BIR Form 2307 for Junk Shops and Scrap Metal Dealers: Does a Buyer Withhold Tax?

A regular business buying scrap metal or junk on an ad hoc basis generally withholds no creditable tax at all — the 1% Top Withholding Agent (TWA) goods rate applies only when the buyer has been specifically designated a BIR Top Withholding Agent, such as a steel mill or recycling company that buys scrap as raw material input, under RR No. 2-98 as restructured by RR No. 11-2018. The type of goods (scrap vs. new materials) doesn’t change the rule — the buyer’s TWA status does.

This guide is part of the BIR Form 2307 series. It applies the same TWA goods-purchase framework already covered in BIR Form 2307 for Construction Materials and Office Supplies Dealers and BIR Form 2307 for Purchases of Goods to the specific case of scrap metal and junk purchases.

Who actually withholds when buying scrap metal or junk? #

A purchase of scrap metal or junk is a purchase of goods, and like any other goods purchase in this series, withholding is triggered only when the buyer has been specifically designated a BIR Top Withholding Agent — not simply because the buyer is a corporation or business-registered individual. The base definition of a withholding agent under RR No. 2-98 still applies to everyone:

“(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)

But meeting that general definition is not enough to trigger withholding on a straight goods purchase. As covered in The ‘Regular Supplier’ Rule for BIR Form 2307 and BIR Form 2307 for Purchases of Goods, the 1% goods rate under RR No. 2-98 as restructured by RR No. 11-2018 applies only once the buyer has received a BIR TWA designation letter. A hardware store, small trading firm, or ordinary manufacturer that occasionally buys scrap metal or junk — say, to resell as-is or to clear out old equipment — but has never been designated a TWA generally withholds nothing on that purchase, regardless of how large the transaction is.

This is a narrower question than a junk shop’s own tax obligations. A junk shop operator’s duty to register with the BIR and remit VAT or percentage tax on its own sales is a separate compliance topic based on the junk shop’s gross receipts — this guide only addresses whether the party buying from the junk shop withholds tax on the purchase price.

What rate and ATC code apply once the buyer is a designated TWA? #

A designated Top Withholding Agent that buys scrap metal or junk as a raw material input withholds 1% under the same goods bracket that applies to any other TWA purchase of goods. This is the identical rate and code already documented across this series for construction materials, office supplies, and general goods purchases — scrap and junk are not carved out into a separate bracket.

The most common real-world scenario for this rate is a manufacturer that consumes scrap as an input — a steel mill or metal recycling company buying scrap metal to melt down and reprocess — because these businesses tend to purchase at volumes that put them on the BIR’s TWA list in the first place. An ordinary business that is not a TWA, buying the same scrap for its own disposal or resale, stays outside this rule entirely.

Worked example: a steel recycler vs. a hardware store #

Scrap Steel Recyclers Corp., a fictional metal recycling company designated a BIR Top Withholding Agent, buys ₱150,000 worth of scrap metal in a month from Mang Ver’s Junk Shop, an unregistered individual junk shop operator, to use as raw material input for its melting operation.

Because Scrap Steel Recyclers Corp. is a designated TWA and the scrap purchase is a purchase of goods for its own production input, it withholds ₱1,500, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues Mang Ver’s Junk Shop a BIR Form 2307 under ATC WI158 using whatever TIN the operator has on file (or following its own documentation procedure for a payee without a formal TIN).

Contrast that with Lakas Hardware, a small hardware and resale store that is not a designated TWA, buying an identical ₱150,000 of scrap metal from the same junk shop to resell as-is to another buyer. Because Lakas Hardware has no TWA designation, it withholds nothing on the purchase and issues no BIR Form 2307 at all — the ₱150,000 changes hands in full, and the only party with a withholding obligation in this pair of examples is the TWA-designated recycler.

FAQs #

Does a company have to withhold tax when buying scrap metal or junk from a junk shop? #

Not automatically. Withholding on a purchase of goods, including scrap metal or junk, applies only when the buyer has been specifically designated a BIR Top Withholding Agent (TWA) under RR No. 2-98 as restructured by RR No. 11-2018. A regular business without that designation generally withholds nothing on an ad hoc scrap or junk purchase, no matter the amount.

What rate applies once the buyer is a designated Top Withholding Agent? #

A designated Top Withholding Agent withholds 1% creditable withholding tax on its purchases of goods, including scrap metal bought as a raw material input, under ATC WC158 if the seller is a corporation or WI158 if the seller is an individual.

Is a junk shop’s own VAT or percentage tax registration the same issue as this withholding rule? #

No. A junk shop’s own obligation to register for VAT or percentage tax and remit its own output tax is a separate compliance topic based on the junk shop’s gross sales. This guide covers only whether the buyer withholds tax on the purchase price and issues BIR Form 2307 — it does not address the junk shop’s own registration or output tax obligations.

Does an unregistered junk shop operator still get a BIR Form 2307 if the buyer withholds? #

Yes. Withholding is triggered by the buyer’s TWA status and the nature of the payment, not by whether the seller is VAT-registered or has a formal business registration. If a designated TWA buys scrap from an unregistered junk shop operator, it still withholds 1% and should still issue BIR Form 2307 using the seller’s available TIN or, if none exists, following its normal unregistered-payee documentation procedure.

Summary #

Whether a buyer withholds tax on a scrap metal or junk purchase turns entirely on the buyer’s own BIR Top Withholding Agent status, not on the type of goods changing hands — the same TWA goods framework under RR No. 2-98 as restructured by RR No. 11-2018 that this series applies to construction materials, office supplies, and general goods purchases. A designated TWA buying scrap as raw material input withholds 1% (ATC WC158/WI158) and issues BIR Form 2307; an ordinary, non-TWA business buying the identical scrap withholds nothing. See BIR Form 2307 for Purchases of Goods for the general TWA goods rule and BIR Form 2307 for Construction Materials and Office Supplies Dealers for another worked application of the same rule. For the full library of BIR Form 2307 guidance, start at the BIR Form 2307 series hub or the pillar guide.