Submission of BIR Form 1709 and preparation of transfer pricing documentation required only for certain taxpayers

(Revenue Regulations No. 34-2020 published on December 22, 2020)

This Tax Alert is issued to inform all concerned on the streamlined guidelines and procedures in the submission of BIR Form No. 1709 (Information Return on Related Party Transactions) and its required attachments including transfer pricing documentation (TPD).

Submission of BIR Form 1709

Only the following taxpayers will now be required to submit the RPT Form (BIR Form No. 1709):

  1. Large taxpayers;
  2. Taxpayers enjoying incentives, i.e. BOI- and PEZA-registered enterprises enjoying Income Tax Holiday or subject to preferential tax rate;
  3. Taxpayers reporting net operating losses for the current taxable year and immediately preceding two (2) consecutive taxable years; and
  4. A related party which has transactions with taxpayers enumerated above. Key management personnel are no longer required to submit BIR Form No. 1709.

Transactions with key management personnel and the reporting entity is no longer required to be reported in BIR Form 1709.

Starting with short period returns to be filed in 2021, the submission of BIR Form 1709 by the above taxpayers is also required in case of filing of short period annual income tax return.

Submission of TPD and other supporting documents

The TPD and other supporting documents to the BIR Form 1709 are no longer required to be attached to the form. However, these are required to be submitted within 30 calendar days (subject to non-extendible period of 30 days based on meritorious grounds) upon receipt of request from the BIR pursuant to a duly issued Letter of Authority covering all internal revenue taxes. However, in Part IV of the BIR Form 1709, the taxpayer shall disclose whether they prepared a Transfer Pricing Documentation (TPD) for the related party transactions as prescribed under Revenue Regulations No. 2-2013.

The preparation and submission of TPD is required only for the above taxpayers who are covered by the submission of BIR Form No. 1709 and who meet the following criteria:

a. Annual gross sales/revenues for subject taxable period exceeds P150,000,000 and the total amount of related party transactions with foreign and domestic related parties exceeds P90,000,000.

In computing the threshold, the following are included:

  • Amounts received and/or receivable from related parties or amounts paid and/or payable to related parties during taxable year but excluding compensation to key management, dividends and branch profit remittance.
  • Outstanding balances of loans and non-trade amounts due from/to all affiliates

b. Related party transactions threshold:

  • If involving sale of tangible goods, the aggregate amount exceeds P60,000,000 within the taxable year;
  • If involving service transaction, interest payment, use of intangible goods or other related party transactions in the aggregate amount exceeds P15,000,000 within the taxable year

c. If TPD was required to be prepared during the immediately preceding taxable period for exceeding (a) or (b) above.

Taxpayers who are not covered by the submission of BIR Form No. 1709 are required to disclose in the Notes to Financial Statements that they are not covered by the requirements of preparation and submission of BIR Form 1709, TPD and other supporting documents.

A simplified version of BIR Form No. 1709 shall be used by the covered taxpayers.