BIR Form 2307 for Payments Made in Foreign Currency: How to Convert and Report Withholding Tax

Yes — a Philippine withholding agent that pays a resident supplier, consultant, or professional in US dollars or another foreign currency must still withhold expanded withholding tax (EWT) and issue BIR Form 2307, exactly as it would for a peso payment. The only extra step is converting the foreign currency amount to Philippine Peso, since BIR Form 2307 and the related withholding returns are denominated in peso only.

This guide is part of the BIR Form 2307 series. For the underlying rate structure on service payments before you get to the currency question, see BIR Form 2307 for Professional Fees and the pillar guide, What Is BIR Form 2307.

Does currency change whether you have to withhold? #

No. The obligation to withhold turns on the nature of the payment and the payee’s classification, not the currency it’s paid in. RR No. 11-2018 sets EWT rates for professional fees, rent, contractor payments, commissions, and other income categories without carving out an exception for payments settled in USD, EUR, or any other foreign currency. If a payment would trigger EWT when paid in peso, it triggers EWT when paid in dollars.

This comes up most often when a Philippine company engages a resident freelancer, IT contractor, or consultant who bills in USD — common for outsourcing, software development, or remote professional services — or when a locally registered branch pays a Philippine-resident supplier under a dollar-denominated contract. As long as the payee is a resident taxpayer receiving income subject to creditable withholding, the withholding agent’s obligations under RR No. 11-2018 apply in full: withhold at the applicable rate, remit through the monthly/quarterly EWT return, and issue BIR Form 2307 as proof of the amount withheld.

How do you convert a foreign currency payment for withholding tax purposes? #

Convert the foreign currency income payment to its Philippine Peso equivalent using the exchange rate prevailing at the time the income is payable or paid, then compute EWT on the converted peso amount. This conversion-before-withholding approach is not new — the BIR has required it since Revenue Memorandum Circular (RMC) No. 40-92, which specifically addressed the exchange rate to use when collecting withholding tax on foreign-currency-denominated income payments.

RMC No. 40-92 states the rule directly:

“The foreign currency denominated income payment shall first be converted into Philippine Peso equivalence, using the applicable foreign exchange conversion rate prevailing at the time such income, which is subject to withholding, is payable or paid.”

In practical terms, that rate is either the interbank reference rate at the time the income is payable or paid (for a payment recorded as an accrual with no actual currency exchange yet), or the buying/selling rate applied when the payment is actually transacted through an authorized agent bank. Whichever rate is used, it should also be the rate used to record the transaction in the withholding agent’s own books — the tax conversion and the accounting conversion should not diverge.

More recently, the BIR issued RMC No. 12-2024 to clarify how foreign currency transactions generally should be converted to peso for both financial reporting and tax purposes. Multiple tax practitioner summaries of that circular (Grant Thornton Philippines and Reyes Tacandong & Co. among them) describe the same core mechanics: USD-denominated transactions are converted using the Bankers Association of the Philippines (BAP)-published rate, while transactions in other foreign currencies use the applicable Bangko Sentral ng Pilipinas (BSP) rate, both applied as the spot rate on the date of the transaction — not a monthly average. Because RMC No. 12-2024 is the more recent, general statement on forex-to-peso conversion, it’s the safer reference point for which specific published rate to cite; the underlying “convert at the rate prevailing when the income is paid or accrued” principle for withholding traces back to RMC No. 40-92.

Which exchange rate should you actually use, and when? #

Use the rate in effect on the date the income is paid or becomes payable — the accrual date if you record the liability before paying, or the actual payment/conversion date if you’re withholding at the point of payment. Don’t use an average rate for the month or a rate from an earlier invoice date if the payment date has moved.

A few practical points for withholding agents:

• BSP publishes a daily reference rate on its website, and banks publish their own buying/selling rates for same-day conversions — either can serve as your documented source, but be consistent from payment to payment.
• Keep the rate source and the peso computation on file. RMC No. 12-2024 also introduced a notification/documentation expectation for the forex rate a taxpayer elects to use, with administrative penalties under Section 255 of the Tax Code for failing to notify the BIR where required — so treat the rate you used as part of your withholding tax records, not just an internal working paper.
• Round to the peso, since BIR Form 2307 and the EWT returns (BIR Form 0619-E, 1601-EQ) accept peso amounts only — there is no foreign currency field on the form.

Worked example: a USD professional fee converted for BIR Form 2307 #

Suppose a Philippine company engages a resident IT consultant to build a reporting dashboard and agrees to pay a flat fee of USD 2,000 on completion. The consultant is an individual, non-VAT registered, but has already exceeded the ₱3,000,000 gross income threshold for the year and has no current sworn declaration on file with this payor — so the higher individual EWT rate applies under RR No. 11-2018.

The exchange rate below is an illustrative example rate only, not a claim about the current market rate — always use the actual BSP or BAP rate in effect on your payment date.

The company withholds ₱11,700 of the ₱117,000 peso-equivalent fee, remits it through its EWT return, and issues BIR Form 2307 showing an amount of income payment of ₱117,000.00 and tax withheld of ₱11,700.00 — both entirely in peso, with ATC WI011 marking it as the individual professional-fee rate for income over the ₱3,000,000 threshold. (If the consultant instead qualified for the lower 5% rate — gross income within ₱3,000,000 and a valid sworn declaration on file — the ATC would be WI010 and the tax withheld would drop to ₱5,850.00. See BIR Form 2307 for Professional Fees for the full 5%/10% rate table.) The USD 2,000 contract amount and the exchange rate used stay in the company’s supporting file — they don’t appear as separate fields on the form itself.

How to complete BIR Form 2307 for a foreign currency payment #

Every field on BIR Form 2307 is filled in with the peso-converted figures — there is no foreign currency column. Practically, that means:

1. Convert first, then compute. Apply the prevailing exchange rate to the gross foreign currency payment to get the peso tax base before applying the EWT rate.
2. Enter the peso amount of income payment in the corresponding field, using the same figure you used to compute the tax.
3. Enter the peso amount of tax withheld, matching what was actually remitted to the BIR.
4. Use the ATC code for the underlying payment type (professional fees, rent, goods, etc.) — currency doesn’t change which ATC applies, only the peso amounts that flow from the conversion.
5. Retain the exchange rate source and date in your working papers in case the BIR requests support for the conversion during audit.

Common mistakes to avoid #

• Withholding on the foreign currency face value without converting first — the tax base must be the peso equivalent, not a percentage applied directly to a dollar figure and then converted after the fact, which can produce a mismatched peso amount versus the rate actually used for payment.
• Using a stale or averaged rate instead of the rate on the actual payment or accrual date.
• Leaving the exchange rate undocumented, which makes it difficult to defend the peso figures on BIR Form 2307 if the BIR questions the conversion during an audit.
• Assuming foreign currency payments are exempt from withholding — they are not; the currency of payment has no bearing on whether EWT applies under RR No. 11-2018.

Summary #

A Philippine withholding agent paying a resident payee in foreign currency has the same EWT obligations as one paying in peso — the payment type and payee classification under RR No. 11-2018 determine whether and how much to withhold. The extra step is conversion: translate the foreign currency amount to its peso equivalent using the exchange rate prevailing at the time of payment or accrual, consistent with the approach the BIR has required since RMC No. 40-92 and the more recent conversion guidance in RMC No. 12-2024, then compute and withhold tax on that peso figure. BIR Form 2307 itself only ever shows peso amounts, so keep the foreign currency amount and the exchange rate used in your supporting records rather than on the form.