What is BIR Form 2306?
It is the certificate of final tax withheld at source. With final withholding, the tax deducted is the whole tax on that income: the payee cannot credit it and does not include the income in a return. Creditable withholding (Form 2307) works the other way.
| Form 2306 | Form 2304 | Form 2307 | |
|---|---|---|---|
| Certifies | Final tax withheld | Income not subject to withholding (excluding compensation) | Creditable tax withheld |
| Typical income | Bank interest, dividends, royalties, prizes, payments to non-residents | Payments the payor need not withhold on | Professional fees, rent, contractors |
| Issued | 20 days after the quarter, or with payment if asked | BIR forms page: by 31 January of the next year (check with your RDO) | 20 days after the quarter |
| Payor's returns | 0619-F, 1601-FQ, 1604-F (banks: 1602Q) | 1604-E, which covers payments exempt from withholding | 0619-E, 1601-EQ, 1604-E |
| Payee credits it? | No: tax is final | Nothing withheld; income still taxable | Yes |
| Payee's return | Income not reported again | Attach to 1701 or 1702 | Listed in the SAWT |
Sources: RR 2-98 Sec. 2.58 as amended by RR 11-2018; RMC 74-2019; BIR forms page description of Form 2304. As of November 2026.
Final tax (2306) or no withholding (2304)?
1Payor pays non-salary income
Interest, dividends, royalties, a prize.
Subject to final tax
Payor withholds final tax
E.g. 20% of bank interest.
Remits on 0619-F and 1601-FQ
1604-F by 31 January.
Issues Form 2306
20 days after the quarter.
Payee does not credit or report it
Not subject to withholding
Payor pays in full
Issues Form 2304
Payee reports the income on the annual return
Final withholding tax rates in the Philippines after CMEPA
Most passive income of individuals is taxed at 20% or 10%; non-residents not doing business here pay 25%.
| Income | Payee | From 1 July 2025 | Before | NIRC section |
|---|---|---|---|---|
| Interest on peso deposits, deposit substitutes, trust funds | Citizens, resident aliens, NRAETB | 20% | 20% | 24(B)(1), 25(A)(1) |
| Interest on foreign currency deposits (FCDU) | Residents | 20% | 15% | 24(B)(1); RR 21-2025 |
| Interest on deposits of 5 years or more | Individuals | 20% (new placements) | Exempt | 24(B)(1); RA 12214 Sec. 28 |
| Interest on deposits in any currency | Domestic and resident foreign corporations | 20% | 20%; FCDU 15% | 27(D)(1), 28(A)(1) |
| FCDU deposit income | Non-residents | Exempt | Exempt | 27(D)(2), 28(A)(6)(b) |
| Dividends from a domestic corporation | Citizens, resident aliens | 10% | 10% | 24(B)(2) |
| Same | NRAETB | 20% | 20% | 25(A)(2) |
| Same | Domestic corporations | Exempt | Exempt | 27(D) |
| Same | Non-resident foreign corporation | 15% if tax-sparing applies; else 25% or treaty | Same | 28(B)(5)(b) |
| Royalties (general) | Individuals, corporations | 20% | 20% | 24(B)(5), 27(D)(6) |
| Royalties on books, literary works, music | Individuals | 10% | 10% | 24(B)(5) |
| Prizes and winnings over ₱10,000 | Individuals | 20% | 20% | 24(B)(1) |
| Passive income (dividends, interest, royalties, rents) and salaries or other compensation | NRANETB | 25% or treaty | 25% | 25(B) |
| Fringe benefits (housing, cars, etc.) of managerial and supervisory employees | Paid by the employer, not withheld from the employee | 35% of the grossed-up value (value ÷ 65%) | 35% | 33(A) |
NRAETB / NRANETB: non-resident aliens engaged / not engaged in business here. Fringe benefits tax is a final tax the employer pays on Form 1603Q; for non-resident alien employees the Sec. 25 rates apply instead, and de minimis benefits are exempt. Sources: NIRC as amended by RA 12214, RA 11534 and RA 10963; RR 21-2025. PCSO and lotto winnings of ₱10,000 or less are exempt. Treaty rates not covered. As of November 2026.
Final tax rates on common income of individuals
| Item | Rate |
|---|---|
| Passive income of NRANETB | 25% |
| Bank interest, any currency | 20% |
| Royalties (general) | 20% |
| Prizes over ₱10,000 | 20% |
| Dividends, resident individuals | 10% |
| Royalties on books and music | 10% |
Tax on bank interest: 20% for all deposits since July 2025
CMEPA applies one 20% rate to interest from any currency bank deposit, deposit substitute or trust fund, regardless of term. Only interest is taxed, never the principal.
| Deposit (residents) | Before 1 July 2025 | Placed from 1 July 2025 |
|---|---|---|
| Peso savings or time deposit | 20% | 20% |
| Foreign currency deposit | 15% | 20% |
| 5 years or more | Exempt | 20% |
| Pre-terminated at 4 to under 5 years | 5% | 20% |
| Pre-terminated at 3 to under 4 years | 12% | 20% |
| Pre-terminated before 3 years | 20% | 20% |
Sources: RA 12214 Secs. 4, 28; RR 21-2025. As of November 2026.
Worked example: ₱500,000 time deposit
- 1
Interest: ₱500,000 × 5% = ₱25,000
One-year deposit at an assumed 5% a year.
- 2
Final tax: ₱25,000 × 20% = ₱5,000
Withheld by the bank as final tax.
- 3
Net interest: ₱20,000
The principal is not taxed.
Tax on the interest
₱5,000.00
In an FCDU account before 1 July 2025 the tax would have been 15%, or ₱3,750.00.
Tax on dividends in the Philippines
The paying corporation withholds final tax: 10% for citizens and resident aliens.
| Shareholder | Rate | Tax on ₱50,000 | Net received |
|---|---|---|---|
| Citizen or resident alien | 10% | ₱5,000.00 | ₱45,000.00 |
| NRAETB | 20% | ₱10,000.00 | ₱40,000.00 |
| NRANETB (no treaty) | 25% | ₱12,500.00 | ₱37,500.00 |
| Domestic corporation | Exempt | ₱0.00 | ₱50,000.00 |
Formula: dividend × rate = final tax. NIRC Secs. 24(B)(2), 25(A)(2), 25(B), 27(D) as amended. As of November 2026.
How to fill up BIR Form 2306, part by part
| Item | Label | What to write | Example | Common mistake |
|---|---|---|---|---|
| 1 | For the Period | From and to dates | 01/01/2027 to 03/31/2027 | Blank period |
| 2–5A | Part I – Payee: TIN, name, address, ZIP, foreign address, ICR No. (aliens) | Payee's details | TIN with branch code | No foreign address for a non-resident |
| 6–8A | Part II – Payor: TIN, name, address, ZIP | Payor's details | ABC Corp., Pasig | Missing TIN |
| Part III | Details of Income Payment and Tax Withheld | Nature of income, ATC, amount, tax withheld, total | Cash dividend · ₱50,000 · ₱5,000 | Pre-CMEPA rate |
| Declaration / CONFORME | Payor's and payee's signatures | Both sign, with title and TIN | Treasurer; payee | Payee never signs |
| Bottom block | VAT/percentage tax withholding (substituted filing) | Business-tax withholding only | Usually blank | Used for income tax |
Labels from the official Form 2306, January 2018 (ENCS), circularized by RMC 74-2019. The back-page code schedule dates from 2018 and lists pre-CMEPA items such as pre-terminated long-term deposits; confirm the ATC with the BIR.
What is BIR Form 2304, and who issues it?
The payor issues it to a payee whose income had nothing withheld. The form dates from July 1999.
“A Certificate to be accomplished and issued by a Payor to recipients of income not subject to withholding tax. This Certificate should be attached to the Annual Income Tax Return - BIR Form 1701 for individuals, or BIR Form 1702 for non-individuals.”
| Item | Label | What to write | Example | Common mistake |
|---|---|---|---|---|
| 1 | For the Year | Calendar year | 2026 | Writing a quarter |
| 2–5C | Part I Payee Information | Payee's TIN, name, address | Juan Dela Cruz | Name in the wrong box |
| 6–9B | Part II Payor Information | Payor's TIN, name, address | XYZ Inc. | Missing TIN |
| 10–16 | A. Individual Payees: interest, rent of personal property, premium and annuity, pension, prizes 10,000 or less, transport contractors below P2,000, others | Amount on the matching line | Prize ₱8,000 on item 14 | Using a line for income now withheld on |
| 17–23 | B. Corporate Payees: interest, rent of personal property, premium and annuity, prizes, fees to general professional partnerships, transport contractors, others | Same | Partnership fees on item 21 | Following the instruction page, which mislabels items 20–21 |
| 24–26 | Total; payor signature; title | Sum; sign | Signature over printed name | Unsigned |
Labels from Form 2304, July 1999 (ENCS). Its lines predate later rules: rent of personal property over ₱10,000 a year now bears 5% expanded withholding (RR 11-2018).
Deadlines for final withholding returns, 2306 and 2304
| What | Form | Deadline |
|---|---|---|
| Final tax, months 1–2 | 0619-F | 10th of the following month, even if zero (eFPS: by group, 11th–15th) |
| Final tax for the quarter, with alphalist of payees | 1601-FQ | Last day of the month after the quarter |
| Final tax on bank deposit interest | 1602Q | Last day of the month after the quarter |
| Fringe benefits tax (employer) | 1603Q | Last day of the month after the quarter |
| Certificate to payee | 2306 | 20 days after the quarter, or with payment if asked |
| Annual return with alphalist | 1604-F | 31 January |
| Certificate of income not subject to withholding | 2304 | BIR forms page: 31 January of the next year; governing rule not confirmed, so check with your RDO |
RR 2-98 Sec. 2.58 as amended by RR 11-2018; NIRC Sec. 58. As of November 2026. See the 2027 tax calendar, the employer withholding tax guide and the BIR penalty calculator.
Common mistakes and consequences
| Mistake | Consequence | How to avoid it |
|---|---|---|
| Claiming 2306 tax as a credit | Credit disallowed | Only 2307 tax is creditable |
| Reporting 2306 income again | Taxed twice | Leave final-taxed income out |
| Assuming a new 5-year deposit is exempt | Unexpected 20% tax | Only unchanged pre-July 2025 placements are |
| Rolling over a grandfathered deposit | Old treatment lost | Check the three conditions |
| Ignoring income on a 2304 | Under-declared income | Report it |
Buod sa Tagalog
Ang BIR Form 2306 ay sertipiko ng final tax na ikinaltas sa kita mo, gaya ng interes sa bangko o dibidendo; hindi ito maibabawas sa income tax at hindi na idinedeklara ulit. Mula 1 Hulyo 2025, 20% ang buwis sa interes ng anumang deposito at 10% sa dibidendo ng residenteng indibidwal. Ang Form 2304 ay para sa kitang walang kinaltas, at isinasama ito sa taunang return.
Frequently asked questions
+What is BIR Form 2306?
It is the Certificate of Final Tax Withheld at Source. A payor that withheld final tax, such as a bank on interest or a corporation on dividends, gives it to the payee. It shows the period, both parties, the nature of the income, the amount paid and the tax withheld. The current version is January 2018 (ENCS).
+What is the difference between BIR Form 2306 and 2307?
Form 2306 covers final tax: the tax withheld settles the liability and cannot be credited. Form 2307 covers creditable tax, such as 5% or 10% on professional fees, which the payee deducts from income tax due on quarterly and annual returns. Both are due within 20 days after each quarter.
+What is BIR Form 2304, and who issues it?
It is the Certificate of Income Payment Not Subject to Withholding Tax, excluding compensation. The payor issues it when nothing was withheld. The BIR says to attach it to the payee's annual return (1701 or 1702), because the income is still taxable. The current version dates from July 1999.
+When must the payor give Form 2306 or Form 2304?
Form 2306 is due within 20 days after each quarter, or with the payment if the payee asks (RR 2-98 Sec. 2.58(B) as amended by RR 11-2018). For Form 2304, the BIR forms page says by 31 January of the following year; the governing regulation was not confirmed, so check with your RDO.
+Is the tax on bank interest now 20% for all deposits?
Yes, for residents. From 1 July 2025, CMEPA applies 20% to interest from any currency bank deposit, deposit substitute or trust fund, whatever the term. Foreign currency deposits went from 15% to 20%. Non-residents' FCDU income stays exempt, and unchanged pre-July 2025 placements keep their old treatment.
+Are long-term (5-year) deposits still tax-exempt after CMEPA?
Only placements made before 1 July 2025 that mature after that date and have not been changed, renewed or replaced. They stay exempt for the remaining term. Long-term deposits made on or after 1 July 2025 pay 20% on the interest, and a rollover counts as a new placement.
+What is the tax on dividends in the Philippines?
Cash or property dividends from a domestic corporation bear 10% final tax for citizens and resident aliens, 20% for non-resident aliens engaged in business, and 25% or a treaty rate for those not engaged in business. Dividends between domestic corporations are exempt. CMEPA did not change these rates.
+Do I include income covered by a 2306 in my income tax return?
No. Income subjected to final tax is not declared again in the annual return, and its tax cannot be claimed as a credit. Keep the 2306 as proof the tax was paid. Income on a 2304 is different: nothing was withheld, so you must report it.
+Can Forms 2306 and 2304 be e-signed?
Yes. RMC 29-2021 lets withholding agents use electronic signatures on Forms 2306, 2304, 2307 and 2316 without prior BIR approval. The payee's signature, manual or electronic, is still needed where the form calls for one, such as the CONFORME line of Form 2306.
Sources and references
- BIR Form 2306 (January 2018 ENCS) — official form (checked November 12, 2026)
- BIR Form 2304 (July 1999 ENCS) — official form (checked November 12, 2026)
- RMC 74-2019 — Forms 2306 and 2307 (checked November 12, 2026)
- RA 12214 (CMEPA) — 20% on interest; transitory rule (checked November 12, 2026)
- RR 21-2025 — passive income rates (checked November 12, 2026)
- RR 11-2018 — returns and certificates (checked November 12, 2026)
- RA 11534 (CREATE) — foreign corporation rates (checked November 12, 2026)
- RMC 29-2021 — e-signatures (checked November 12, 2026)
Related tools and guides
Author and editorial review
Deepak Middha, Chartered Accountant
Chartered Accountant with 18 years in hedge funds; writes and maintains sulat.ph. Every rate, ceiling, deadline and fee on this page is taken from the National Internal Revenue Code or a BIR issuance and was checked against that source on November 12, 2026. Where a figure could not be confirmed officially, the page says so.
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