Does a Non-VAT Registered Supplier Still Get a BIR Form 2307?
Yes — a payee’s VAT registration status has nothing to do with whether expanded withholding tax (EWT) applies. Whether a professional, contractor, or supplier is VAT-registered, percentage-tax registered, or below any threshold at all, the payor still withholds and issues BIR Form 2307 whenever the type of payment — a professional fee, rent, a contractor’s fee, a covered goods purchase — falls under Revenue Regulations (RR) No. 2-98, as amended.
This guide clears up a common source of confusion in the BIR Form 2307 series: why VAT status and EWT are unrelated, and why the sworn-declaration ₱3,000,000 figure on BIR Form 2307 is a completely different rule from the ₱3,000,000 VAT registration threshold, despite sharing the same number.
Generate BIR Form 2307 for Any Payee FREE →Why VAT status and EWT are two separate systems #
VAT and expanded withholding tax answer two different questions, computed on two different bases, under two different parts of the Tax Code. VAT (or percentage tax, for non-VAT taxpayers) is a business tax on the payee’s own sales or receipts. EWT is a mechanism for prepaying a payee’s income tax — withheld by the payor and credited against the payee’s eventual income tax liability.
| VAT / Percentage Tax | Expanded Withholding Tax (EWT) | |
|---|---|---|
| What it taxes | The payee’s business sales/receipts | The payee’s income, prepaid at source |
| Who determines coverage | The payee’s own registration status (VAT vs. non-VAT) | The type of income payment the payor is making |
| Depends on payee’s VAT status? | Yes — this is exactly what VAT status governs | No |
| Certificate issued | Official receipt/invoice reflecting VAT or non-VAT status | BIR Form 2307 |
Because these sit in different parts of the system, a payor cannot skip withholding EWT just because a supplier says “I’m not VAT-registered.” VAT status tells the payor whether the supplier’s invoice should show VAT — it says nothing about whether the payment itself is subject to EWT.
The two unrelated ₱3,000,000 thresholds #
One genuine source of confusion is that two completely different BIR rules happen to use the same ₱3,000,000 figure. They are not the same rule, and crossing one threshold has no automatic bearing on the other.
| VAT registration threshold | EWT sworn-declaration threshold | |
|---|---|---|
| Legal basis | NIRC Section 236(G) | RR No. 11-2018 |
| What ₱3,000,000 measures | A business’s gross sales/receipts for the year, for determining mandatory VAT registration | An individual professional’s or supplier’s current-year gross income, for choosing between the 5% and 10% EWT rate |
| Consequence of crossing it | Business must register as a VAT taxpayer | Payor withholds at 10% instead of 5%, absent a valid sworn declaration on file |
| Applies to | Any business measuring its own sales | Individual payees receiving EWT-covered income (see BIR Form 2307 for Professional Fees for the full rate table) |
NIRC Section 236(G) itself frames the VAT-registration trigger around the payee’s own gross sales or receipts, not around anything a payor withholds:
“His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (AA), have exceeded Three Million pesos (P3,000,000)…”
That’s a test the payee applies to their own business results. It has no connection to the payor’s separate EWT withholding decision on any single payment. A professional whose gross income for the year is projected to exceed ₱3,000,000 loses eligibility for the 5% sworn-declaration rate and gets withheld at 10% instead — that’s an EWT rate consequence. Separately, if that same professional’s gross receipts cross ₱3,000,000, they may also need to register as a VAT taxpayer — that’s a completely different consequence, governed by a different section of the Tax Code. The two figures can move together in practice (since both are typically measuring similar gross income), but they are not the same test, and satisfying or failing one doesn’t answer the other.
Worked example: a non-VAT consultant #
An individual consultant is registered as a non-VAT (percentage tax) taxpayer, with gross income well under ₱3,000,000 for the year, and has a valid sworn declaration on file with a client. The client pays a ₱50,000 consulting fee for the quarter.
| Item | Amount |
|---|---|
| Gross professional fee | ₱50,000.00 |
| EWT withheld (5%, sworn declaration on file) | ₱2,500.00 |
| Net amount paid to consultant | ₱47,500.00 |
The client still withholds 5% and issues BIR Form 2307, exactly as it would for a VAT-registered consultant charging the same fee. The only difference on the consultant’s own invoice is that no VAT (or, alternatively, 3% percentage tax handled by the consultant separately) is added — the EWT treatment on the payor’s side doesn’t change based on that status at all.
Frequently asked questions #
Does a non-VAT registered supplier or professional still receive BIR Form 2307? #
Yes. Expanded withholding tax under Revenue Regulations No. 2-98, as amended, applies based on the category of income payment — professional fees, rent, contractor payments, and similar items — not on whether the payee is VAT-registered or percentage-tax registered. A non-VAT payee subject to an EWT-covered payment still gets BIR Form 2307.
Are the ₱3,000,000 VAT threshold and the ₱3,000,000 sworn declaration threshold on BIR Form 2307 the same rule? #
No, even though they use the same peso figure. The VAT registration threshold under NIRC Section 236(G) determines whether a business must register as a VAT taxpayer. The separate ₱3,000,000 gross income figure in the EWT sworn-declaration rule under RR No. 11-2018 determines whether an individual professional or supplier qualifies for the 5% (versus 10%) withholding rate. Crossing one threshold does not automatically mean anything about the other.
If a payee isn’t VAT-registered, does the payor still need to withhold VAT on the purchase? #
No — there’s nothing to withhold if the payee isn’t charging VAT in the first place. What the payor still withholds is expanded withholding tax (income tax), which is separate from VAT and depends on the category of payment, not the payee’s VAT status.
Does a percentage-tax-registered contractor still fall under the 2% EWT rate for contractors? #
Yes. The 2% expanded withholding tax rate for contractors under RR No. 11-2018 applies to the type of service performed, regardless of whether the contractor is VAT-registered or subject to percentage tax instead.
Can a non-VAT payee still use BIR Form 2307 to claim a tax credit? #
Yes. BIR Form 2307 substantiates a creditable withholding tax credit against income tax, which every income taxpayer computes regardless of VAT registration status. VAT registration and income tax withholding are two separate systems, and a non-VAT payee still files an income tax return and claims the EWT shown on Form 2307 against that liability.
Summary #
A payee’s VAT registration status is irrelevant to whether expanded withholding tax applies — EWT coverage turns on the type of income payment, under RR No. 2-98 as amended, not on whether the recipient charges VAT or percentage tax. Don’t confuse the ₱3,000,000 VAT registration threshold with the separate ₱3,000,000 gross-income figure in the EWT sworn-declaration rule — they’re unrelated tests that happen to share a number. For the sworn-declaration mechanics themselves, see BIR Sworn Declaration for Lower Withholding, and for the VAT-side threshold, see VAT Registration Threshold in the Philippines.