Philippines Transfer Pricing Policy

Email: mnl4ww@evershinecpa.com
or
Contact by Viber or Skype during working hours of the Philippines time zone.
For Philippines going-out cases, the coordinator window will be:
Manila Branch of Evershine BPO Service Corp. in Taiwan
Project Manager Meiling Wu, who speaks both English and Tagalog.
Viber: +886966173105
Skype: wumeiling25

TP-Q-10
Why kinds of scenarios will be adopted TP policy? What is the relevance between DTA and TP policy?

TP-A-10
When the Philippines Tax entity would like to pay out whatever business profits, Royalty, Technical Services fees, Interests, trading amount etc., it will adopt the DTA tax rate. Its judge criteria, please see the Philippines Treaty Page.
But if want to verify the above-mentioned amount if reasonable, will adopt the Philippines TP Policy.

TP-Q-20:
在菲律宾甚麼情況下, WFOE 外商投資企業不需要同時處理TP 申報和文件申報?
What are the scenarios in the Philippines, that a Wholly Foreign-Owned Entity (WFOE) is exempted from compliance of Transfer Pricing (TP) declaration and TP documentation?

TP-A-20:
You are exempted from TP declaration if you failed to fulfill all 3 criteria below:

1. It is required to file an Annual Income Tax Return (AITR);
2. Has a domestic or foreign related party transactions; and
3. Any of the 3 below:
4. a) Large taxpayer (Note 1)
5. b) Enjoy tax incentives (Note 2)
6. c) Net operating losses in current and immediately preceding 2 tax years (Note 3)
7. d) A related party that has transactions with (a), (b), or (c).

You are exempted from TP documentation if you failed to meet any of the below criteria:

1. At least Annual Revenue PHP 150 million (USD 3.1 million) and Related party transactions (Foreign and Domestic) PHP 90 million (USD 1.9 million).
2. Related party transactions for sales of tangible goods PHP 60 million (USD 1.2 million) or for service, interest, intangible goods in aggregate PHP 15 million (USD 0.3 million).
3. Transfer pricing documentation was required to be prepared during the immediately preceding taxable period for exceeding either (1) or (2) above.

TP-Q-30:
在菲律宾甚麼情況下, WFOE 外商投資企業需要向該國的稅務局發送TP 申報? 甚麼是申報單名稱?
What are the scenarios in the Philippines, that a Wholly Foreign-Owned Entity (WFOE) is required to submit a TP declaration to the country’s tax bureau? What is the name of the TP declaration form?

TP-A-30:
You are required to submit TP declaration if you fulfill all 3 criteria below:

1. It is required to file an Annual Income Tax Return (AITR).
2. Has domestic or foreign-related party transactions.
3. Any of the 3 below:
4. a) Large taxpayer (Note 1)
5. b) Enjoy tax incentives (Note 2)
6. c) Net operating losses in current and immediately preceding 2 tax years (Note 3)
7. d) A related party that has transactions with (a), (b), or (c).

TP declaration form – BIR Form No.1709 (RPT Form)

TP-Q-40:
在菲律宾甚麼情況下, WFOE 外商投資企業需要向該國稅務局發送TP 申請和文件? 甚麼 declaration 表單名和文檔名?
What are the scenarios in the Philippines, that a Wholly Foreign-Owned Entity (WFOE) is required to submit TP declaration and TP documentation to the country’s tax bureau? What is the name of the TP declaration form and TP documentation form?

TP-A-40:
Refer TP-A30 – TP declaration form – BIR Form No.1709 (RPT Form)
If you meet any of the following criteria, you are required to submit TP documentation form – Local File, Master File, and CbC Report.

1. At least Annual Revenue PHP 150 million (USD 3.1 million) and Related party transactions (Foreign and Domestic) PHP 90 million (USD 1.9 million).
2. Related party transactions for sales of tangible goods PHP 60 million (USD 1.2 million) or for service, interest, intangible goods in aggregate PHP 15 million (USD 0.3 million).
3. Transfer pricing documentation was required to be prepared during the immediately preceding taxable period for exceeding either (1) or (2) above.

Philippines TRANSFER PRICING for professionals

Overview

While the Philippines is not a member of the OECD, the transfer pricing regulations issued by the BIR are largely based on the OECD Transfer Pricing Guidelines.
The Philippine Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 34-2020, providing guidance on TP regulations.
The regulations take effect on 23 December 2020.
In the Philippines, transfer pricing rules apply to domestic and international transactions engaged with a person with a related party relationship.

Related party relationship

Having 30% or more equity ownership (directly or indirectly or under common ownership) with the other party.

Types of transactions covered
*Sale or purchase of goods
*Sale or purchase of property and other assets
*Rendering or receiving of services
*Leases
*Transfer of research and development
*Transfer under license agreements
*Transfer under finance arrangements
*Provision of guarantees
*Settlement of liabilities on behalf of the entity or by the entity on behalf of that related party

Acceptable Transfer Pricing method

*Comparable Uncontrolled Price (CUP)
*Resale Price
*Cost Plus
*Transactional net margin
*Profit split

Documentation

*Bureau of Internal Revenue has prescribed the guidelines and procedures for submission of RPT form and Transfer Pricing Documentation in the Revenue Regulations (RR) No. 34-2020.
*Key Management Personnel are exempted from filing of Form 1709. Companies are no longer required to report any transactions between the KMP and the reporting entity.

Due dates and respective threshold:

Note:

1. Large taxpayer must have been classified and duly notified by the Commissioner of Internal Revenue (CIR) for having satisfied with any or combination of set criteria as prescribed in the said Regulations. Set criteria are classified as below:

1. Value Added Tax – net VAT payable at least PHP 200,000 per quarter for the preceding year;
2. Excise Tax – Annual payable at least PHP 1 million for the preceding year;
3. Income Tax – Annual income tax payable at least PHP 1 million for the preceding year;
4. Withholding Tax – Annual remittance for all types at least PHP 1 million;
5. Percentage Tax – Amount payable at least PHP 200,000 per quarter for the preceding year;
6. Documentary Stamp Taxes – Aggregate annual stamp taxes of at least PHP 1 million;
7. Gross Sales/ Receipts – Annual amount at least PHP 1 billion for the preceding year;
8. Net Worth – Total at the close of each calendar or fiscal year of at least PHP 300 million;
9. Gross Purchases – Annual amount at least PHP 800 million for the preceding year;
10. Top corporate taxpayers listed and published by Securities and Exchange Commission (SEC).

2. Tax incentive includes Board of Investments (BOI)-registered and economic zone enterprises, Income Tax Holiday (ITH), or subject to the preferential income tax rate.
3. Net operating losses for income tax purposes and not on the Audited Financial Statements.

Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Manila Evershine BPO Service Limited Corp.
E-mail: mnl4ww@evershinecpa.com
or
Contact by Viber or Skype in working hours of Philippines time zone.
For Philippines going-out cases, the coordinator window will be:
Manila Branch of Evershine BPO Service Corp. in Taiwan
Project Manager Meiling Wu , who speak in both English and Tagalog.
Viber: +886966173105
Skype: wumeiling25

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System,
please send an email to HQ4mnl@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
Email address:dalechen@evershinecpa.com
linkedin address:Dale Chen

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