If you’re a business owner hiring professionals, or you’re a self-employed freelancer or consultant, it’s essential to understand how Professional Fee Withholding Tax works in the Philippines. It affects how much income is withheld, reported, and remitted to the BIR.
In this guide, we’ll break down what professional withholding tax is, who needs to withhold it, applicable rates, and how to file it properly—helping you stay compliant and avoid penalties.
What Is Professional Fee Withholding Tax?
Professional Fee Withholding Tax is a percentage of income withheld by a payor (usually a business) when paying a professional (like a consultant, doctor, lawyer, or accountant) for their services. The withheld amount is then remitted to the Bureau of Internal Revenue (BIR) as a form of advance tax payment on behalf of the professional.
Who Is Subject to Professional Withholding Tax?
Withholding tax applies when a business or organization pays a professional who is not an employee, such as:
- Consultants
- Freelancers
- Accountants
- Lawyers
- Doctors
- Engineers
- Architects
- Other licensed professionals offering services
💡 If you’re hiring an independent professional and issuing them a BIR Form 2307, you’re likely required to withhold tax.
What Is the Withholding Tax Rate for Professional Fees?
As of 2025, here are the standard withholding tax rates in the Philippines for professional fees:
- 10% – If the payee is registered and regularly files income tax returns
- 15% – If the payee fails to file an income tax return or submit proper documents (per BIR’s “no return, higher rate” rule)
📄 Note: Professionals who earn less than the VAT threshold (currently ₱3,000,000 annually) may be subject to creditable withholding tax and not final withholding tax.
Filing and Remitting Withholding Tax
For the Payor (Business or Client):
- Withhold the correct amount upon payment to the professional
- Issue BIR Form 2307 (Certificate of Creditable Tax Withheld) to the payee
- File and remit using BIR Form 0619-E (monthly) and BIR Form 1601-EQ (quarterly)
- Remit payment via eFPS, eBIRForms, or accredited banks
For the Payee (Professional):
- The withheld amount is considered an advance payment toward their income tax liability
- Must include the BIR Form 2307 when filing their annual ITR (Form 1701 or 1701A)
- Can deduct the withheld amount from the total tax due
Tips to Stay Compliant
- Always ask for a copy of BIR Form 2307 if you’re the professional
- As a business, track all payments to professionals and remit taxes on time
- Keep digital and hard copies of all forms for at least 3 years, in case of audit
- Use BIR’s official e-services or authorized agents for filing and payments
Penalties for Non-Compliance
Failing to withhold or remit professional fees correctly can result in:
- Surcharges and interest penalties
- Disallowance of expense deductions
- Legal issues or audits from the BIR
Summary: Key Points About Professional Fee Withholding Tax
| Category | Details |
| Who Withholds | Businesses paying professionals |
| Who Is Taxed | Independent professionals, not employees |
| Standard Rates | 10% (with documents), 15% (without) |
| Forms Needed | 2307 (certificate), 0619-E (monthly), 1601-EQ (quarterly) |
| When to File | Monthly and quarterly, before BIR deadlines |
Final Thoughts
Understanding Professional Fee Withholding Tax in the Philippines is crucial for both businesses and professionals. Staying compliant not only avoids penalties but also ensures smoother transactions and accurate tax filings. Whether you’re paying or getting paid for professional services, knowing the tax rules keeps your finances—and your records—in good order.
DISCLAIMER: This article is developed by subject matter experts at Babylon2k. This is for general information only and does not constitute expert advice. It is based on current regulations and may not account for all related topics. Any tax or compliance guidance provided cannot be used to avoid penalties or promote specific actions. Laws and interpretations may change over time, which could affect the accuracy of this report. We are not obligated to update this advisory if new regulations arise.
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