BIR Form 2307 for Solar Panel Installation Contractors: Withholding on the Installer's Fee

A business that pays a contractor to install rooftop or ground-mounted solar panels generally withholds 2% expanded withholding tax (EWT) under RR No. 2-98, Section 2.57.2(E), and issues BIR Form 2307 on the installation contractor’s fee. This is a distinct question from a registered renewable energy developer’s own VAT zero-rating on the power it later generates and sells — one concerns the business paying for an installation job, the other concerns a developer’s own output tax treatment.

This guide is part of the BIR Form 2307 series. It covers who withholds on a solar installation contract, the applicable ATC codes, how this differs from the separate renewable-energy VAT question, and a worked commercial installation example.

Who withholds on a solar installation 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 manufacturing plant, warehouse operator, mall, or office building that hires a contractor to install solar panels on its facility is a withholding agent under clause (A) or (B). A homeowner installing panels on a purely personal residence, with no trade or business behind the payment, generally falls outside the rule.

What EWT rate and ATC code apply to a solar installation contract? #

Solar panel installation falls within the same specialty and utility-installation contracting bracket the BIR has long applied to building and power-related construction work. BIR guidance on the general building contractor category under RR No. 2-98 describes coverage extending to structures including “powerhouse, power plants and other utility plants and installation” requiring specialized engineering knowledge and skill — the same conceptual bracket a rooftop or ground-mounted solar installation falls under, alongside the specialty-contractor category for work requiring specialized building trades or craft.

This is the same 2% general contractor bracket already covered for construction and installation work generally in BIR Form 2307 for Contractors and Subcontractors and for a comparable specialized-trade supplier in BIR Form 2307 for Equipment and Personal Property Rentals (a different transaction — renting equipment rather than installing it — but a useful point of comparison for classifying a bundled contract).

How is this different from renewable energy VAT zero-rating? #

These are two separate tax questions about two different parties in the solar value chain. VAT Zero-Rating for Renewable Energy Developers covers a registered renewable energy developer’s own sales of power, equipment, and services under the Renewable Energy Act — a question about the developer’s output VAT. This guide covers a different question entirely: the expanded withholding tax a paying business withholds when it hires a contractor to install solar equipment on its own facility. A business installing solar panels for its own use as an end consumer of the installation service withholds EWT on the contractor’s fee regardless of whether that contractor also happens to hold renewable energy developer registration.

Worked example: a warehouse operator’s commercial solar installation #

Logistiko Warehousing Corp. contracts SolarBuild Philippines Inc. to install a ₱4,500,000 rooftop solar array on its distribution center, billed as a single lump-sum contract covering equipment and installation labor.

Because SolarBuild bills the job as a single contract price rather than itemizing panels, inverters, and labor separately, Logistiko withholds 2% on the full ₱4,500,000, remits the ₱90,000 EWT through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues SolarBuild a BIR Form 2307 for the period. If Logistiko is instead a designated Top Withholding Agent and SolarBuild itemizes the invoice into equipment and labor, Logistiko could apply the 1% Top Withholding Agent goods rate to the itemized equipment portion and 2% to the labor portion instead — see BIR Form 2307 for Purchases of Goods for how that split works.

Frequently asked questions #

Does a company have to withhold tax when paying a contractor to install solar panels? #

Yes, if the company paying the contractor is a corporation or a business-registered individual. Under RR No. 2-98, Section 2.57.3(A)-(B), any juridical person or business-connected individual that pays a solar installation contractor 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 solar installation contract? #

Solar panel installation is a specialty/utility-installation contracting service under RR No. 2-98, Section 2.57.2(E), as amended by RR No. 11-2018 — the same 2% general contractor bracket that covers construction and installation work generally. ATC WI120 applies to an individually owned installation business, WC120 to one organized as a corporation.

Is this the same as the VAT zero-rating that applies to renewable energy developers? #

No, these are two different questions about two different parties. VAT zero-rating under the Renewable Energy Act applies to a registered renewable energy developer’s own sales of power and equipment. This guide covers a separate issue — the expanded withholding tax a paying business withholds on a solar installation contractor’s service fee — which applies regardless of the developer’s own VAT status.

Does an individual homeowner withhold tax when installing solar panels on a personal residence? #

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 homeowner installing solar panels on a purely personal residence, with no trade or business behind the payment, is generally not a withholding agent for that installation fee.

Does the withholding base include the solar panels and equipment themselves, or only the labor? #

Generally the full contract price, when the installer bills a single lump-sum contract covering both the equipment and the installation labor as one job order, similar to how a general contractor’s combined materials-and-labor invoice is withheld in full. A Top Withholding Agent that receives a separately itemized invoice may instead apply the 1% goods rate to the panels and equipment and the 2% services rate to the labor portion.

Summary #

A solar panel installation contractor’s fee sits in the flat 2% general contractor bracket (ATC WI120/WC120) under RR No. 2-98, Section 2.57.2(E), the same bracket that covers construction, engineering, and utility-installation work generally — separate entirely from a renewable energy developer’s own VAT zero-rating on its power sales. A purely personal residential installation, by contrast, generally triggers no withholding at all under Section 2.57.3(B). See BIR Form 2307 for Contractors and Subcontractors for the general 2% bracket this rate draws from and VAT Zero-Rating for Renewable Energy Developers for the separate developer-side VAT question.