BIR Form 2307 for School Bus and Student Transport Services: Contract Withholding

A school that contracts a bus operator or van service to provide student transport generally withholds 2% expanded withholding tax (EWT) under RR No. 2-98, Section 2.57.2(E), and issues BIR Form 2307 on the transport contract fee. This creditable withholding tax is a separate matter from the common carrier’s percentage tax the bus operator itself files on its own gross receipts.

This guide is part of the BIR Form 2307 series. It covers who withholds on a school transport service contract, the applicable ATC codes, how this differs from the operator’s own common carrier’s tax, and a worked school-year contract example.

Who withholds on a school transport service contract? #

The same payor-status test this series applies to every contractor payment decides the outcome: a corporation or business-connected individual withholds, a private individual generally does not. RR No. 2-98 sets the test 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 private school, whether organized as a corporation or a sole proprietorship, that contracts a bus operator to run designated student pickup and drop-off routes is a withholding agent under clause (A) or (B). This applies whether the school pays the operator a flat monthly contract fee or a per-route rate.

What EWT rate and ATC code apply? #

A student transport service contract is not named as its own separate line item in RR No. 2-98 — it falls under the same flat 2% general contractor/business-services catch-all that already covers courier and last-mile delivery services in BIR Form 2307 for Courier and Last-Mile Delivery Providers and moving/relocation contracts in BIR Form 2307 for Moving Companies, both comparable recurring transport-service contracts.

How is this different from the bus operator’s own common carrier’s tax? #

These are two separate taxes on two different tax bases, and confusing them is a common mistake. The 2% EWT covered here is a creditable withholding tax the school deducts from what it pays the bus operator, which the operator then credits against its own income tax due. The common carrier’s percentage tax under NIRC Section 117 is a different tax entirely — a 3% tax the bus operator computes and files on its own gross receipts from land transport of passengers, covered in Common Carrier’s Tax on Land and Sea Transport. A school’s EWT withholding and the operator’s own percentage tax filing run in parallel, on different amounts, filed by different parties.

Worked example: a school-year bus service contract #

Paaralan ng Bukas Academy contracts Ligtas Eskwela Transport Services for a ₱25,000 per month, per-route student transport contract covering the full ten-month school year.

Paaralan ng Bukas withholds ₱500 each month, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues Ligtas Eskwela a BIR Form 2307 at the end of each quarter summing ₱75,000 in fees and ₱1,500 in cumulative EWT for the period. Over the full ten-month school year, that totals ₱250,000 in contract fees and ₱5,000 in cumulative EWT. Separately, and unrelated to this withholding, Ligtas Eskwela computes and files its own 3% common carrier’s percentage tax on its total gross receipts from all of its transport contracts, including this one.

Frequently asked questions #

Does a school have to withhold tax when paying a bus operator for student transport service? #

Yes, if the school is a corporation, partnership, or business-registered individual. Under RR No. 2-98, Section 2.57.3(A)-(B), a school that pays a bus operator or transport company under a service contract is a withholding agent and must withhold expanded withholding tax and issue BIR Form 2307.

What withholding tax rate and ATC code apply to a school bus service contract? #

A student transport service contract falls under the flat 2% general contractor/business-services bracket under RR No. 2-98, Section 2.57.2(E), as amended by RR No. 11-2018 — ATC WI120 if the bus operator is individually owned, or WC120 if it is organized as a corporation.

Is this the same tax as the common carrier’s percentage tax the bus operator itself pays? #

No, these are two separate taxes on two different parties’ obligations. The 2% EWT the school withholds is a creditable tax against the bus operator’s own income tax, deducted from what the school pays. The common carrier’s percentage tax under NIRC Section 117 is a separate 3% tax the bus operator itself computes and files on its gross receipts from land transport of passengers, unrelated to what any individual client withholds.

Does withholding apply if parents pay the school for the bus service and the school passes the payment to the bus operator? #

The withholding obligation follows whoever is actually paying the bus operator under the service contract. If the school contracts and pays the bus operator directly, even though it collects a transport fee from parents to fund that payment, the school remains the withholding agent on its own payment to the operator.

Does an individual parent withhold tax when hiring a private van service directly for their child, outside any school arrangement? #

Generally no. Under RR No. 2-98, Section 2.57.3(B), an individual only withholds on payments connected to a trade or business. A parent paying a private van or jeepney driver directly for a child’s personal daily commute, with no trade or business behind the payment, is generally not a withholding agent for that fee.

Summary #

A school bus or student transport service contract sits in the flat 2% general business-services bracket (ATC WI120/WC120) under RR No. 2-98, Section 2.57.2(E) — the same bracket covering courier and moving-company contracts elsewhere in this series — and is entirely separate from the 3% common carrier’s percentage tax the transport operator files on its own gross receipts under NIRC Section 117. See BIR Form 2307 for Courier and Last-Mile Delivery Providers for a closely analogous recurring transport contract and Common Carrier’s Tax on Land and Sea Transport for the operator’s own separate tax.