Withholding Tax on Rent Paid to a Nonresident Foreign Landlord

A Philippine tenant leasing property from a landlord who is a nonresident foreign individual or a nonresident foreign corporation withholds 25% final withholding tax on the gross rental — under NIRC Section 25(B) for a nonresident alien not engaged in trade or business, and NIRC Section 28(B)(1) for a nonresident foreign corporation. Unlike rent paid to a Philippine-based lessor, this tax is final, not creditable, and the tenant certifies it on BIR Form 2306, not BIR Form 2307.

Why is rent to a foreign landlord taxed differently from rent to a local lessor? #

The difference comes down to whether the landlord has a Philippine trade or business presence behind the rental income, not the nationality of the property owner. A domestic lessor — any Philippine-registered individual or corporation renting out property it owns — is withheld at 5% creditable withholding tax under RR No. 11-2018, as covered in Withholding Tax on Rent: How to Complete BIR Form 2307 for Lessors. A nonresident alien not engaged in trade or business (NRA-NETB) or a nonresident foreign corporation (NRFC), by contrast, has no Philippine return on which a credit would even apply — so the NIRC instead taxes that income at source, in full, through a single final withholding tax.

This is the same final-vs-creditable split explained generally in Final Withholding Tax vs Creditable Withholding Tax: What’s the Difference? — a payee who files no further Philippine return on that income gets final tax; a payee who still nets the withheld amount against an annual return gets creditable tax. A nonresident foreign landlord with only a single leased unit or building in the Philippines, and no other local trade or business, falls squarely into the first category.

What rate applies — and does it differ for an individual versus a corporate foreign landlord? #

Both a nonresident alien landlord and a nonresident foreign corporate landlord are withheld at the same 25% rate on gross rental, though the two land there under separate NIRC provisions. A nonresident alien not engaged in trade or business in the Philippines is taxed under NIRC Section 25(B), which imposes a flat percentage “upon the entire income received from all sources within the Philippines” by that individual. A nonresident foreign corporation is taxed under NIRC Section 28(B)(1), which covers “rents” among the enumerated categories of Philippine-source gross income subject to final tax.

“There shall be levied, collected and paid for each taxable year upon the entire income received from all sources within the Philippines by every nonresident alien individual not engaged in trade or business within the Philippines… a tax equal to twenty-five percent (25%) of such income.”

That is the operative language of NIRC Section 25(B). The corporate-side counterpart, Section 28(B)(1), used to impose 30% on an NRFC’s gross Philippine-source income — including rents — until the CREATE Act (Republic Act No. 11534) lowered that rate to 25%, effective January 1, 2021, aligning it with the individual rate. As of 2026, both routes land on the same 25% figure:

Note that both the NRA-NETB and NRFC rates apply to gross rental — unlike a domestic lessor’s income tax, there is no deduction for the landlord’s own expenses, because the tax is computed and collected entirely at the tenant’s end.

BIR Form 2307 vs BIR Form 2306: which certificate goes to a nonresident foreign landlord? #

A nonresident foreign landlord receives BIR Form 2306, the Certificate of Final Tax Withheld at Source — never BIR Form 2307. The two certificates document fundamentally different outcomes: one leaves the payee something left to credit, the other does not, and issuing the wrong one misstates the landlord’s actual Philippine tax position.

The mechanics mirror the dividend treatment covered in Is a Dividend Payment Subject to BIR Form 2307 or Form 2306? — any income item the NIRC taxes as final, rather than creditable, gets a Form 2306, regardless of what kind of income it is.

How does the tenant remit the tax and file? #

The tenant, as the withholding agent, remits the 25% final tax using BIR Form 1601-F, the Monthly Remittance Return of Final Income Taxes Withheld, rather than the forms used for creditable withholding. Because the tax is final rather than creditable, it does not run through the quarterly alphalist of creditable payees or the BIR Form 1601-EQ cycle that a domestic lessor’s 5% withholding uses. Instead:

1. Compute 25% of the gross monthly (or periodic) rental due to the nonresident landlord.
2. Withhold that amount before remitting the net rental to the landlord.
3. File and remit the withheld amount via BIR Form 1601-F, within the deadline the BIR sets for final withholding tax remittances.
4. Issue BIR Form 2306 to the landlord as proof that the final tax on that rental period was withheld and remitted.
5. Retain copies of the certificate and proof of remittance — a foreign landlord generally has no further Philippine filing to make on this income, but the tenant’s own compliance file should still show the chain of withholding, filing, and certification.

Can a nonresident foreign landlord claim a lower rate under a tax treaty? #

Yes, in principle — a landlord resident in a country that has an income tax treaty with the Philippines may be entitled to a reduced withholding rate or exemption on Philippine rental income, but the 25% statutory rate applies by default unless and until that treaty benefit is properly established with the BIR. The mechanism for this is the tax treaty relief process administered by the BIR’s International Tax Affairs Division (ITAD): the nonresident landlord (or the withholding agent, in some cases) submits a Certificate of Residency for Tax Treaty Relief, together with the landlord’s home-country tax residency certificate and supporting documents, either before the first payment (to apply the treaty rate at source) or afterward as a request for confirmation or refund if the regular 25% was already withheld.

This process, and the documentation it requires, is covered in more depth in Tax Treaty Relief Application (TTRA) with the BIR. Because treaty rates vary by country and by income category, a tenant should not unilaterally apply a reduced rate without the landlord having completed this process — withholding below 25% without a properly established treaty basis exposes the tenant, as withholding agent, to a deficiency assessment for the shortfall.

Worked example: ₱200,000 monthly rent to a nonresident foreign landlord #

A Philippine corporation leasing office space for ₱200,000 a month from a nonresident foreign individual landlord — with no treaty relief in place — withholds ₱50,000 in final tax and remits ₱150,000 net to the landlord.

A Manila-based company leases a commercial unit directly from Mr. Alan Reyes-Whitfield, a nonresident alien who inherited the property but lives abroad and has no other Philippine trade or business. The lease runs at ₱200,000 per month, VAT not applicable because the landlord is not a VAT-registered Philippine taxpayer conducting business locally. Because the landlord is an NRA-NETB, the tenant withholds under NIRC Section 25(B):

The tenant issues Mr. Reyes-Whitfield a BIR Form 2306 showing ₱200,000 as gross rental and ₱50,000 as final tax withheld. He has no further Philippine income tax return to file on this rental — the ₱50,000 already represents the full and final settlement of his Philippine tax liability on that income. Had the lease instead been with a nonresident foreign corporation — say, a Singapore-incorporated holding company owning the same building — the computation would be identical: 25% of ₱200,000 under NIRC Section 28(B)(1), the same ₱50,000 withheld, and the same BIR Form 2306 issued in the corporation’s name instead.

If Mr. Reyes-Whitfield’s country of residence had an income tax treaty with the Philippines reducing the rate on real property rentals, and he had completed the ITAD tax treaty relief process before the lease payments began, the tenant could instead withhold at that lower treaty rate from the outset — but absent that documentation, 25% remains the applicable default.

Frequently asked questions #

What withholding tax rate applies to rent paid to a nonresident foreign landlord? #

A Philippine tenant paying rent to a nonresident alien not engaged in trade or business withholds 25% final withholding tax on the gross rental under NIRC Section 25(B). Rent paid to a nonresident foreign corporation is withheld at the same 25% rate on gross income under NIRC Section 28(B)(1), as reduced from 30% by the CREATE Act effective January 1, 2021.

Is withholding tax on rent to a foreign landlord creditable or final? #

It is final withholding tax, not creditable withholding tax. The 25% withheld fully satisfies the landlord’s Philippine income tax on that rental, so there is nothing left for the landlord to credit or report on a further Philippine return.

Does the tenant issue BIR Form 2307 or BIR Form 2306 to a nonresident foreign landlord? #

BIR Form 2306, the Certificate of Final Tax Withheld at Source. BIR Form 2307 certifies creditable withholding tax, which applies only to payments to a resident, Philippine-based lessor, not to a nonresident foreign landlord whose rental income is subject to final tax.

Which BIR form does the tenant use to remit the tax withheld? #

The tenant remits final withholding tax on rent paid to a nonresident foreign landlord using BIR Form 1601-F, the Monthly Remittance Return of Final Income Taxes Withheld, rather than the 1601-EQ/0619-E forms used for creditable withholding tax.

Can a nonresident foreign landlord get a lower withholding tax rate on Philippine rent? #

Only if the landlord’s country of residence has a tax treaty with the Philippines and the landlord secures preferential treatment through the BIR’s tax treaty relief process, by submitting a Certificate of Residency for Tax Treaty Relief and supporting documents to the BIR’s International Tax Affairs Division before or after the regular rate is applied. Without that, the statutory 25% rate applies by default.

Summary #

Rent paid to a landlord with no Philippine trade or business — whether a nonresident alien or a nonresident foreign corporation — is withheld at a flat 25% final withholding tax on the gross rental, under NIRC Section 25(B) or Section 28(B)(1) respectively, and certified on BIR Form 2306, not BIR Form 2307. The tenant remits that tax through BIR Form 1601-F rather than the creditable-withholding cycle a domestic lessor’s 5% EWT uses, and the landlord generally has no further Philippine return to file on that income. A tax treaty can lower the rate, but only once the landlord has completed the BIR’s tax treaty relief process — absent that, 25% applies by default. For the domestic-lessor comparison, see Withholding Tax on Rent: How to Complete BIR Form 2307 for Lessors, and for the broader final-versus-creditable distinction, see Final Withholding Tax vs Creditable Withholding Tax: What’s the Difference?