Referral and Finder's Fees Paid to Individuals: Withholding Tax and BIR Form 2307

Yes — a referral or finder’s fee paid to an ordinary individual is generally subject to expanded withholding tax if the payor is itself a withholding agent, even when the recipient isn’t a licensed broker, isn’t an employee, and only did it once. What decides the answer is whether the payment compensates a service — bringing about a transaction — not the recipient’s job title or how often they do this. This guide covers the rate, the ATC bracket it most reasonably fits, and a worked example.

Is a referral fee actually subject to withholding tax? #

A referral or finder’s fee is subject to expanded withholding tax (EWT) when the person paying it is a withholding agent and the payment is for a service — introducing a client, connecting a buyer and a seller, or otherwise bringing about a transaction the payor benefits from. Under RR No. 2-98 (as amended, most recently by RR No. 11-2018), the withholding obligation attaches to corporations generally, and to individuals with respect to payments made in connection with their own trade or business or practice of a profession. That obligation is defined by who the payor is and what the payment is for — not by whether the recipient is a “regular” service provider or a licensed intermediary.

This means an individual who is not a licensed real estate broker, not an insurance agent, and not employed by the payor can still be the subject of withholding if they are paid for finding a client, a supplier, a tenant, or a buyer. The label on the payment — “referral fee,” “finder’s fee,” “introduction fee,” or “commission” — does not change this analysis; what matters is the substance of what was paid for.

This is different from a genuine gift. A no-strings-attached gift — money given without the giver expecting or receiving anything of value in return — is not a payment for a service and falls outside EWT altogether. A finder’s fee, by definition, is paid because the recipient did something the payor considers worth compensating. If a payment is genuinely a gift with no service attached, it isn’t a finder’s fee in the first place; if it’s called a “gift” but was actually paid for making an introduction that closed a deal, its substance as a service payment controls.

What rate and ATC code does a finder’s fee fall under? #

The BIR’s Alphanumeric Tax Code (ATC) schedule has no line item specifically labeled “referral fee” or “finder’s fee.” A finder’s fee compensates someone for bringing about a transaction — introducing parties who then transact — which is economically the same substance as a broker’s commission: both are payments for successfully connecting a buyer and a seller, even though a finder isn’t a licensed broker. On that reasoning, the most defensible treatment is to apply the same bracket this series uses for brokers and sales-agent commissions in BIR Form 2307 for Commissions and Brokers: the individual 5%/10% rate under RR No. 11-2018, rather than inventing a separate “referral fee” category the regulations don’t define.

A commentary on agency-type commissions under Philippine withholding tax practice frames the substance-over-label point this way:

A payment called “incentive,” “service fee,” “rebate,” “marketing support,” “referral fee,” or “consultancy fee” may still be treated as a commission if its substance is compensation for agency-type services.

This site relied on that secondary legal-commentary source (Respicio & Co., Expanded Withholding Tax on Agency Commissions in the Philippines) for this framing, as the BIR has not published a primary ruling specifically addressing the ATC treatment of one-off “finder’s fees” that this research pass could confirm — a payor with a large or recurring finder’s-fee arrangement should confirm the classification with a tax professional or BIR ruling before finalizing a filing position. In practice, most payors applying this reasoning issue BIR Form 2307 using the same WI010/WI011 codes as any other individual commission-type payment, since the sworn-declaration mechanic and the 5%/10% split are otherwise identical.

Does it matter that it’s a single, one-off payment? #

No — the withholding obligation attaches per qualifying payment made by a withholding agent, not to whether the recipient does this kind of work regularly. Nothing in the expanded withholding tax rules conditions the obligation on the payment recurring. A payor doesn’t get to skip withholding on a first-and-only introduction fee just because it isn’t part of an ongoing arrangement, and a recipient doesn’t escape being subject to withholding merely by pointing out that this was a one-time thing.

This is worth stating plainly because it’s a common point of confusion: businesses sometimes assume withholding only kicks in for “real” suppliers or “regular” service providers with an ongoing relationship. That assumption applies to a different, narrower rule — the “regular supplier” threshold that governs when a Top Withholding Agent must withhold on purchases of goods, discussed in The “Regular Supplier” Rule for BIR Form 2307. It does not extend to service-type payments like professional fees, commissions, or finder’s fees to individuals, where the withholding rate itself doesn’t depend on transaction count — a single ₱50,000 finder’s fee is withheld exactly like the fiftieth one would be.

Worked example: a ₱50,000 condo referral fee #

A real estate developer pays an individual — not a licensed broker, just someone who introduced a buyer — a ₱50,000 finder’s fee for referring a condo unit sale. Treating it under the same bracket as a broker’s commission, the developer withholds ₱2,500 at 5% if the individual has filed a sworn declaration, or ₱5,000 at 10% if not.

Ramon is a private individual — an office worker with no real estate license — who introduces his cousin to a condominium developer’s sales team. The cousin buys a unit, and as agreed beforehand, the developer pays Ramon a ₱50,000 finder’s fee once the sale closes. The developer is a corporation and therefore a withholding agent. Because this was a one-off introduction and not an ongoing arrangement, the developer initially has no sworn declaration on file for Ramon, so it applies the higher individual rate:

The developer remits the ₱5,000 through its monthly (BIR Form 0619-E) and quarterly (BIR Form 1601-EQ) withholding tax returns, reports Ramon on its Quarterly Alphalist of Payees, and issues BIR Form 2307 showing ₱50,000 as the income payment and ₱5,000 as tax withheld — even though Ramon has no BIR registration as a broker and this is likely the only such payment he’ll ever receive from this developer. Had Ramon filed a sworn declaration confirming his gross receipts for the year would not exceed ₱3,000,000 before the payment, the developer would instead withhold only ₱2,500 at 5%. Ramon uses the BIR Form 2307 he receives to credit the withheld amount against his own income tax due when he files his annual return, reporting the ₱50,000 as other income from services rendered.

Frequently asked questions #

Is a referral fee or finder’s fee subject to withholding tax? #

Generally yes, if the person paying it is a withholding agent — a corporation, or an individual engaged in business or the practice of a profession — and the payment compensates the recipient for a service, such as introducing a paying client or connecting two parties to a deal. This holds even if the recipient is an ordinary individual who did it once, not a licensed broker or a regular service provider, because expanded withholding tax attaches to the nature of the payment, not the recipient’s job title.

What ATC code applies to a referral or finder’s fee? #

The BIR’s Alphanumeric Tax Code table has no line item labeled “referral fee” or “finder’s fee” by name. Because a finder’s fee economically compensates someone for bringing about a transaction — the same substance as a broker’s commission — the reasoned approach is to treat it under the same commission bracket used for brokers and sales agents (ATC WI010 at 5% with a sworn declaration, or WI011 at 10% without one) rather than as a separate, undefined category.

Does a one-off, non-recurring referral fee still get withheld? #

Yes. The expanded withholding tax obligation attaches to each qualifying payment made by a withholding agent, not to whether the recipient does this regularly. A single, non-recurring finder’s fee paid to an individual for one introduction is still a payment for services if the payor is a withholding agent, so it is withheld the same as a recurring commission would be.

Is a referral fee the same as a gift, and does that change anything? #

No, a genuine no-strings-attached gift is not a payment for services and falls outside expanded withholding tax entirely. A referral or finder’s fee is different by definition: it is paid because the recipient did something — made an introduction, connected a buyer and seller — that the payor considers to have earned the payment. Calling a service payment a “gift” or a “token of appreciation” does not change its substance for withholding purposes.

Who withholds the tax on a finder’s fee, and who issues BIR Form 2307? #

The party paying the finder’s fee withholds the tax if it is itself a withholding agent — typically a corporation or an individual engaged in business or the practice of a profession. That payor deducts the tax before releasing the fee, remits it to the BIR, and issues BIR Form 2307 to the individual who received the fee.

Can the individual who received the finder’s fee use BIR Form 2307 as a tax credit? #

Yes. The withheld amount reflected on BIR Form 2307 is a creditable withholding tax the recipient applies against their income tax due for the year, whether the finder’s fee is their only self-employment income for the year or one item among several.

Summary #

A referral or finder’s fee paid to an ordinary individual is a service payment, not a gift, and is subject to expanded withholding tax whenever the payor is itself a withholding agent — regardless of whether the recipient is a licensed broker, an employee, or just someone who made one introduction. Absent a dedicated ATC line item for “finder’s fees,” the reasoned treatment follows the same 5%/10% bracket used for broker and sales-agent commissions, and the one-off nature of the payment does not exempt it. For the closely related professional and brokerage categories, see BIR Form 2307 for Commissions and Brokers and BIR Form 2307 for Professional Fees, or start from the BIR Form 2307 series hub for the full set of payment-type guides.