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Transfer – Pricing Substance and New Form

Posted by on February 18th, 2022

The Bureau of Internal Revenue released rules and new issuances covering the related-party transactions and enforcing the arm’s length principle as a way of determining transfer prices of associated enterprises as it is applied internationally.


A transfer price is the price charged for goods and or services between associated enterprises that should be at par with those between unrelated parties.


Transfer pricing is found in Sec. 50 of the Tax Code which allow the Bureau of Internal Revenue (BIR) to adjust, allocate or apportion revenues and expenses of related parties to prevent tax evasion to clearly reflect the amount of income earned by each party.



The said regulation provides guidelines in applying the arm’s length principle for cross border and domestic transactions between associated enterprises.

The concept of the Transfer Pricing under the regulation should be contemporaneous such that associated enterprises must consider the arm’s length principle at the time they develop or implement any related party arrangement or whenever they review such arrangements when preparing tax returns.


It provides standardized audit procedures and techniques in the audit of Taxpayers which related party and or intra-firm transactions.

The BIR may perform adjustments during a tax audit to reflect the appropriate arm’s length price or rate for a Taxpayers related party transaction in case it is not in compliant with the arm’s length principle or in absence of TP documentation. The taxpayer are given only a 5-day period to submit TP – related documents upon request of the Bureau of Internal Revenue (BIR) examiner during an audit.

RR. NO. 19-2020,reinforces the TP rules by Prescribing the use of new form No. 1709 ( Information Return on Related Party Transactions (Domestic and or Foreign). The new form replaces the old BIR Form 1702-H or the Information Return on Transactions with Related Foreign Persons (series of 1992). It aims to ensure proper disclosures of related party transactions and compliance with the arm’s length principle so as to protect the tax base by effectively implementing Philippine Accounting Standards (PAS) 24 on Related Party Disclosure for tax purposes.

RR No. 19-2020 enforces the contemporaneous requirement in minting the TP documentation under the Philippine TP regulations since it is now required to be submitted with annual income tax return. The taxpayer is required to supply a detailed information on the nature of the transactions and the affected accounts, a brief business overview of the ultimate multinational group to which the taxpayer belongs a brief functional profile and the industry in which it operates among others. All information must be provided. The information requested in the new form is the same as those that BIR  expects to find in the documentation as listed in the Philippine TP Regulations. Supporting documents include a certified true copy of the relevant contracts or proof of the transaction, withholding tax return and corresponding proof of payment of taxes withheld and remitted to the BIR, proof of payment of foreign taxes or ruling duly issued by foreign tax authority where the other party is a resident and a certified true copy of any advance pricing agreement.


Violation of the provisions of the new regulation are subject to penalties provided under Sec 250 of the Tax Code which covers failures to file certain information returns as well as other pertinent provisions of the Tax Code.


Revenue Regulation (RR NO. 19-2020) took effect on July 25,2020.