RMC No. 54-2021: Clarifies certain provisions of Revenue Regulations No. 34-2020

Summary

RMC No. 54-2021 clarifies certain provisions of Revenue Regulations No. 34-2020 on the Related Party Transaction (RPT) Form and Transfer Pricing Documentation (TPD).

Key points

1. Who files the RPT Form. A taxpayer files the RPT Form if it must file an Annual Income Tax Return (AITR), has transactions with a domestic or foreign related party, and is a large taxpayer, a taxpayer with tax incentives, a taxpayer with net operating losses for the current year and the two (2) preceding consecutive years, or a related party transacting with any of these. A taxpayer is a large taxpayer only if the CIR classified and notified it, and net operating loss is measured for Income Tax purposes, not by the Audited Financial Statements.
2. Preferential rates and exclusions. Preferential rate status is judged on how the taxpayer is taxed as a whole, not per transaction, so a regular-rate corporation with some treaty-rate transactions is not covered by that ground. Not required are economic zone taxpayers under regular Income Tax, taxpayers exempt under Section 30, certain regional or area headquarters and representative offices, and post-employment benefit plans with only sponsor contributions. International carriers taxed on Gross Philippine Billings or gross revenues, or exempt by treaty or reciprocity, are not required, but those taxed on Philippine-source profits are.
3. Related party status. A domestic party need not file if its non-resident foreign related party is not required to file. The enumeration in Section 2 is exclusive, so taxpayers not listed need not file.
4. Contents of the RPT Form. All related party transactions are disclosed regardless of amount, with similar transactions with the same party aggregated if possible and no less than the actual amounts declared. Supporting documents and the TPD are not attached but are made available on audit. The form has a perjury clause, and missing material information means it is not duly filed and the penalty applies.
5. When a TPD is mandatory. A TPD is required only of RPT Form filers who meet a Section 3 condition. These are annual gross sales or revenue above ₱150,000,000 with related party transactions above ₱90,000,000, tangible goods sales to the same related party above ₱60,000,000, other transactions with the same related party above ₱15,000,000.00, or a TPD required in the preceding period. Related party totals include trade receivables and payables and loan and non-trade balances, and exclude key management compensation, dividends and branch profit remittances.
6. Currency, audit, APA and effectivity. Foreign currency amounts are shown with local currency equivalents at the transaction date rate. The BIR uses RPT Forms for initial transfer pricing risk assessment but may audit any taxpayer with related party transactions, who must prove arm’s length dealing. An Advance Pricing Agreement exempts disclosure only if approved and accepted by the BIR, and RR No. 34-2020 took effect after publication on December 23, 2020 and applies to RPT Forms due after that.

Who is affected

• Large taxpayers
• Taxpayers with tax incentives
• Taxpayers with net operating losses for the current and two preceding years
• Related parties of those taxpayers

Deadlines and effectivity

• RR No. 34-2020 effective after publication on December 23, 2020
• RPT Form mandatory for short period returns required to be filed in 2021 and subsequent years

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.