Withholding in both directions
Marketplaces withhold tax from what they pay you, and you withhold tax from what you pay your landlord. Same idea, two directions, one picture.
← 4.4 Common VAT mistakesLess cash, both ways
Carla noticed two things. Shopee pays Kuting Kitchen a little less than the sale minus its fees. And Kuting Kitchen pays its landlord less than the ₱30,000 rent.
Both are the same thing: withholding tax. This lesson covers it from both sides.
What withholding is
Withholding is income tax paid in advance, collected by whoever pays you. The payer keeps a small part of the payment and sends it to the Bureau of Internal Revenue (BIR) in your name.
| Withholding agent | The payer, who keeps the tax and sends it to BIR |
|---|---|
| Payee | The one being paid, whose tax it is |
| BIR Form 2307 | The certificate the payer gives the payee, showing what was withheld |
Arrow 1: the marketplace withholds from you
Since 15 July 2024, Shopee, Lazada and TikTok Shop withhold 0.5% of your sales before VAT (first set by RR 16-2023, restated by RR 5-2025).
On one ₱480 order, the sale before VAT is ₱428.57. Shopee withholds 0.5% of that: ₱2.14. With its ₱72 fees, Kuting Kitchen's payout is ₱405.86.
For Kuting Kitchen, it's a credit
The ₱2.14 isn't lost. Shopee pays it to BIR, and each quarter it gives Kuting Kitchen a 2307 for the total.
In Q3 2026 the three marketplaces withheld ₱6,000 in all. Kuting Kitchen subtracts that from its income tax for the quarter. Lesson 5.2 shows how.
Arrow 2: you withhold from the landlord
Now Kuting Kitchen is the payer. Rent is one of the payments a business must withhold on: 5% of ₱30,000 is ₱1,500.
The landlord gets ₱28,500 in cash. Kuting Kitchen pays the ₱1,500 to BIR and gives the landlord a 2307, so the landlord can claim it. That's why its 2303 lists expanded withholding (Lesson 1.2).
That ₱1,500 isn't yours
The ₱1,500 is the landlord's tax, held by Kuting Kitchen until it pays BIR. In the books it's a liability, not a saving.
Withholding agents who fail to withhold or pay it over face penalties on top of the tax itself, the same as for any late return. Lesson 5.3 covers the forms and dates.
Arrow 3: staff salaries
Kuting Kitchen's two staff are payees too. Tax on salaries is withholding on compensation: paid monthly on the 1601-C, with a 2316 to each employee instead of a 2307.
Same idea, different forms. Lesson 8 covers payroll.
Who gives the certificate to whom
The payer withholds, and the payer certifies.
| Payment | Certificate | From → to |
|---|---|---|
| Marketplace payout | 2307 | Marketplace → Kuting Kitchen |
| Rent | 2307 | Kuting Kitchen → landlord |
| Salary | 2316 | Kuting Kitchen → each employee |
Withheld from you is a credit: collect every 2307 and subtract it from your income tax. Withheld by you is a debt to BIR: pay it on time and give your payee the certificate.
Pop Quiz: who gives the certificate?
For each payment, pick what happens on Kuting Kitchen's side.
TikTok Shop sends Kuting Kitchen its weekly payout.
TikTok Shop is the payer, so it withholds 0.5% and gives Kuting Kitchen the 2307.
Kuting Kitchen pays the landlord October's ₱30,000 rent.
Kuting Kitchen is the payer: it withholds ₱1,500, pays it to BIR and gives the landlord a 2307.
Kuting Kitchen pays a staff member's monthly salary.
Salaries are compensation: the employee gets a 2316, not a 2307. Lesson 8.
Lazada sends Kuting Kitchen the payout for 30 orders.
Lazada is the payer: it withholds and certifies. Kuting Kitchen collects the 2307 and claims it.
General information for learning, not tax advice. Kuting Kitchen, its landlord and staff are fictional. Which payments you must withhold on, and at what rate, depends on the payment and the payee: check each one with your accountant or RDO.
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