Asia-Pacific Transfer Pricing Handbook

Chapter Twenty-Three

Philippine Transfer Pricing Regulations

The Republic of the Philippines is in the process of developing transfer pricing regulations. The Philippine Department of Finance, Bureau of Internal Revenue (BIR), issued a draft of these transfer pricing regulations on June 21, 2006. Despite expectations to the contrary, the BIR has not issued final regulations as of July 2012.

The National Internal Revenue Code of 1997, section 50, raises transfer pricing responsibilities. The BIR designed the Philippine transfer pricing regulations to address the section 50 considerations. Section 50 addresses the determination of true taxable income, the methods for verifying and applying the arm’s length standard, and the maintenance of necessary documents. The BIR addressed the draft transfer pricing regulations to its internal revenue officers rather than to the enterprise.

SCOPE OF THE PHILIPPINE PROVISIONS

The Philippine transfer pricing regulations are comprehensive, and, as a general matter, follow the Organisation for Economic Co-operation and Development (OECD) principles:

Section 1. Scope

Section 2. Authority of the Commissioner to allocate income and deductions

Section 3. Definition of terms

Section 4. Scope and purpose of review

Section 5. Limits to allocation

Section 6. Arm’s length standard

Section 7. Comparability analysis

Section 8. Arm’s length pricing methodologies

Section 9. Best transfer pricing method

Section 10. Application of advance pricing arrangements ...