Real-Estate Agent/Broker Commissions in the Philippines: Withholding Tax & VAT (Updated to 24 June 2025)
1. Legal Backbone
| Area | Principal Authority |
|---|---|
| VAT & Percentage Tax | National Internal Revenue Code (NIRC), 1997, as amended — §§ 106–109; Republic Act No. 10963 (TRAIN, 2018); RA 11534 (CREATE, 2021); RA 11976 (Ease of Paying Taxes, 2024) |
| Creditable Expanded Withholding Tax (EWT) | NIRC § 57; BIR Revenue Regulations (RR) 2-98, as amended (especially RR 11-2018, RR 16-2020, RR 5-2024) |
| Professional Status of Brokers | RA 9646 (Real Estate Service Act, 2009) |
| BIR Forms & Filing | BIR Forms 2550M/Q (VAT), 2551Q (Percentage Tax), 0619-E & 1601-EQ (EWT), 2307 (withholding certificate) |
Scope. “Real-estate agent” and “real-estate broker” are treated alike; both are “real-estate service practitioners” (RESA Law) rendering services for a fee or commission.
2. VAT vs. Percentage Tax on Commissions
| Scenario | Tax Type | Rate | Notes |
|---|---|---|---|
| VAT-registered broker (mandatory if > ₱3 million annual gross receipts, or voluntary) | VAT | 12 % on the gross commission | Broker issues VAT-official receipt (OR); VAT is reported in Forms 2550M (monthly) and 2550Q (quarterly). |
| Non-VAT broker | Percentage Tax | 3 % of gross (statutory rate) 1 % from 1 Jul 2020 – 30 Jun 2023 (CREATE); 1 % remains in force under RA 11976 until Congress sets a new rate by 31 Dec 2028 |
Declared in Form 2551Q. |
Important details
- VAT threshold. Sec. 109(1)(BB) exempts service providers with ≤ ₱3 million gross receipts in the past 12 months; once exceeded (or upon voluntary registration) VAT applies prospectively.
- VAT base. The VAT is computed on the actual commission due, before EWT. Commission × 12 % = Output VAT.
- Input VAT. Brokers may claim input VAT on business expenses (e.g., marketing materials) if proper VAT invoices/ORs are held.
3. Creditable Expanded Withholding Tax (EWT) on Commission
| Payee (Broker) | Regulatory Slot | EWT Rate | Withholding Agent |
|---|---|---|---|
| Individual broker/agent | RR 2-98 § 2.57.2(A)(1) – “professional fees” | 10 % (flat). Historical two-tier 10 %/15 % based on ₱720k threshold was abolished by RR 11-2018. | Usually the developer, seller, or leasing principal who pays the commission. |
| Corporation/partnership (real-estate brokerage firm) | Same provision – “professional fees to juridical persons” | 15 % | Same. |
Practical rules
- Base of withholding. EWT is computed on the net commission exclusive of VAT. Example (VAT-registered individual broker): Gross commission ₱100,000 Plus 12 % VAT ₱12,000 Tax bases • EWT = ₱100,000 × 10 % = ₱10,000 (to BIR) • VAT = ₱12,000 (to broker, who remits as output VAT)
- Timing & forms. • Who withholds? The payor (developer/owner). • When? – 0619-E (monthly remittance) – on or before the 10th day of the following month (eFPS filers: 15th). – 1601-EQ (quarterly return) – last day of the month following the close of the quarter. • 2307 – Certificate issued to broker within 20 days after end of the quarter; broker may credit it against income tax.
- When no withholding? Only if the total annual payments to the broker do not exceed ₱10,000 for the entire year (de minimis threshold in § 2.57.3); rare in practice.
4. Income-Tax Interaction
| Classification | Return | Tax Regime |
|---|---|---|
| Individual broker | BIR Form 1701Q (quarterly) & 1701-A (annual) | • Graduated rates up to 35 % or • 8 % optional rate on gross if total ≤ ₱3 million and non-VAT |
| Corporate brokerage | Form 1702Q & 1702-RT | 25 % (regular), or 20 % if net taxable ≤ ₱5 million & total assets ≤ ₱100 million (CREATE) |
EWT certificates (2307) are treated as tax credits against quarterly and annual income-tax liabilities.
5. Illustrative Computation (all figures in Philippine peso)
| Particulars | Non-VAT Broker | VAT-Registered Broker |
|---|---|---|
| Agreed commission | 150,000 | 150,000 |
| Less: EWT (10 %) | 15,000 | 15,000 |
| Amount subject to VAT | — | 150,000 |
| Output VAT (12 %) | — | 18,000 |
| Net cash received | 135,000 | 153,000 (₱150,000 − ₱15,000 + ₱18,000) |
| Broker’s periodic tax filings | 2551Q (3 %/1 %) | 2550M/2550Q (12 % VAT) |
| Input VAT allowable? | N/A | Yes |
6. Local Business Tax (LBT)
Local government units may impose an annual business-licence tax (typically at 2 %–3 % of gross receipts) under the Local Government Code. Payment of national taxes does not exempt brokers from LBT.
7. Record-Keeping & Invoicing Must-Haves
- BIR-registered ORs – indicating separately: (a) commission base, (b) VAT if any, (c) EWT withheld.
- Contracts / authorities to sell – to substantiate agency relationship.
- 2307 certificates – filed chronologically; reconcile with 1601-EQ.
- Books of accounts – manual or loose-leaf; keep for 10 years (Sec. 235 as amended by EOPT).
8. Typical Compliance Pitfalls
| Pitfall | Consequence |
|---|---|
| Treating the **commission **net of VAT as percentage-tax base | Under-declaration; surcharge & interest. |
| Developer fails to withhold EWT | Assessed for tax + 20 % interest + 25 % surcharge + compromise. |
| Wrong rate (e.g., 5 % instead of 10 %) | Disallowed as credit to broker; deficiency to payor. |
| Broker crosses ₱3 million threshold mid-year but delays VAT registration | Unpaid 12 % VAT + penalties beginning the month after threshold breach. |
9. Quick-Reference Checklist (From the Broker’s Perspective)
☐ Check annual gross receipts: > ₱3 M? → Register/change to VAT immediately.
☐ Issue OR every time, showing VAT or percentage tax separately.
☐ Confirm EWT rate (10 % or 15 %) with payor before commission release.
☐ Obtain BIR 2307 certificate quarterly; match with Form 1604-E at year-end.
☐ File:
- VAT: 2550M/Q or Percentage: 2551Q
- EWT: only if you yourself pay sub-agents (then you become withholding agent).
- Income Tax: 1701Q / 1701-A or 1702Q / 1702-RT
☐ Renew local business permit every January; pay local business tax.
10. Conclusion
For Philippine real-estate professionals, two national tax regimes converge on every commission:
- Output tax on the service itself – 12 % VAT if VAT-registered, or percentage tax if not; and
- Creditable EWT withheld by the payor – 10 % for individuals, 15 % for firms, computed on the VAT-exclusive amount.
Sound compliance hinges on correctly identifying your tax status, segregating VAT from the withholding base, and collecting (or issuing) the right BIR certificates. Because BIR issuances evolve quickly—especially after TRAIN, CREATE and the 2024 Ease-of-Paying-Taxes Act—practitioners should monitor new Revenue Regulations and RMCs, or seek updated professional advice when in doubt.
This article is for general guidance only and is not a legal opinion. Consult your tax adviser or the BIR for transactions with unique facts or material amounts.