BIR Form 2307 for Pawnshops: Withholding on Appraisers, Security Agencies, and Repair Vendors

A pawnshop is a withholding agent on its own vendor payments, the same as any other registered business — when it pays a security agency to guard the vault, a jewelry appraiser to authenticate pledged items, or a repair/refurbishing vendor to restore pawned jewelry, it must withhold expanded withholding tax (EWT) under RR No. 2-98 and issue BIR Form 2307, the Certificate of Creditable Tax Withheld at Source, to each vendor.

This guide is part of the BIR Form 2307 series. It covers the payor side of a pawnshop’s withholding obligations — a different question from BIR Form 2307 for Remittance and Bills-Payment Sub-Agents, which covers a pawnshop as the payee earning commission from a remittance network, and from Are Pawnshops Subject to VAT or Percentage Tax?, a separate question entirely about how the pawnshop’s own lending income is taxed.

Is a pawnshop a BIR withholding agent on its own purchases? #

Yes — a pawnshop that pays for services in the course of its lending business is a withholding agent under RR No. 2-98 Section 2.57.3, regardless of whether it’s organized as a corporation or run as a sole proprietorship. The regulation defines who must deduct and withhold this way:

“(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 pawnshop chain organized as a corporation falls under clause (A) automatically — a corporation is a withholding agent whether or not it’s “in business” in any narrower sense. A pawnshop operated as a sole proprietorship falls under clause (B) instead, because lending against pledged property is squarely a trade or business, so the owner withholds on payments connected to it. Either way, there’s no carve-out for pawnshops: the same rule this series has already applied to HOA and condo corporations and tax-exempt construction joint ventures applies here — the pawnshop’s own tax status doesn’t excuse it from withholding on what it pays out.

How is this different from the pawnshop questions this series already covers? #

A pawnshop shows up in BIR compliance discussions in at least three unrelated roles, and conflating them is a common mistake. The table below separates them so a bookkeeper doesn’t apply the wrong post to the wrong question.

This guide only addresses the third row. A pawnshop can be a sub-agent earning commission from Western Union or Cebuana Lhuillier’s network on one side of its business, and simultaneously a withholding agent paying its own security agency on the other — the two roles sit side by side without affecting each other.

What rate applies when a pawnshop pays its vault security agency? #

A pawnshop that contracts a security agency to guard its vault, counter, and pledged collateral withholds 2% EWT — but only on the agency’s fee, not the guards’ salaries — the same RMC No. 39-2007 carve-out this series already covers for any other client of a security agency. Republic Act No. 5487 makes the client primarily liable for the guards’ minimum wage and requires the agency to earmark and segregate that portion of the billing, so it never becomes part of the agency’s own gross income subject to withholding. See BIR Form 2307 for Security Agencies for the full mechanics and ATC codes (WI120 for an individually owned agency, WC120 for a corporate one, both at 2% of the agency-fee base alone).

A pawnshop is not a special case here — it withholds on its security agency’s fee exactly the way a retail store, bank branch, or condominium corporation would, because the carve-out is grounded in RA 5487’s wage-earmarking rule, not in anything specific to the pawnshop industry.

What rate applies when a pawnshop pays a jewelry appraiser to authenticate pledged items? #

Generally 2%, not the 5%/10% named-professional bracket — because unlike a real estate appraiser licensed under RA No. 9646, there is no equivalent Philippine professional licensing framework for jewelry or gemstone appraisal. BIR Form 2307 for Real Estate and Insurance Appraisers establishes that a real estate appraiser clears the 5%/10% named-professional bracket on two grounds at once: RA 9646 licensure as a real estate service practitioner, and direct enumeration as a “professional appraiser” in RR No. 2-98 Section 2.57.2(A)(1)’s list of individually engaged professionals (alongside architects, engineers, and marine surveyors).

A pawnshop’s jewelry or gemstone appraiser doesn’t clear either ground the same way. There’s no RA 9646-style licensing act for jewelry or gem appraisal in the Philippines, and gemological credentials such as a Graduate Gemologist designation are private certifications, not a government-issued professional license. This series has already drawn the same kind of distinction for interior designers versus architects: a profession that isn’t individually and specifically grounded in a recognized licensing framework generally falls into the flat 2% general business-services bracket (ATC WI120/WC120 under RR No. 2-98 Section 2.57.2(E)) instead of the 5%/10% bracket, even when the vendor’s job title uses the word “appraiser.”

A pawnshop should confirm with its appraiser, and if needed its own tax adviser, before assuming either bracket — misapplying the named-professional rate to a jewelry appraiser who holds no recognized license results in an incorrect certificate that both sides later have to correct.

What rate applies when a pawnshop pays a repair or refurbishing vendor? #

A repair or refurbishing vendor that restores, cleans, or re-plates pawned jewelry and other pledged items before resale or redemption is withheld at the flat 2% general contractor rate under RR No. 2-98 Section 2.57.2(E), using ATC WI120 for an individual repair provider or WC120 for a corporation. This is the same bracket this series covers for auto repair shops and dealership service centers and IT equipment repair and maintenance contracts — repairing someone else’s (or, here, pledged) property for a fee is a service payment, not a goods purchase, so the same 1%-goods-vs-2%-services line this series applies elsewhere carries over to a pawnshop’s repair vendors without any pawnshop-specific adjustment.

If a repair vendor’s invoice separately itemizes replacement parts (new clasps, settings, or plating material) from labor, and the pawnshop happens to be a BIR-designated Top Withholding Agent, the itemized parts portion can instead be split out at the 1% goods rate under RR No. 11-2018’s TWA rules — but for most pawnshops that aren’t TWAs, the simpler rule is to withhold 2% on the full repair billing.

Worked example: SentryVault Pawnshop’s monthly security fee and a one-time appraisal job #

SentryVault Pawnshop pays a vault security agency a monthly fee and separately commissions a one-time jewelry authentication job from an independent gemologist-appraiser. The figures are fictional.

SentryVault withholds a combined ₱1,200 across the two vendors that month, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, lists both vendors on its Quarterly Alphalist of Payees, and issues each one a BIR Form 2307 — ₱45,000 income payment/₱900 tax withheld to Vanguard Vault Security Corp. under ATC WC120, and ₱15,000 income payment/₱300 tax withheld to the gemologist-appraiser under ATC WI120. Had SentryVault instead paid a jewelry refinishing vendor ₱8,000 to re-plate and repair a redeemed bracelet, that payment would be withheld the same way as the appraiser’s fee — 2% under ATC WI120/WC120 — since repair work and unlicensed appraisal work land in the same general business-services bracket.

Pre-filing checklist for a pawnshop withholding on its own vendors #

1. Confirm your pawnshop’s own BIR registration lists expanded withholding tax as an applicable tax type on BIR Form 2303, regardless of whether you’re organized as a corporation or a sole proprietorship.
2. Get an itemized billing from your security agency that separates the earmarked guards’-salary portion from the agency fee, so you withhold 2% on the fee alone, not the full contract price.
3. Don’t assume “appraiser” in a vendor’s job title triggers the 5%/10% rate — confirm whether the appraiser holds a recognized professional license (like a real estate appraiser under RA 9646) before applying anything other than the flat 2% general-services rate.
4. Treat repair and refurbishing vendors the same as any other contractor — 2% on the full billing, split 1%/2% only if your pawnshop is a classified Top Withholding Agent and the invoice itemizes parts separately from labor.
5. Issue BIR Form 2307 within 20 days after quarter-end, or within 3 business days if a vendor specifically requests it.

How does this fit with the rest of the BIR Form 2307 series? #

A pawnshop’s withholding obligations as a payor follow the same rules this series applies to every other business — BIR Form 2307 for Security Agencies for the vault security carve-out, BIR Form 2307 for Real Estate and Insurance Appraisers for the named-professional bracket a jewelry appraiser generally doesn’t clear, and BIR Form 2307 for Contractors and Subcontractors for the general 2% rate that covers repair vendors. For the pawnshop’s own income-side questions, see BIR Form 2307 for Remittance and Bills-Payment Sub-Agents (commission earned) and Are Pawnshops Subject to VAT or Percentage Tax? (lending-income tax classification).

Frequently asked questions #

Does a pawnshop have to withhold tax on payments to its own vendors? #

Yes. A pawnshop — whether organized as a corporation or operated as a sole proprietorship engaged in the lending business — is a withholding agent under RR No. 2-98 Section 2.57.3 on the payments it makes to its own vendors, the same as any other business. This is distinct from the pawnshop’s treatment as a payee when it earns commission as a remittance or bills-payment sub-agent.

What withholding rate applies when a pawnshop pays its vault security agency? #

The standard 2% EWT rate for security agencies applies, but only on the agency-fee portion of the billing, not the guards’ salaries. Under RMC No. 39-2007, the agency’s billing must itemize the earmarked guards’ wages separately from its own agency fee, and only the fee is withheld at 2% under ATC WI120/WC120.

Does a pawnshop withhold 5%/10% or 2% on a jewelry appraiser’s authentication fee? #

Generally 2%, not the 5%/10% named-professional rate. Unlike a real estate appraiser licensed under RA No. 9646, there is no Philippine professional licensing framework for jewelry or gemstone appraisal, so a pawnshop’s in-house or contracted jewelry appraiser is more conservatively withheld under the general 2% business-services bracket (ATC WI120/WC120) rather than the named-professional bracket, absent some other recognized professional credential.

What rate applies to a repair or refurbishing vendor a pawnshop pays for pawned items? #

The flat 2% general contractor/services rate under RR No. 2-98 Section 2.57.2(E) applies, using ATC WI120 for an individual repair provider or WC120 for a corporation — the same bracket this series covers for auto repair shops and IT equipment repair contractors.

Is this the same question as whether a pawnshop pays VAT or percentage tax? #

No. Whether a pawnshop pays the 5% Gross Receipts Tax instead of VAT under Republic Act No. 9238 is about how the pawnshop’s own lending income is taxed. Withholding under BIR Form 2307 is about the pawnshop’s separate role as a payor when it buys services from its own vendors — the two questions don’t affect each other.

Is this the same question as the pawnshop’s remittance sub-agent commission? #

No. A pawnshop that also serves as a sub-agent for a remittance or bills-payment network is the payee on that commission, and the network withholds and issues BIR Form 2307 to the pawnshop. This guide covers the opposite direction — the pawnshop as the payor withholding on its own security, appraisal, and repair vendors.

Summary #

A pawnshop is a withholding agent on its own vendor payments under RR No. 2-98 Section 2.57.3, the same as any other corporation or business-registered sole proprietorship — a question entirely separate from whether the pawnshop pays VAT or percentage tax on its lending income, and from whether it receives a BIR Form 2307 as a remittance sub-agent. A vault security agency’s fee is withheld at 2% on the agency-fee portion alone under RMC No. 39-2007; a jewelry or gemstone appraiser’s authentication fee generally falls into the flat 2% general-services bracket rather than the 5%/10% named-professional rate, absent a recognized licensing framework like the one real estate appraisers have under RA 9646; and a repair or refurbishing vendor is withheld at the same 2% contractor rate as any other repair shop. See the BIR Form 2307 series hub for the full set of payor-side and payee-side scenarios this series covers.