Withholding Tax Basis for Toll Fee Payments (Philippines)

Overview

This article explains how Philippine withholding tax (WT) rules apply to toll road fees paid to expressway operators (e.g., for RFID/post-paid fleet accounts or cash/retail transactions). It covers what to withhold (if any), who withholds, when, the proper documents and returns, edge cases, and practical compliance tips. It is written for taxpayers and accounting teams who handle transportation expenses and supplier payments.

1) Quick definitions

Withholding tax (WT) is a collection mechanism where the payor (customer) withholds a portion of an income payment to a supplier and remits it to the BIR, either as creditable (Expanded Withholding Tax or EWT) or final WT.
EWT applies to income payments subject to regular income tax and listed/covered by BIR regulations (rates vary by income type). It is creditable against the supplier’s income tax due.
Toll fees are the user charges collected by private tollway concessionaires/operators for the use of an expressway. They are typically VATable sales of services when the operator is VAT-registered.
Retail vs. billed corporate accounts: Retail (walk-in cash/reload) transactions produce small value receipts at plazas. Corporate/B2B users often maintain RFID/postpaid or periodic billed accounts, and receive summarized billing and official receipts.

2) Core question: Are toll fees subject to withholding tax?

A. Conceptual basis

EWT attaches to income payments that are (i) income-taxable to the payee and (ii) specifically covered by WT regulations.
A toll fee is the operator’s service revenue. In broad terms, payments for services to a domestic corporation can be EWT-able if the income category is one that the BIR has identified for creditable withholding (e.g., certain services/contractor fees).
But the WT system also considers practicability and how the payment is made. The ability to withhold, issue/collect Certificates (BIR Form 2307), and match books is central.

B. Practical line-drawing by payment channel

Retail/over-the-counter toll payments (cash or consumer RFID reloads)
- Impracticable to withhold. Payments are small, point-of-sale, and often anonymous. The toll plaza or self-serve reload stations cannot net a customer’s withholding on the spot, and the customer cannot remit WT on behalf of an unidentified payee relationship (no netting, no 2307 exchange in real time).
- Result: In practice, no EWT is withheld by retail users. The operator reports gross receipts and pays income tax/VAT in the ordinary course.
Billed corporate/fleet accounts (post-paid/periodic invoices)
- Practicable to withhold. There is an established supplier–customer relationship, billing, and official receipts—so the payor can withhold EWT (subject to rate/category; see below), pay the net, remit the withheld tax to BIR, and issue BIR Form 2307 to the operator.
- Result: EWT commonly applies in B2B arrangements if the toll operator’s revenue falls into a WT-covered category and the parties have aligned their invoicing to reflect WT.

Bottom line: No WT for retail toll payments due to impracticability; EWT can apply for billed corporate/fleet accounts where invoicing and 2307 exchange are feasible.

3) Categorizing the income and choosing the rate

Classify the payment under the closest BIR EWT category for services (e.g., payments for services/contractors or similar catch-all service categories applicable to domestic corporations).
Applicable rate: Use the prescribed EWT rate for that category (frequently a low single-digit percentage for ordinary services). Rates and categories change over time—always check your company’s current BIR WT matrix and the operator’s advice on the agreed category code/rate.
Do not confuse “tolling fees” in manufacturing (a separate concept) with toll road fees for expressway use.

Practical approach:

Request the operator’s BIR registration details (line of business, VAT status) and preferred WT category/rate for corporate accounts; align your supplier masterfile accordingly.
Reflect the chosen WT code in your AP voucher, 2307, and QAP/Alphalist.

4) Who withholds and when?

Who: Any payor engaged in trade or business paying billed toll fees to the toll operator under a corporate account generally acts as withholding agent. Individuals purely for personal use are not WT agents.
When: Upon payment or crediting (whichever comes first) of the billed amount. For RFID prepaid (advance funding) arrangements that later convert into periodic billing/OR issuance, treat the withholding on the billing/recognition event when the income becomes determinable and receipted, as aligned with the operator’s billing mechanics.

5) VAT interaction and invoicing mechanics

Toll fees of VAT-registered operators are typically subject to VAT. For corporate accounts:
1. Operator issues Sales Invoice/Billing (or Statement) and later an Official Receipt (OR) for payment.
2. Your AP should record gross amount plus VAT.
3. Withhold EWT on the income base (i.e., net of VAT—as EWT is on income, not VAT).
4. Pay net of EWT to the operator.
5. Remit the withheld EWT to BIR and issue BIR Form 2307 to the operator covering the period.

6) Documentation & returns

From the operator:
- BIR-registered documents (COR/2303), VAT registration, updated OR/Invoice series, and address/TIN for your supplier masterfile.
From the customer (withholding agent):
- BIR Form 2307 (Certificate of Creditable WT at Source) issued to the operator for the covered quarter.
- Monthly WT remittance form for EWT (for advances) and Quarterly EWT return with QAP/Alphalist reflecting the operator as payee.
- Books/ledgers showing gross toll fees, VAT input claim (if any), EWT withheld and remitted, and payment references.

Common forms used in practice (names/uses):

2307 – Certificate you give the operator.
Monthly EWT remittance form (for monthly deposits on account, where applicable).
Quarterly EWT return (1601-EQ) – Summarizes EWT for the quarter; attach QAP/Alphalist. (Exact form numbering may be updated; follow the current BIR eFPS/eBIR forms in use in your organization.)

7) Corporate RFID/post-paid set-up checklist

Masterfile set-up: confirm operator’s TIN, registered name, VAT status, address, preferred WT category/rate.
Contract/Enrollment: ensure billed account; bulk RFID tags mapped to plate numbers/cost centers.
Invoicing cadence: monthly cut-off; ensure EWT base excludes VAT.
AP process: compute EWT, pay net, remit EWT within statutory timelines.
2307 issuance: calendar quarterly issuance to the operator.
Reconciliation: match ORs to reloads/usages, tag input VAT, reconcile EWT vs. 2307 and operator’s acknowledgment.

8) Special cases & edge scenarios

Government-owned/controlled expressways: If the payee is the government itself, the usual EWT-on-supplier construct does not apply (you don’t withhold tax from the government). Many Philippine expressways, however, are operated by private concessionaires—treat them as private suppliers unless your contract clearly states otherwise.
Zero-rated/Exempt toll users: The user’s VAT status does not change the operator’s output VAT (or your EWT duty). VAT reliefs (e.g., ecozone‐related) require operator compliance and proper VAT documentation; EWT analysis is separate.
Prepaid wallets with periodic official receipts: You may replenish wallets during the month (no practicable WT), but when the operator issues the period invoice/OR recognizing revenue for your usage, that is the WT event—withhold then.
Promotions/rebates: Compute EWT on the income actually payable to the operator net of documented discounts but before VAT.
Related-party operators: Be extra careful on transfer pricing documentation. WT mechanics still follow the supplier/payor roles.

9) Bookkeeping entries (illustrative)

Assume a ₱112,000 billed toll usage (₱100,000 fee + ₱12,000 VAT) and 2% EWT (illustrative only):

Record expense and payable to operator (gross of VAT):
- Dr. Toll Expense ₱100,000
- Dr. Input VAT ₱12,000
- Cr. Accounts Payable – Operator ₱112,000
Record EWT (creditable to the operator):
- Dr. Accounts Payable – Operator ₱2,000
- Cr. Withholding Tax Payable (EWT) ₱2,000
Pay operator net of EWT:
- Dr. Accounts Payable – Operator ₱110,000
- Cr. Cash ₱110,000
Remit EWT to BIR per statutory schedule:
- Dr. Withholding Tax Payable (EWT) ₱2,000
- Cr. Cash ₱2,000

(Rates and timing are illustrative; confirm your actual category and deadlines.)

10) Controls, timelines, and penalties

Timelines: Observe the BIR monthly/quarterly WT remittance and return deadlines that apply to your filing profile (eFPS/eBIRForms).
Certificate discipline: Issue 2307 every quarter without fail; operators rely on these to credit their WT against income tax.
Audit readiness: Maintain contracts/enrollment docs, invoices/ORs, payment proofs, 2307s, WT returns, and reconciliation schedules.
Non-compliance risks: Surcharges, interest, disallowance of expense (for lack of WT), and VAT input disallowance if documentation is incomplete or inconsistent.

11) Practical compliance takeaways

Retail tolls: No WT in practice—keep official receipts for expense/VAT substantiation.
Corporate billed accounts: Apply EWT using the appropriate services category; withhold on the net of VAT, pay net to operator, remit and certificate on time.
Align early: Obtain the operator’s TIN, VAT status, and preferred WT category/rate, and embed these in your AP and 2307 workflows.
Document rigorously: Reconcile usage vs. billings, and ensure 2307s match what you remitted and what the operator expects to credit.
Review annually: WT rates/categories and BIR form numbers can change—refresh your WT matrix and SOPs at least once a year.

12) Model policy clause (you can adapt)

Toll Fees – Withholding & Documentation For all billed toll road accounts with private concessionaires, the Company shall withhold creditable withholding tax at the applicable services rate on the amount net of VAT, remit the tax to the BIR within the prescribed deadlines, and issue BIR Form 2307 quarterly to the operator. Retail or anonymous point-of-sale toll payments shall be treated as non-withheld due to impracticability; official receipts shall be secured and retained to support expense recognition and VAT input claims. AP shall maintain a supplier masterfile for each operator containing the operator’s TIN, VAT registration, WT rate/category, and reconciliation records.

Final note

The framework above reflects standard Philippine WT principles applied to toll road services and commonly observed industry practice for retail vs. billed corporate payments. Because WT categories and rates can evolve, keep your withholding matrix current and align with each operator in writing on the rate and documentation they expect for smooth audits on both sides.