251.

Does the 8% option remove any withholding-related filing for the payee? #

It removes the payee’s own percentage tax return (BIR Form 2551Q) and the percentage tax otherwise due under Section 116, since the 8% rate stands in place of that tax. It does not remove the payee’s need to keep and reconcile BIR Form 2307 certificates, which still function as creditable withholding tax regardless of which income tax regime the payee elected.

Summary #

Choosing the 8% income tax rate is a decision about how a self-employed individual or professional computes their own income tax — it swaps out the graduated rate table and the Section 116 percentage tax, nothing else. It has no effect on a client’s duty to withhold under Sections 57–58 of the Tax Code, so BIR Form 2307 keeps arriving exactly as it would under the graduated rates, at the same 5%/10% sworn-declaration rate, and the payee keeps crediting it against the 8% tax due at quarter- and year-end. For the rate rules this depends on, see BIR Form 2307 for Professional Fees and BIR Sworn Declaration for Lower Withholding.