This guide is for foreign individuals who earn Philippine-source salary, fees, dividends, interest or rent without living in the Philippines, and for the payroll, HR and bookkeeping staff who withhold on them. It is not for Filipino citizens working abroad (see the OFW tax guide), foreigners who live in the Philippines (resident aliens), foreign corporations, or estate tax on a non-resident alien's property (see the property inheritors guide). If the BIR has issued an assessment, or a treaty claim was denied, take it to a tax practitioner.
NRANETB and NRAETB meaning
Both labels describe a foreigner whose residence is outside the Philippines. A nonresident alien "means an individual whose residence is not within the Philippines and who is not a citizen thereof" (NIRC Sec. 22(G)). The labels split that group by activity:
- NRAETB: nonresident alien engaged in trade or business in the Philippines.
- NRANETB (also written NRA-NETB): nonresident alien not engaged in trade or business in the Philippines.
Neither class is taxed on foreign income. "An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines" (NIRC Sec. 23(D)). Staying longer does not change this.
Engaged or not engaged in trade or business: the 180-day test
Answer two questions for the calendar year:
- Did the person stay in the Philippines more than 180 days in total? If yes, they are an NRAETB. The law says such a person "shall be deemed a 'nonresident alien doing business in the Philippines', Section 22(G) of this Act notwithstanding" (RA 12214 (CMEPA), NIRC Sec. 25(A)(1)). Days need not be consecutive: the test is an "aggregate period".
- If 180 days or fewer, did they actually carry on a trade, business or profession here? If yes, they are still an NRAETB. The 180-day rule adds people to the engaged class; it does not remove someone who is in fact doing business. If no, they are an NRANETB.
The NIRC test is "more than one hundred eighty (180) days" in a calendar year. A 183-day figure you may see elsewhere is not the NIRC test, so do not use it to classify someone under Sec. 25.
Rates for each class (from July 1, 2025)
CMEPA restated Sec. 25 effective July 1, 2025 (RR 21-2025 digest). The rates below apply from that date.
| Income | NRAETB | NRANETB |
|---|---|---|
| Salary, fees, business income | Graduated table, 0% to 35% (NIRC Sec. 24(A)(2)) | 25% final on gross |
| Cash or property dividends from a domestic corporation | 20% (Sec. 25(A)(2)) | 25% final, or the treaty rate |
| Bank deposit interest | 20% final | 25% final, or the treaty rate |
| Rents, royalties, emoluments | Graduated (royalties as passive income 20%) | 25% final |
For the NRANETB, Sec. 25(B) levies "a final tax equal to twenty-five percent (25%)" on the "entire income received from all sources within the Philippines", including "salaries, wages ... compensation, remuneration, emoluments" (RA 12214). Gains on unlisted shares and real property follow separate rules (15% and 6%) under the same digest.
Worked example: ₱1,200,000 of Philippine-source pay
Inputs: a foreign engineer is paid ₱1,200,000 in 2026 for work performed in the Philippines, with no other Philippine income. Compensation earners take no deductions (NIRC Sec. 34), so taxable income is ₱1,200,000.
| Scenario | Rule | Working | Tax |
|---|---|---|---|
| 150 days in the country, no business activity: NRANETB | 25% final on gross, Sec. 25(B) | ₱1,200,000 x 25% | ₱300,000 |
| 200 days in the country: NRAETB | 2023 graduated table, Sec. 24(A)(2) via Sec. 25(A)(1) | ₱102,500 + 25% of (₱1,200,000 minus ₱800,000) | ₱202,500 |
At this income the graduated table takes 16.9% of pay (₱202,500 divided by ₱1,200,000) against a flat 25%. The graduated tax equals 25% of income only at about ₱3,950,000 of taxable income; below that amount, NRAETB status produces the lower bill on the same pay. We computed this from the same table our income tax calculator uses. On ₱600,000 the gap is wider: ₱150,000 at 25% against ₱62,500 graduated.
One limit for NRAETBs with business income: the 40% Optional Standard Deduction is not available to "a nonresident alien" (NIRC Sec. 34(L)), so expenses must be itemized and documented.
What each class files
NRANETB: the Philippine payor withholds the 25% final tax (or the treaty rate) at source; the BIR's treaty FAQ addresses "the income payor on the income of the nonresident alien not engaged in trade or business". Because the tax is final, the income is not added to a graduated computation.
NRAETB earning compensation: the employer withholds under the graduated table, but substituted filing does not apply. RR 11-2018 lists "Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income" among those "still required to file Income Tax Return" (RR 11-2018). That return is due April 15 of the following year (NIRC Sec. 51(C)(1)).
NRAETB with business or professional income: files the quarterly return (Form 1701Q, May 15, August 15, November 15) and the annual Form 1701 by April 15.
Treaty relief
If the person's home country has a tax treaty with the Philippines, a lower rate or exemption may apply. The BIR International Tax Affairs Division processes Tax Treaty Relief Applications (TTRA) and requests for confirmation (RFC); its Taxation of Non-Residents page lists who may apply, when the payor may apply the treaty rate, and the documents to submit. The RR 21-2025 table itself marks NRANETB dividends, interest and royalties as "25% (or the tax treaty rate)".
Next steps
- Count the calendar-year days in the Philippines and apply the two-question test above.
- For an NRAETB, run the amount through the income tax calculator. For a payor, check the withholding on the withholding tax calculator.
- Before claiming a treaty rate, read the BIR's Taxation of Non-Residents requirements.
- For filing an NRAETB return, follow how to file your ITR.
How to tell you got it right: an NRANETB's payment shows 25% (or a documented treaty rate) withheld on the gross, with no annual return; an NRAETB's year-end tax equals the graduated-table figure for their Philippine-source taxable income, and the return is on file by April 15.