Finally, the Philippines issued its Transfer Pricing Guidelines in the Philippines in 2013. This move responds to the increasing globalization of trade, which may lead to harmful tax practices, particularly concerning transfer pricing.
Further, the Philippine transfer pricing guidelines are largely based on the arm’s length methodologies as set out under the Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines. The issuance of the transfer pricing guidelines was based on the authority of the Commissioner of Internal Revenue as provided under Section 50 of the Philippine Tax Code.
In case that a taxpayer under tax investigation is being questioned by the BIR relative to transfer pricing issue, he must demonstrate that the transfer prices are consistent with the arm’s length principle. The documentations are not required to be submitted when the tax returns are filed but such should be retained and submitted to the BIR when required or requested.
The details of transfer pricing documents include, but are not limited to, the following:
(1) Organizational structure
(2) Nature of the business/industry and market conditions
(3) Controlled transactions
(4) Assumptions, strategies, policies
(5) Cost contribution arrangements (CCA)
(6) Comparability, functional and risk analysis
(7) Selection of the transfer pricing method
(8) Application of the transfer pricing method
(9) Background documents
(10) Index to documents
To know more about Philippine transfer pricing guidelines or if you need any assistance on your tax or accounting matters, please contact Triple i Consulting.