RR No. 19-2020: Prescribes the use of the new BIR Form No. 1709, replacing Form No. 1702H, Series of 1992.​ RR 19-2020

Key points

1. Purpose and submission. The Regulations call for effective implementation of Philippine Accounting Standards (PAS) 24 on related party disclosures. BIR Form No. 1709 and its supporting documents are submitted under the revenue issuances on attachments to the Annual Income Tax Returns. Tax examiners are told to examine related party transactions closely so that revenues are not understated and expenses not overstated.
2. Who is a related party. Related parties include a person or close family member with control, joint control or significant influence over the reporting entity, or who is key management personnel. They also include entities in the same group, associates and joint ventures, post-employment benefit plans, and entities controlled by or linked to those persons. The substance of the relationship counts, not only the legal form.
3. Covered transactions. These include purchases or sales of goods, property and other assets, services, leases, and transfers of research and development or under license agreements. They also include finance arrangements, guarantees or collateral, commitments, and settlement of liabilities on behalf of the entity or the related party, among others.
4. Required disclosures. Disclosures are made separately for the parent, entities with joint control or significant influence, subsidiaries, associates, joint ventures, key management personnel, and other related parties. For each, the taxpayer gives the transaction amounts, outstanding balances with terms, provisions for doubtful debts, and the expense recognized for bad or doubtful debts.
5. Filling out the form. The form is completed truthfully by the taxpayer or authorized representative and attached to the ITRs for the current taxable year and later years. The nature of each transaction and the accounts affected are described in detail, and Parts IV(A) and IV(B) cover the ultimate parent’s business overview and the functional profile. No space is left blank, and a non-applicable portion is stated as such.
6. Attachments. These are certified true copies of the relevant contracts or proof of transaction, withholding tax returns with proof of payment, and proof of payment of foreign taxes or a ruling from the foreign tax authority. A certified true copy of any Advance Pricing Agreement and any transfer pricing documentation are also attached.

Who is affected

• Taxpayers with related party transactions, whether reporting entity or related party
• BIR tax examiners

Deadlines and effectivity

• Form attached to the ITRs for the current taxable year and subsequent years