Do you still prepare BIR Form 2306 until now? Do you still issue it to your suppliers and the same is still accepted? If it is, then you and your suppliers might not have read the Circular of the Bureau of Internal Revenue (BIR) which discontinued the use of the form.
In your next transaction, stop using the form as it is no longer required to be prepared and issued.
The BIR issued Revenue Memorandum Circular (RMC) No. 36-2021 to discontinue the use of BIR Form 2306 and provides guidelines on shifting from Final to a Creditable System on the Value-Added Tax (VAT) withheld on sales to Government or any of its political subdivisions, instrumentalities or agencies, including Government-Owned or -Controlled Corporations (GOCCs).
The shift is in view of Section 37 of the TRAIN Law and as implemented under Section 4-114-2 of Revenue Regulation No. 13-2018, which says that the Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax (VAT) imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: provided, that beginning January 1, 2021 the VAT withholding system under this subsection shall shift from final to a creditable system.
Having said that, concerned government agencies who are required to withhold creditable VAT shall issue BIR Form No. 2307 using Alphanumeric Tax Code (ATC) No. WV010 for purchases of goods or WV020 for purchases of services. Thus, BIR Form No. 2306 shall no longer be issued.
Open Forum: Let’s discuss how the details of BIR Form 2306 are presented in BIR Form 2307
AGREE or DISAGREE: The details of BIR Form 2306 are presented under the “Money Payments Subject to Withholding of Business Tax (Government & Private)” portion of BIR Form 2307, where the withholding agent put the withholding tax on business. The withholding agent has to indicate VAT withholding on purchases of goods (ATC is WV010) or VAT withholding on purchases of service (ATC is WV020).
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[Download Revenue Memorandum Circular No. 36-2021]
