Does a company withhold tax when exchanging currency through a money changer?

Generally no, on the currency exchange itself. A sale or purchase of foreign currency through a BSP-registered forex dealer or money changer is a transaction in currency, not an income payment for a service, so it generally falls outside the expanded withholding tax (EWT) system covered by RR No. 2-98. The exchange rate spread the dealer earns is its own trading margin, not a withholdable fee.

What if the dealer charges a separate service or handling fee?

A handling, courier, or bulk-transaction service fee billed separately from the currency exchange itself is a payment for a service, and is withheld at 2% expanded withholding tax under RR No. 2-98 Section 2.57.2(E), as amended by RR No. 11-2018, using ATC WI120 for an individually operated money changer or WC120 for one organized as a corporation.

Is this the same treatment as interest paid to a bank?

The reasoning is similar to how this series treats bank transactions generally — a bank's core lending/deposit-taking activity and, by the same logic, a forex dealer's core currency-trading activity sit largely outside the ordinary EWT net, while a distinct, separately billed service charge does not. See BIR Form 2307 for Interest Income From Lending Money to a Business for the parallel bank-vs-nonbank distinction in a different context.

Does a BSP-registered money changer need its own license to operate?

Yes. Money changers and foreign exchange dealers in the Philippines must register with the Bangko Sentral ng Pilipinas (BSP) as money service businesses, separate from their BIR registration and tax compliance. That licensing requirement doesn't change the withholding analysis in this guide, which concerns only the paying company's EWT obligations.

BIR Form 2307 for Forex Dealers and Money Changers: Is the Exchange Rate Spread Withheld?

A company that exchanges currency in bulk through a BSP-registered forex dealer or money changer generally withholds no creditable tax on the currency exchange itself — the dealer’s exchange-rate spread is a trading margin, not a service fee — but a separately billed handling or service charge is withheld at 2%, under Revenue Regulations (RR) No. 2-98 as amended by RR No. 11-2018.

This guide is part of the BIR Form 2307 series. It draws on the bank-vs-nonbank distinction in Is Interest Income From Lending Money to a Business Subject to BIR Form 2307? and the fee-vs-pass-through split in BIR Form 2307 for Travel Agencies and Tour Operators.

Generate a Forex Service Fee BIR Form 2307 FREE →

Why a currency exchange itself generally isn’t withheld #

A sale or purchase of foreign currency through a money changer is a transaction in currency rather than a payment for a service rendered to the buyer, so it does not fit the income-payment structure RR No. 2-98 targets under the general withholding-agent definition:

“(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 money changer’s revenue on a straight currency sale comes from the buy-sell rate spread, which is realized through its own books as trading income rather than as an income payment the customer makes to the dealer for a service. This parallels how this series already treats core bank activity for EWT purposes — the underlying financial transaction sits largely outside the ordinary creditable-withholding net, while a distinct, separately identifiable service charge does not.

What rate and ATC code apply to a handling or service fee? #

Once a forex dealer separately itemizes a handling fee, courier fee, or bulk-transaction service charge — distinct from the exchange rate itself — that fee is a payment for a service and falls under the flat 2% general contractor/business-services bracket used throughout this series.

Component	Payee	ATC	Rate
Currency exchange (the sale itself, at the quoted rate)	Money changer/forex dealer	—	Not an EWT income payment
Separately billed handling/service fee	Individually operated money changer	WI120	2%
Separately billed handling/service fee	Money changer/forex dealer, organized as a corporation	WC120	2%

Worked example: a BPO’s bulk payroll currency conversion #

Northstar BPO Services, Inc. (fictional) converts USD 50,000 of client billings into Philippine pesos through Metro Exchange Corp. (a corporation), a BSP-registered money changer, at the quoted exchange rate, and separately pays a ₱3,500 bulk-transaction handling fee for same-day processing and secure delivery of the converted funds.

Item	Amount	ATC	EWT Withheld
Currency exchange at quoted rate	(currency sale, not an income payment)	—	None
Bulk-transaction handling fee	₱3,500.00	WC120 (2%)	₱70.00

Northstar withholds nothing on the currency conversion itself, but withholds ₱70 on the ₱3,500 handling fee, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, lists Metro Exchange Corp. on its Quarterly Alphalist of Payees, and issues a BIR Form 2307 for ₱3,500 under ATC WC120. Had Metro Exchange simply quoted a single all-in rate with no separately itemized fee, there would be no withholding event in this transaction at all.

Summary #

Exchanging currency through a money changer generally triggers no EWT on the exchange itself, because the dealer’s margin is a trading spread rather than a service fee — but a separately billed handling or service charge is withheld at 2% under ATC WI120/WC120, the same general contractor/business-services bracket used throughout this series. See Is Interest Income From Lending Money to a Business Subject to BIR Form 2307? for the parallel bank-vs-nonbank reasoning. For the full library of BIR Form 2307 guidance, start at the BIR Form 2307 series hub or the pillar guide.