How to Claim the 5% Creditable VAT Withheld on Government Sales Using the SAWT DAT File

Since January 1, 2021, the 5% VAT that government agencies and GOCCs withhold on their VAT-registered suppliers is a creditable tax, not a final one — you claim it back against your output VAT instead of writing it off. It is evidenced by BIR Form 2307 (not the old Form 2306), and you claim it on the VAT return by listing each certificate in a Summary Alphalist of Withholding Taxes (SAWT) DAT file.

The 2021 shift: final to creditable #

The TRAIN Law changed the 5% VAT withholding on government sales from a final tax to a creditable tax, effective January 1, 2021 — meaning the withheld VAT is now an advance you recover, not a cost you absorb. NIRC Section 114(C), as amended, provides:

“The government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services… deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That beginning January 1, 2021, the VAT witholding system under this Subsection shall shift from final to a creditable system.”

— NIRC Section 114(C), as amended by RA 10963 (TRAIN), Section 37

Before 2021, that 5% was final — the supplier could not recover it. Since 2021, it is creditable against output VAT, which is why claiming it correctly now matters to cash flow.

It is now on BIR Form 2307, not 2306 #

Because the withholding became creditable, the BIR shifted the certificate from Form 2306 to Form 2307 — RMC No. 36-2021 directs that Form 2306 is no longer issued for the 5% VAT on government sales. The government payor now issues BIR Form 2307 using ATC WV010 for goods and WV020 for services. Anyone still expecting a Form 2306 for a government sale is working from the pre-2021 rules. For the underlying difference between the two certificates, see BIR Form 2306 vs BIR Form 2307: Final vs Creditable Withholding Certificates, and for the withholding side, BIR Form 2307 for Government Money Payments.

Claiming the credit through the SAWT DAT file #

To claim the creditable 5% VAT, the supplier lists each BIR Form 2307 in the Summary Alphalist of Withholding Taxes (SAWT), exports it as a DAT file, and submits it with the quarterly VAT return, BIR Form 2550Q. The SAWT is the mechanism the BIR uses to match the credits you claim against the certificates issued to you. Each row captures the payor’s TIN and name, the ATC (WV010 or WV020), the income payment, and the tax withheld. For what the SAWT is more broadly, see What Is SAWT?, and for structuring the source data, How to Convert Excel to a BIR DAT File for SAWT.

Steps #

1. Collect every BIR Form 2307 received from government payors for the quarter.
2. Enter each certificate into a SAWT data entry tool — payor details, ATC, income payment, and VAT withheld.
3. Validate and export the SAWT as a .DAT file.
4. Submit the DAT file via the BIR’s eSubmission facility, or attach it in eFPS, together with BIR Form 2550Q.
5. Reconcile the total creditable VAT claimed on the return against the SAWT — they must agree, a check covered in SAWT Reconciliation With BIR Form 2307.

Worked example: a ₱1,000,000 government sale #

Assume a VAT-registered supplier sells ₱1,000,000 (net of VAT) of services to a government agency in a quarter. The agency withholds 5% VAT, issues Form 2307, and the supplier claims it as a credit.

The ₱50,000 reduces the supplier’s net VAT payable for the quarter — but only if the Form 2307 is captured in the SAWT DAT file and submitted with the return. A certificate left off the SAWT is a credit left on the table, so the DAT file is not a formality; it is how the money comes back.

Frequently asked questions #

Is the 5% VAT withheld by government final or creditable? #

Creditable, since January 1, 2021. Under the TRAIN Law amendment to NIRC Section 114(C), the 5% final VAT withholding on sales to government shifted to a creditable system effective that date, so the supplier now claims it as a credit against output VAT rather than treating it as a final tax.

Which certificate evidences the creditable 5% VAT on government sales? #

BIR Form 2307 (Certificate of Creditable Tax Withheld at Source), using ATC WV010 for goods and WV020 for services. Per RMC No. 36-2021, BIR Form 2306 is no longer issued for this purpose, because the withholding is creditable rather than final.

What is the SAWT and how does it relate to this credit? #

The Summary Alphalist of Withholding Taxes (SAWT) is a DAT file listing the withholding certificates a taxpayer claims as credits, submitted as an attachment to the return. To claim the creditable 5% VAT, the supplier lists each BIR Form 2307 in the SAWT and files it with BIR Form 2550Q.

How do I prepare the SAWT DAT file? #

Enter each BIR Form 2307’s details — payor TIN and name, ATC (WV010/WV020), amount of income payment, and tax withheld — into a SAWT data entry tool that outputs a validated .DAT file, then submit it via the BIR’s eSubmission facility or attach it in eFPS with the VAT return.

Are ODA-funded government purchases covered by the creditable system? #

The shift from final to creditable VAT withholding generally applies to sales to government, but purchases funded by Official Development Assistance (ODA) were treated differently under the implementing rules. Confirm the treatment of an ODA-funded contract with your RDO before claiming the credit.

Summary #

The 5% VAT on government sales is money you get back — but only if you claim it correctly. Since January 1, 2021, NIRC Section 114(C) makes it creditable, RMC No. 36-2021 puts it on BIR Form 2307 (ATC WV010/WV020) rather than Form 2306, and you recover it on BIR Form 2550Q by listing each certificate in a SAWT DAT file. Capture every certificate, reconcile the SAWT to the return, and confirm current procedures on the BIR website before filing.