Tax Alert No. 92 [Revenue Regulations (RR) No. 34-2020 dated 18 December 2020]

Streamlines the guidelines and procedures for the submission of BIR Form No. 1709, Transfer Pricing Documentation and other supporting documents

The Commissioner of Internal Revenue (CIR) has issued RR No. 34-2020 to streamline the guidelines and procedures for the submission of BIR Form No. 1709 (RPT Form), Transfer Pricing Documentation (TPD) and other supporting documents by providing, inter-alia, safe harbors and materiality thresholds. We highlight below some salient provisions.

Taxpayers required to file and submit the Related Party Transactions Form

The following taxpayers are required to file and submit the RPT Form, together with the Annual Income Tax Return (AITR):

1. Large Taxpayers;
2. Taxpayers enjoying tax incentives;
3. Taxpayers reporting net operating losses for the current taxable and the immediately preceding two consecutive years and
4. A related party which has transactions with (a) (b) or (c). Key Management Personnel (KMP) shall no longer be required to file and submit the RPT form nor shall there be any requirement to report any transaction between KMP and the reporting entity.

Who are required to prepare and submit TPDs and other supporting documents

The preparation and submission of TPDs under prevailing tax regulations shall be mandatory for those taxpayers required to submit the RPT Form who shall meet the following materiality thresholds:

1. Annual gross sales/receipts for the subject taxable period exceeding PHP150,000,000 and the total amount of related party transactions with foreign and domestic related parties exceeds PHP90,000,000.
2. Related party transactions exceeding the following materiality threshold:
   • If involving sale of tangible goods exceeding PHP60,000,000;
   • If involving service transaction, payment of interest, utilization of intangible goods or other related party transaction in the aggregate amount exceeding PHP15,000,000.00; or
3. If TPD was required to be prepared during the immediately preceding taxable period for exceeding either (a) or (b) above.

Other guidelines

• The TPDs and other supporting documents as set out in Section 6 of RR No. 19-2020 shall no longer be attached to the RPT Form but shall be submitted within thirty (30) calendar days upon receipt of request by the Commissioner or his/her duly authorized representatives, pursuant to a duly issued Letter of Authority, subject to non-extendible period of 30 calendar days based on meritorious grounds.
• Taxpayers who are not required to submit the RPT Form in this issuance are nevertheless required to disclose in the Notes to the Financial Statements that they are not covered by the requirements and procedures for related party transactions provided under this RR.
• The simplified version of the RPT Form (BIR Form 1709) shall henceforth be used in lieu of the old form.

The regulations shall take effect upon publication today.

You may access the full version of this issuance through the BIR website.