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Bloomberg reports that business restructuring, specifically global mergers and acquisitions (M&A) activity, reached $5.9 trillion in 2021, crushing the previous all-time high of $4.2 trillion set in 2015. In its article, Grant Thornton (GT) LLP said global M&A activity slowed in 2022 at a total value of $3.7 trillion, and most analysts are predicting that we could see a return to pre-2021 activity.

Foreign investors look at the Philippines as one of the most preferred destinations in South Asia for offshore manufacturing due to low labor cost, large and young labor pool, manufacturing capabilities, high English proficiency, and fiscal incentives, to name a few.

There are a variety of reasons why associated enterprises normally enter into commercial transactions with each other.

By definition, a lease is a contract whereby one of the parties (lessor) binds himself to give to another (lessee) the enjoyment or use of a thing for a certain price, and for a period that may be definite or indefinite.

The main objective of a benchmarking analysis in a Transfer Pricing Documentation (TPD) is to determine the arm’s length range of price or return.

In our previous article “BIR transfer pricing audits - the next wave?”, we have looked into Revenue Audit Memorandum Order (RAMO) No. 1-19 which is the current regulation set by the Bureau of Internal Revenue (BIR) when it comes to Transfer Pricing (TP) audits. The RAMO explained in detail how will the BIR conduct its audit of related party transactions.

If transfer pricing documentation (TPD) were a movie, the benchmarking analysis would be the plot. A well-crafted plot bears weight on the quality of a movie as much as a well-prepared benchmarking analysis bears weight on the quality of a TPD.

The Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) have expressed a shared goal to increase taxes collected as a percentage of GDP of 14.6% in 2022 to 17.1% by 2028. They confidently expect to meet this goal as it will be driven primarily by economic growth and by offering taxpayers convenience through tax digitalization programs. While it is accurate to claim that the BIR will derive more revenues with a stronger economy and by providing more convenient avenues for taxpayers to pay their dues, taxpayers know well what this means – an upsurge of BIR assessments across all industries.