Sept. deadline set for reporting all related-party transactions

THE Bureau of Internal Revenue (BIR) has set the end of September as the deadline for taxpayers to report and submit documentation on related-party transactions (RPTs) of any size, with no reporting threshold determined yet.

Commissioner Caesar R. Dulay signed Revenue Memorandum Circular No. 76-2020 Wednesday giving taxpayers until Sept. 30 to report such transactions in the form of attachments to income tax returns for the period ending March 31.

All such transactions, regardless of size, will need to be reported since no threshold has been set, BIR Deputy Commissioner Marissa O. Cabreros said in a text message Thursday.

According to the circular the deadline was extended due to the pandemic.

The bureau issued Revenue Regulations (RR) No. 19-2020 early this month to require reporting of RPT via the new Form 1709, along with supporting documents.

The rule aims to ensure that transactions between related parties are made at arm’s-length. The new form is now among the required attachments taxpayers have to submit along with their annual income tax returns.

“Ultimately, it is aimed at improving and strengthening the BIR’s transfer pricing risk assessment and audit. With the information gathered in the RPT Form and its attachments, the BIR will be able to perform transfer pricing risk assessment and make an informed decision, at the early stage, whether or not to conduct a thorough review/audit of a particular entity or transaction. In this way, and given its limited resources, the BIR will be able to focus its audit and commit its resources only on the most important transfer pricing issues,” the bureau said.

It said non-profit corporations and organizations are also required to comply with the directive since they are allowed to participate in activities “conducted for profit without losing their tax-exempt status for their not-for-profit activities.”

RR No. 19-2020 defines RPTs as the “transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.” — Beatrice M. Laforga