BIR Form 2307 for Software Developers and IT Consultants: Professional Fee or Contractor Rate?

A business that pays for software development, IT consulting, or systems-integration services must generally withhold expanded withholding tax (EWT) and issue BIR Form 2307 — but which rate applies depends heavily on whether the payee is an individual freelancer or a registered IT company. An individual programmer or consultant is typically withheld as a “management and technical consultant” under the 5%/10% individual professional-fee bracket, while a software development or IT outsourcing company is withheld under the flat 2% contractor rate instead.

This guide is part of the BIR Form 2307 series. It covers why there’s no dedicated “software developer” ATC code, how the individual-consultant-vs-corporate-contractor distinction plays out for IT work specifically, the ATC codes for each, and a worked example contrasting a freelance developer with a registered software company on the same project.

Why isn’t there a specific ATC code for “software developer”? #

RR No. 2-98’s list of individually engaged professionals — the same enumeration that names lawyers, CPAs, architects, and engineers by their specific licensed profession — does not name computer programmers, software developers, or IT consultants as their own distinct category. Software development as a profession emerged and scaled largely after that enumeration was written, and unlike architecture or engineering, most IT roles don’t carry a Professional Regulation Commission (PRC) license the way a doctor, lawyer, or civil engineer does. In practice, the BIR and withholding agents fit an individual’s software development, systems design, or IT consulting fee into the closest matching category the enumeration already provides: management and technical consultants, which RR No. 2-98 does list.

“…the following individuals shall be subjected to expanded withholding tax: …management and technical consultants…”

— Section 2.57.2(A) of Revenue Regulations No. 2-98, as amended, listing individually engaged professionals subject to expanded withholding tax

This means an individual freelance developer or IT consultant is withheld the same way a management consultant would be — under ATC WI010/WI011 — rather than falling outside EWT entirely just because “software developer” isn’t a named licensed profession.

Individual freelancer or IT company — why the payee type changes the rate #

The withholding rate and ATC code turn on whether the payee is an individual providing personal technical/consulting services, or a company delivering the work as a business — the nature of the underlying deliverable (custom software, an app, a system integration) does not change which bracket applies; the payee’s legal form does.

A company that engages “Miguel Santos” directly as an individual freelancer to build a custom application — invoicing under his own name and TIN — generally withholds under WI010/WI011 as a management/technical consultant. The same company paying an invoice from “Codeworks Solutions, Inc.” for an identical development project withholds under WC160 at the flat 2% contractor rate instead, because the payee is a corporation providing the service as a business, not an individually licensed or personally engaged consultant. See BIR Form 2307 for Purchases of Services: Top Withholding Agent 2% Rate Explained and BIR Form 2307 for Contractors and Subcontractors for how the 2% contractor bracket works more broadly.

Who has to withhold on a software development or IT consulting fee? #

Any business or individual engaged in business — a corporation, a registered sole proprietorship, or a self-employed professional paying in the course of that business — that pays for software development, IT consulting, or systems-integration services is a withholding agent and must withhold EWT before releasing payment. Common payors include:

• A startup or company paying an individual freelance developer to build or maintain a custom application
• A retailer or manufacturer engaging an IT outsourcing firm for systems integration or enterprise software implementation
• A company retaining an individual IT consultant on a monthly retainer for network or infrastructure advisory work
• A corporation paying a registered software company for a fixed-price development project

Only a payor itself engaged in business triggers the obligation. An individual paying a freelance developer purely for a personal, non-business project (say, a personal portfolio website with no business purpose) is not a withholding agent under these rules, the same way an ordinary consumer paying any other individual professional for a personal matter is not.

The sworn declaration: how an individual developer or consultant gets the 5% rate #

An individual freelance developer or IT consultant secures the lower 5% rate the same way any other individual professional does — by filing an Income Payee’s Sworn Declaration of Gross Receipts/Sales with each business that pays them, together with a copy of their BIR Certificate of Registration (BIR Form 2303). Without that declaration on file, the paying business should default to the higher 10% rate. See BIR Sworn Declaration for Lower Withholding for the Annex “B-1” (single payor) versus Annex “B-2” (multiple payors) distinction and the January 15 filing deadline for an ongoing engagement. A software or IT company withheld under the corporate 2% contractor rate does not use this individual sworn-declaration mechanism at all.

Worked example: the same project, two different payees #

A retail chain needs a custom inventory-management system built and budgets ₱800,000 for the project.

Scenario A — an individual freelance developer. The retailer engages “Ana Reyes,” an individual freelance developer, who bills the ₱800,000 fee under her own name and TIN and has an Income Payee’s Sworn Declaration (Annex B-1) on file confirming gross income for the year under ₱3,000,000.

Scenario B — a registered IT company. The same retailer instead engages “ByteForge Systems, Inc.,” a registered software development corporation, for the identical ₱800,000 project.

The deliverable and the price are identical in both scenarios — only the payee’s legal form changes which ATC code and rate the retailer applies, and how much it withholds and remits through BIR Form 0619-E and BIR Form 1601-EQ, and reflects on the BIR Form 2307 it issues to each payee.

Frequently asked questions #

What withholding tax rate applies when a company pays an individual freelance software developer? #

An individual freelance software developer or IT consultant is generally withheld as a management or technical consultant under the individual professional-fee bracket in Section 2.57.2(A) of RR No. 2-98, as amended by RR No. 11-2018: 5% (ATC WI010) if gross income for the current year does not exceed ₱3,000,000 and a sworn declaration is on file, or 10% (ATC WI011) otherwise.

What rate applies when the payment goes to a software development or IT outsourcing company instead of an individual? #

A software development, IT outsourcing, or systems integration company organized as a corporation is generally withheld under the flat 2% contractor rate (ATC WC160/WI160) under RR No. 11-2018, since it is providing services as a business entity rather than as an individually licensed professional.

Is there a specific BIR ATC code just for “computer programmers” or “software developers”? #

No. RR No. 2-98’s enumeration of individually engaged professionals does not name computer programmers or software developers as their own category the way it names architects, engineers, or CPAs. In practice, an individual providing IT consulting or software development services is treated as a management and technical consultant, which does fall inside the named professional-fee list.

Does a startup paying an individual freelance app developer need to withhold tax? #

Yes, if the startup itself is engaged in business — a registered company, partnership, or sole proprietorship paying a freelancer for services in the course of that business is a withholding agent and must withhold EWT and issue BIR Form 2307, regardless of whether the freelancer works informally or through a written contract.

Does BIR Form 2307 for IT services change if the payment is for a one-time project versus an ongoing retainer? #

No. The withholding obligation and applicable rate turn on who the payee is (individual professional vs. corporate contractor) and the payee’s income/registration status, not on whether the engagement is a one-time project fee or a recurring monthly retainer — both are subject to the same EWT rules and require BIR Form 2307.

Summary #

Software development and IT consulting fees don’t have their own dedicated ATC code — an individual freelance developer or consultant is instead withheld as a management/technical consultant under the 5%/10% individual professional-fee bracket (WI010/WI011), while a software company or IT outsourcing firm organized as a corporation is withheld under the flat 2% contractor rate (WC160) instead. The same project, the same deliverable, and the same price can carry two very different withholding results depending purely on whether the payee is an individual or a registered company. For the underlying contractor and professional-fee mechanics this scenario draws on, see BIR Form 2307 for Contractors and Subcontractors and BIR Form 2307 for Professional Fees.