|Regulation Type||National regulations based on OECD|
|Are there specific transfer pricing regulations?||Yes|
|Submission deadline upon request||Directly|
|Annual update required||No|
|Official language requirements||Pilipino, English|
|Potential impact of penalties||N/A|
Philippines tax law
Rules for transfer pricing in Philippines are based upon:
- National Internal Revenue Code of 1997 Section 50
- Revenue Memorandum Circular No. 26-08
- Revenue Regulations No. 2-2013
- Revenue Memorandum Order No. 23-2009
- Revenue Memorandum Order No. 36-2010
Rules and regulations for transfer pricing in the Philippines are large based on the OECD Transfer Pricing Guidelines, even though the Philippines is not yet an OECD member, but merely an “observer”.
Guidance on the Application of the Arm’s Length Principle:
Step 1: Conduct a comparability analysis
Step 2: Identify the tested party and the appropriate transfer pricing method
Step 3: Determine the arm’s length results.
Accepted methods are:
- The comparable uncontrolled price method
- The resale price method
- The cost plus method
- The profit split method
- The transactional net margin method
Priority of methods
Rules for transfer pricing in the Philippines do not prescribe any specific method. Therefore, the most appropriate method should be used.
Information that should be included in the documentation:
- Organizational structure
- Nature of the business/industry and market conditions
- Controlled transactions
- Assumptions, strategies, policies
- Cost Contribution Arrangements
- Comparability, functional and risk analysis
- Selection of the transfer pricing method
- Application of the transfer pricing method
- Background documents
- Index to documents
Rules for transfer pricing prescribe that documentation should be provided for in English language.
Requirements to prepare documentation annually
There is no requirement to prepare documentation annually.
Submission deadline upon request by tax authorities
Upon request of the tax authorities, documentation should be submitted directly.
Advanced Pricing Agreements
Rules for transfer pricing in the Philippines provide for options to obtain Advanced Pricing Agreements (APA).
Rules for transfer pricing in the Philippines do no prescribe any term for which an APA can be obtained.
The transfer pricing regulations 2-2013 states: “the provisions of the Tax Code and other applicable laws regarding the imposition of penalties and other appropriate sanctions shall be applied to any person who fails to comply with or violates the provisions and requirements of these regulations.”