Every year is always a tax season for business owners and self-employed individuals. And if you’ve been receiving payments with taxes already deducted, you’ll need to know where to put them when you file.
Let’s break down the forms you need and the tax rates you should know when it comes to withholding taxes.
But first.. What is ATC (Alphaneumeric Tax Code)?
The ATC (or Alphanumeric Tax Code) identifies the correct withholding tax rate that applies to a payment. It tells you how much tax to withhold from your suppliers based on their business activities, and how much tax others should withhold from your own income based on your line of business.
Think of it this way. A doctor, lawyer, or freelancer getting paid for their services is taxed differently from a supplier who delivers physical goods to an online seller.
The BIR treats services and goods as two separate categories, each with its own ATC and tax rate. That is why using the correct ATC is important because the wrong code could mean withholding the wrong amount.
What ATC Should You Use?
When paying your employees or suppliers, a portion of their income needs to be set aside for taxes. This is where the ATC comes in. Your ATC determines how much tax should be withheld from each income, and knowing the right one helps you avoid over or under withholding.
Below is a list of ATCs, their descriptions, and their corresponding tax rates:
What Are the Recent Withholding Tax Updates?
The BIR has made a few updates to withholding taxes that are relevant to business owners and self-employed individuals. While the BIR issued these a few months back, they remain the most recent updates as of writing. Here’s a quick summary:
- Online sellers on e-commerce platforms: If you sell through platforms like Shopee, Lazada, or similar marketplaces, note that the BIR now applies the withholding tax on your full gross remittance instead of just half of it. (RMO No. 26-2025, May 20, 2025)
- Digital payment platforms: If you receive payments through digital financial services like GCash or Maya, the same update applies. The withholding tax is now based on the full gross remittance to sellers. (RMO No. 26-2025, May 20, 2025)
- BIR Form 2307: You can now send and receive this form digitally through email or other electronic means. No need to hand it over physically anymore. (RMC No. 14-2025, February 19, 2025)
These changes may or may not apply to you depending on your type of business. To know more about how these updates affect your specific situation, it is best to consult with a licensed accountant or tax professional.
What Forms Should You Receive When Someone Withholds Taxes from Your Income?
If someone withholds taxes from your income, they must give you these forms:
- BIR Form 2307: This form shows how much tax the payor withheld from your income. You will need this when you file your taxes.
- BIR Form 2316: For employees only. Shows the total tax withheld from your salary for the whole year. Your employer gives this to you at the end of the year.
Where to Include Withheld Taxes When Filing
If you are a business owner or freelancer, withheld taxes need to be reported when you file your income taxes. Here is where to include them:
Quarterly Filing
- BIR Form 1701Q (for individuals and freelancers)
- BIR Form 1702Q (for corporations)
Annual Filing
- BIR Form 1701 (for mixed income earners, using either itemized or optional standard deduction)
- BIR Form 1701A (for purely self-employed individuals and freelancers, using either the 8% flat rate or graduated rate with optional standard deduction)
- BIR Form 1702RT (for corporations subject to the regular income tax rate)
💡 Always make sure to report any taxes that have already been withheld from your income. These can be used as tax credits to reduce what you owe to BIR.
How to Use Your Withheld Taxes as a Tax Credit
The good news is that you can use the taxes withheld from your income to reduce what you owe the BIR, or even get a refund if you overpaid. Here is how it works:
- Collect your BIR Form 2307: Request this form from the person or company that withheld taxes from your income. This form proves how much tax they already deducted from your payment.
- Include it when you file your taxes: When filing your quarterly or annual income tax return, attach your BIR Form 2307 and report the withheld amount. Your total tax due will decrease by the withheld amount.
- Apply it as a tax credit: Deduct the withheld amount from your income tax due. If you withheld more than what you owe, you may get a refund or carry the excess over to the next filing period.
If Withholding Taxes from Suppliers and Employees
Here are the forms you need to use for your suppliers:
- BIR Form 1601-EQ: Filed every quarter to report and remit the expanded withholding taxes you collected from your suppliers.
- BIR Form 0619-E : Used to remit expanded withholding tax for the first two months of each quarter.
- BIR Form 2307: Give this to your suppliers after withholding taxes from their payment. This is their proof that you withheld taxes on their behalf, and they will use this to claim a tax credit when they file.
Here are the forms you need to use for your employees:
- BIR Form 1601-C: Filed monthly to remit the withholding tax on your employees’ salaries.
- BIR Form 1604-C: Filed annually to summarize all compensation taxes you withheld from your employees for the whole year.
- BIR Form 2316: Give this to each of your employees. It shows the total tax withheld from their salary for the entire year.
Understanding ATC codes and withholding taxes can feel like a lot to take in, but knowing the basics goes a long way in keeping your business compliant with the BIR.
Whether you are a freelancer, a self-employed professional, or a business owner, using the correct ATC code and filing the right forms ensures that you are paying the right amount of tax — nothing more, nothing less.
If you want to make withholding tax easier, check out how Taxumo can help!