9 February 2013 marks the effective date of new Transfer Pricing Guidelines issued by the Secretary of Finance as Revenue Regulations No. 2-2013 dated 23 January 2013. The regulations, which took almost seven years to be finalized, provide guidance in applying the arm’s length principle to cross-border and domestic transactions between associated enterprises.
Consistent with Interim Transfer Pricing Guidelines issued in 2008, the new rules are largely based on the arm’s length methodologies under the OECD Transfer Pricing Guidelines. In line with this, the Bureau of Internal Revenue (BIR) also expressly states that there is no hierarchy or preference for any one method. Instead, the pricing method that produces the most reliable measure of an arm’s length result should be used.