BIR Sworn Declaration for Lower Withholding: How Payees Qualify for 5% Instead of 10% on BIR Form 2307
A BIR sworn declaration is the notarized document — Annex “B-1” for non-VAT payees or Annex “B-2” for VAT-registered payees — that lets a professional, agent, contractor, or other income payee qualify for the lower 5% creditable withholding tax rate on BIR Form 2307 instead of the default 10%. Under Revenue Regulations (RR) No. 11-2018, a withholding agent that never receives this declaration must withhold at the higher rate, even if the payee’s actual gross receipts would have qualified for the lower one.
This post is part of the BIR Form 2307 series. For the underlying rate rules by payment type, see BIR Form 2307 for Professional Fees, BIR Form 2307 for Commissions and Brokers, and BIR Form 2307 for Talent Fees, all of which reference this same declaration.
Apply the Right Withholding Rate on Form 2307 FREE →Why does the sworn declaration exist? #
RR No. 11-2018 tied the creditable withholding tax rate on professional fees, commissions, talent fees, and similar income to the payee’s expected gross receipts for the year, rather than using a single flat rate for everyone. Because a withholding agent has no independent way to know a payee’s total annual income across all clients, the regulation shifts that disclosure onto the payee: the payee self-declares their expected gross receipts/sales under oath, and the withholding agent relies on that declaration — plus a copy of the payee’s BIR Certificate of Registration (COR) — to pick the correct rate.
Annex B-1 vs Annex B-2: which one applies? #
Which annex a payee files depends on VAT registration status and income level, not on the type of service performed. Both annexes cover the same categories of income (professional fees, commissions, talent fees, and other payments under RR No. 11-2018’s expanded withholding tax rules), but they lead to different rates:
| Declaration | Who files it | Condition | Resulting individual rate | Resulting corporate rate |
|---|---|---|---|---|
| Annex “B-1” | Non-VAT-registered individual payees | Gross receipts/sales for the year will not exceed ₱3,000,000 | 5% | — (individuals only) |
| Annex “B-2” | VAT-registered payees, or any payee whose gross receipts/sales exceed ₱3,000,000 | VAT-registered status or income above the threshold | 10% | 15% |
| No declaration submitted | Any payee that fails to file either annex | N/A | 10% | 15% |
A payee submits the annex together with a photocopy of their BIR Certificate of Registration so the withholding agent can verify the declared status.
When is the declaration due? #
A payee must submit the sworn declaration to each income payor not later than January 15 of the current year, or before the first payment for a relationship that starts mid-year. In practice, this means:
- An existing client relationship: the payee files the declaration by January 15 so the payor applies the correct rate from the start of the year.
- A new client relationship that begins after January 15: the payee files the declaration before the first payment is made, so the payor never has to withhold at the default higher rate and then correct it later.
- The withholding agent keeps the notarized declaration on file for audit purposes — it is not submitted with each individual BIR Form 2307, but it should be available if the BIR questions why a 5% rate was applied.
RR No. 11-2018 also requires the withholding agent to consolidate the declarations it received and submit its own Income Payor/Withholding Agent’s Sworn Declaration, with the list of qualifying payees, to the BIR on or before January 31 of the following year.
Worked example: the cost of not filing #
A payee who qualifies for the 5% rate but never files the sworn declaration ends up with double the tax withheld on every payment, cutting take-home cash flow even though the payee’s total tax liability may not actually change.
An independent IT consultant, non-VAT-registered, expects around ₱2,400,000 in gross receipts for the year — comfortably under the ₱3,000,000 threshold for the 5% rate. The consultant issues a ₱150,000 invoice to a corporate client for a project milestone:
| Scenario | Rate applied | EWT withheld on ₱150,000 | Net amount received |
|---|---|---|---|
| Annex B-1 filed and on record | 5% | ₱7,500 | ₱142,500 |
| No sworn declaration on file | 10% (default) | ₱15,000 | ₱135,000 |
The consultant can still claim the full amount withheld as creditable withholding tax against income tax due at year-end, so the extra ₱7,500 isn’t lost — but it does sit with the BIR instead of the consultant’s bank account until the annual return is filed and any excess is refunded or carried over. Filing Annex B-1 by January 15 avoids that cash-flow gap entirely.
Frequently asked questions #
What is a BIR sworn declaration for withholding tax purposes? #
A BIR sworn declaration is a notarized statement — Annex B-1 for non-VAT payees or Annex B-2 for VAT-registered payees — in which an income payee declares their gross receipts or sales for the year to a withholding agent, so the agent can apply the correct creditable withholding tax rate under Revenue Regulations No. 11-2018.
What’s the difference between Annex B-1 and Annex B-2? #
Annex B-1 is for individual payees who are not VAT-registered and whose gross receipts or sales for the year will not exceed ₱3,000,000 — it supports the 5% withholding rate. Annex B-2 is for VAT-registered payees and payees (individual or corporate) whose gross receipts or sales exceed ₱3,000,000, and it supports the higher 10% (individual) or 15% (corporate) rate that applies to that income level.
When must a payee submit the sworn declaration? #
RR No. 11-2018 requires the payee to submit the sworn declaration to each income payor/withholding agent not later than January 15 of the current year, or before the first payment of the professional fee, commission, talent fee, or similar income for payees who start the relationship mid-year.
What rate applies if a payee never submits a sworn declaration? #
If a payee fails to submit a sworn declaration, the withholding agent must apply the higher withholding tax rate — 10% instead of 5% for individual payees, or 15% instead of 10% for corporate payees — regardless of the payee’s actual gross receipts for the year.
Does the withholding agent have to submit anything to the BIR based on these declarations? #
Yes. RR No. 11-2018 requires the withholding agent to submit a notarized Income Payor/Withholding Agent’s Sworn Declaration, together with the list of payees who submitted their own sworn declarations, to the BIR on or before January 31 of the following year, or within 20 days after the close of the taxable quarter if using a fiscal year.
Summary #
The sworn declaration under RR No. 11-2018 — Annex B-1 for non-VAT payees under ₱3,000,000, Annex B-2 for VAT-registered or higher-income payees — is what tells a withholding agent whether to apply 5% or 10% (individual) and 10% or 15% (corporate) on BIR Form 2307. Missing the January 15 deadline, or the first-payment deadline for a new client, doesn’t change a payee’s actual tax liability, but it does mean more cash sits with the BIR until the annual return reconciles it. For the rate mechanics by payment type, see BIR Form 2307 for Professional Fees and BIR Form 2307 for Commissions and Brokers.