THE Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) 76-2020 to clarify various issues on the submission of BIR Form 1709 or the Related Party Transactions (RPT) Form and its attachments pursuant to Revenue Regulations 19-2020.
As the BIR aims to improve and strengthen its transfer pricing risk assessment and audit, the RPT Form will be used to monitor compliance of the transfer pricing documentation of related parties and related party transactions. The form shall be accomplished by all Philippine taxpayers with related party transactions regardless of the amount and volume of transactions. Individuals and non-stock, non-profit corporations who are considered related parties of a reporting company are also required to submit the form if it has RPTs.
RPT, defined as transfer of resources, services or obligations, is required to be disclosed regardless of whether a price is charged. Disclosures in Part II of the RPT Form is more particular on the tax treatment of the income received from or income payments to related parties, while Part III requires a more detailed disclosure of the substance of the recognized income or expenses as a result of the RPTs.
Additionally, a tax treaty relief application filed with International Tax Affairs Division relative to income payments made by the Philippine taxpayer to its related parties shall be indicated on Part IV of the form. Furthermore, dividends and redemption of shares between and among related parties shall be properly disclosed.
The transfer pricing documentation (TPD) to be submitted must be duly updated when there are significant changes in the business model, factors considered in the drafting of the TPD, or nature of the RPTs.
Companies with their fiscal year ending on March 31, 2020 shall be the first to submit this form and its attachments on or before the extended deadline, which is Sept. 30, 2020. The RPT Form shall be manually filed unless future revenue issuance mandates it to be filed electronically. For manual filers, the RPT Form shall be submitted together with the annual income tax return (AITR) on or before the statutory due date. For eFPS filers, the hard copy of the RPT Form shall be submitted manually and stamped received within 15 days from the statutory due date or actual date of electronic filing of the AITR, whichever comes later.
Penalties under Sections 250, 274 and 266, as applicable, shall be imposed on failure to comply with the submission of the RPT form and its required attachments.
For other clarifications, see full text of RMC 76-2020.
P&A Grant Thornton Certified Public Accountants