Transfer pricing (TP) is one of the areas in which multinationals cause tax problems. The Bureau of Internal Revenue (BIR) has published fairly new rules and issues for transactions with related parties and the application of the arm length principle as a means of determining transfer prices charged by associated companies, as applied internationally. RR No. 2-2013 expressly requires all subjects who participate in transactions with related persons to maintain and retain appropriate and specific TP documents. More importantly, the documentation must be simultaneous, i.e. it must exist or be introduced at the time of the development or implementation of agreements by associated companies that raise transfer pricing issues or that could verify these agreements when developing tax returns. The Philippines may be one of the last countries in Southeast Asia to impose its transfer pricing rules. Since the Bureau of Internal Revenue (BIR) adopted its Transfer Pricing Regulation (Revenue Regulation No. 2-2013, “Transfer Pricing Guidelines,” published on January 23, 2013), progress in implementing the rules has been very limited. It took the BIR nearly a decade to adopt the Income Audit Order No. 1-2019 – issued on August 20, 2019 and came into effect immediately after approval – (RAMO 1-2019 or RAMO), which provides a framework for achieving transfer pricing controls (TP). Apart from these rules, there are no other transfer pricing rules in the Philippines. Kaval works as a consultant for Transfer Pricing Solutions Australia, Transfer Pricing Solutions Asia and Transfer Pricing Solutions Malaysia.
Kaval has more than five years of experience in various transfer pricing areas, such as. B documentation on transfer pricing, comparative studies, cost allocation and mutual agreement procedures (POPs). In addition to the above information, these documents must be kept and kept within three (3) years of filing the annual income tax return. However, it is in the interest of the subject to keep the documents for a longer period of time for the purposes of the Mutual Agreement Procedure (MAP) and possible transfer pricing control. Based on the date of effect of RR 19-2020 mentioned above, the BIR has informed the subjects that those whose fiscal year ended April 30 are covered by the above requirements, since their AITR AE must be filed on August 15, which comes immediately after the Regulation comes into effect. These tax payers have less than a month to prepare version 1709 of BIR, transfer pricing documentation and other supporting documentation. Transfer pricing has long been identified by the BIR as one of its priority programs and plans. As a result, in February 2013, BIR adopted the Sales Tax Regulation (“RR”) No.
02-2013 or the Philippine Transfer Pricing Regulations. The TP verification guidelines apply to all related party transactions in which at least one party is subject to tax in the Philippines.