In the freelancing world, the BIR Form 2307 is a common sight.
It is one of the most important forms that a freelancer will encounter since they are required to attach it with their 1701 or 1701Q form.
One of the many reasons why this form is needed is because it makes tax computations in the Philippines easier; however, its primary function is to ensure and record tax liability.
Learn more about the BIR Form 2307 below:
Why should you file BIR Form 2307?
The BIR Form 2307 is more commonly referred to as the Certificate of Creditable Tax Withheld at Source. This certificate exhibits the income that is subjugated to Expanded Withholding Tax (EWT) that is paid by a withholding agent.
In accounting books, the form is included under assets. The BIR Form 2307 is also considered as income tax pre-payments because it is being deducted from the income tax dues of a taxpayer during the quarterly and the annual income tax return.
For the payee, the Certificate of Creditable Tax Withheld is important when accomplishing the Income Tax Return because it provides legitimate proof of your withholding tax. Without it, taxpayers will not be allowed to claim their tax credit.
Do take note that taxpayers should ask their employers to provide the BIR Form 2307.
Who needs to file BIR Form 2307?
In most instances, freelancers are the ones who file the form. However, part-time freelancers and employers that hire project-based employees or freelance employees have to file the form as well.
This form should be submitted together with the quarterly and annual Income Tax Return, also known as the BIR Forms 1701/1701Q, for employees or BIR form 1702/1702Q for companies and corporations. Once filed, the amount of withholding tax will be accepted as a tax credit on the taxable quarter or taxable year in which it was earned.
What should you put on the BIR Form 2307?
Filling out the BIR Form 2307 is not as complicated as the other forms. However, one must be aware that there are certain items being subjected to withholding taxes such as professional fees & talent fees, payments to beneficiaries, government money payments to suppliers, and political contributions.
When do you need to file the BIR Form 2307?
As mentioned above, the BIR Form 2307 is usually filed along with other forms. To help you identify where else it is needed, here are the forms that the certificate is usually attached with, along with the date in which they need to be filed.
- Income Tax Returns require the BIR form 2307 when filing the quarterly and annual income tax return of both individuals and corporations. The deadlines for quarterly Income Tax Returns or BIR Form 1701Q are on the 15th of May, August, and November. For Annual Income Tax Returns, it should be filed on or before the 15th of April each year.
- EWT or Expanded Withholding Tax is to be issued on or before the 20th day of the month following the end of the taxable quarter. This needs to be provided upon the request of the payee, alongside the income payment. The deadline for the BIR form 1702Q is on or before the 60th day following the close of each of the quarters of the taxable year, and on or before the 15th of April following the close of a taxpayer’s taxable year.
- Percentage Taxes on government money payments require the BIR Form 2307 to be issued alongside the BIR Form 2551. This must be issued within 25 days after the end of each taxable quarter.
- VAT Withholding or the 2550 forms should be accompanied by the BIR Form 2307 and it should be issued no later than the 20th day following the end of each month.
Unlike the other BIR forms, this form is relatively easy to understand, provided you know the many items that are subject to withholding taxes. Freelancers, together with the people who hire freelancers or project-based employees, must know how to file this form. It not only makes tax computations in the Philippines easier, but it also qualifies freelancers to access their tax credits.