BIR Form 2307 for Purchases of Services: Top Withholding Agent 2% Rate Explained
A BIR Top Withholding Agent (TWA) withholds two percent (2%) expanded withholding tax (EWT) on its local purchases of services that aren’t already covered by a more specific withholding category, and issues BIR Form 2307 to the supplier using ATC WC160 (corporate) or WI160 (individual). This is the direct services counterpart to the 1% goods rule, and the two are easy to mix up on an invoice that isn’t clearly classified.
This guide is part of the BIR Form 2307 series. It’s the companion piece to BIR Form 2307 for Purchases of Goods: Top Withholding Agent 1% Rate Explained, which covers the parallel 1% goods rule in detail.
Generate TWA Services BIR Form 2307 FREE →Who withholds 2% on local service purchases, and why? #
Only taxpayers the BIR has classified as Top Withholding Agents withhold 2% under this specific rule — it isn’t a general obligation that applies to every business buying a service. Under Revenue Regulations (RR) No. 7-2019, TWA classification is triggered once a taxpayer’s gross sales/receipts, gross purchases, or claimed deductible itemized expenses reach ₱12,000,000 in the preceding taxable year, and the obligation to withhold begins once the BIR publishes that taxpayer on the official TWA list — not retroactively to the start of the year.
Once classified, a TWA’s local purchases split along the same goods-versus-services line covered in RR No. 2-98 as amended by RR No. 11-2018: goods at 1% (ATC WC158/WI158), and services at 2% (ATC WC160/WI160). This “purchases of services” category functions as a catch-all for local service payments a classified TWA makes that don’t already fall under a more specific enumerated EWT rate.
The obligation to withhold in the first place rests on who counts as a withholding agent, which Section 2.57.3 of RR No. 2-98 defines broadly:
“(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…”
A classified TWA making a local service payment in the course of its trade or business falls squarely within that definition, which is what puts the 2% obligation on the payor rather than the supplier.
How is this different from the contractors’ 2% rate? #
The rates happen to be identical, but the two rules trigger for different reasons, and confusing them leads to the wrong ATC on the certificate. BIR Form 2307 for Contractors and Subcontractors covers a specifically enumerated list of services — general engineering and building contractors, security and janitorial agencies, and similar categories — withheld at 2% under ATC WI120/WC120, and this applies to any payor making that kind of payment, regardless of whether the payor is a classified Top Withholding Agent.
The TWA services rate under WC160/WI160, by contrast, applies because of the payor’s TWA status, covering the broader universe of local service purchases a TWA makes that aren’t already captured by the enumerated contractors’ list or another specific EWT category (like professional fees or rent).
| Rule | ATC | Trigger | Applies to |
|---|---|---|---|
| TWA purchases of goods | WC158 / WI158 | Payor is a classified TWA | Local goods purchases |
| TWA purchases of services | WC160 / WI160 | Payor is a classified TWA | Local service purchases not covered by a more specific rate |
| Contractors (enumerated list) | WI120 / WC120 | Nature of the service itself | Construction, security, janitorial, and similar contractor services — any payor |
| Professional fees | WI010 / WI011 / WC010 / WC011 | Nature of the payment | Professional and talent fees — any payor |
A payment can, in practice, land under the enumerated contractors’ rate instead of the TWA catch-all if it matches one of the specifically listed contractor categories — the specific rule generally takes precedence over the general TWA catch-all when both could apply.
Worked example: TWA pays for a general service #
Solstice Manufacturing Corp. has been on the BIR’s TWA list since the prior year. In August, it pays ₱150,000 to a corporate supplier for equipment calibration and testing services — a local service that isn’t on the specifically enumerated contractors’ list and isn’t a professional fee.
| Item | Amount |
|---|---|
| Local purchase of services (VAT-exclusive) | ₱150,000.00 |
| EWT withheld (2%, ATC WC160) | ₱3,000.00 |
| VAT (12% on ₱150,000) | ₱18,000.00 |
| Net cash to supplier (service + VAT − EWT) | ₱165,000.00 |
Solstice remits the ₱3,000 with its EWT filings, lists the calibration company on its Quarterly Alphalist of Payees, and issues BIR Form 2307 showing ₱150,000 income payment, ATC WC160, and ₱3,000 tax withheld.
If the same ₱150,000 payment had instead gone to a security agency — a service on the specifically enumerated contractors’ list — the ATC would be WI120/WC120 under the contractors’ rule instead, even though the rate is the same 2% either way. And if Solstice purchased ₱150,000 of goods rather than services from the same supplier, the rate would drop to 1% under ATC WC158, following the goods rule instead.
Frequently asked questions #
What withholding rate does a Top Withholding Agent apply on purchases of services? #
A Top Withholding Agent withholds 2% expanded withholding tax on local service purchases not covered by a more specific rate, under RR No. 2-98 as amended by RR No. 11-2018, using ATC WC160 (corporate) or WI160 (individual).
How is the TWA services rate different from the TWA goods rate? #
Goods purchases are withheld at 1% under ATC WC158/WI158; services purchases are withheld at 2% under ATC WC160/WI160. Both apply only to classified Top Withholding Agents.
Is this the same as the 2% contractors’ rate covered elsewhere in this series? #
No. The contractors’ rate (WI120/WC120) applies to a specifically enumerated list of services regardless of TWA status. The TWA services rate (WC160/WI160) applies because the payor is a classified TWA, as a catch-all for services not otherwise assigned a more specific ATC.
Does an ordinary business that isn’t a Top Withholding Agent withhold 2% on services it buys? #
Not under this rule. It may still owe withholding under a different, specific EWT category depending on what was purchased.
What’s the Top Withholding Agent classification threshold? #
Under RR No. 7-2019, a taxpayer is classified as a TWA once its gross sales/receipts, gross purchases, or claimed deductible itemized expenses reach ₱12,000,000 in the preceding taxable year, and the BIR publishes it on the official list.
Summary #
For a Top Withholding Agent, general local service purchases mean 2% EWT and BIR Form 2307 with ATC WC160/WI160 — the mirror image of the 1% goods rule under WC158/WI158, and a separate track from the enumerated contractors’ 2% rate under WI120/WC120 that applies regardless of TWA status. Confirm which rule actually governs a given invoice before picking the ATC. See BIR Form 2307 for Purchases of Goods for the goods side, Who Is a BIR Top Withholding Agent? for the classification rules, and What Is an ATC for the full code reference.