The travails of BIR form no. 1709

(Conclusion)

In the early 1990s, the BIR had already prescribed a similar form, although only for foreign related-party transactions that is, BIR form no. 1702 H, known as the “Information Return on Transactions with Related Foreign Persons”. This long-forgotten form was just one page, listing different possible types of transactions with foreign related parties. All taxpayers had to do was to write the total amounts per type of related-party transaction and the countries of residence of the related parties. But even if it had only one page, this form still allowed any BIR examiner to see at a glance which was the material related-party transaction. Hence, with respect to the RPT form, it may be advisable to limit the information required.

Moreover, taxpayers may be apprehensive over the effort needed to compile the attachments to the RPT form. Aside from the attachments mentioned above, the RPT form requires also the transfer pricing documentation and the advanced pricing agreement (APA), if any. In the instances when the foreign withholding taxes have not yet been remitted to the foreign tax office, the copy of the taxpayer’s tax residency certificate issued by the BIR’s International Tax Affairs Division and submitted to the foreign tax office should be submitted.

For many taxpayers, these documents may be voluminous. Some documents may have to comply with certain formalities. The RPT form requires the contracts and the APAs (if any) to be certified true copies. In the case of foreign withholding taxes, the proof of payment has to be duly authenticated or apostilled and this requirement entails costs.

However, for documents that are not yet existing, as in the case of only purchase orders evidencing intercompany sales/purchases of good, RMC No. 76-20202 expressly requires a written contract of sale. For taxpayers without any transfer pricing documentation for the taxable year, a prior year’s documentation or any applicable documentation prepared by the group will suffice. But for taxpayers that have not yet prepared any documentation at all, they will have to make sure that one is prepared.

Especially for the initial year of compliance, taxpayers should draft a detailed plan for complying with RR No.19-2020. Specifically, the plan should include:

• Preparing a list to see which documents available/existing and which unit are (in the Philippines or abroad) in the organization has custody of the documents

• The timeline for the compilation of attachments – certain efficiencies may be achieved by having during the taxable year a continuing process of monitoring the transactions and turnover of documents to the person in charge of preparing the RPT form. Good coordination is required among the related parties.

• The timeline for preparation of the RPT form.

Maria Carmela M. Peralta is a principal and head of the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected]