The Commissioner of Internal Revenue has issued Revenue Audit Memorandum Order ("RAMO") No. 1-2019 also known as the "Transfer Pricing Audit Guidelines" to provide standardized audit procedures and techniques in the conduct of audit of taxpayers with related party and/or intra-firm transactions.
The salient provisions are summarized as follows:
A. These Guidelines apply to, but not limited to the following transactions:
B. The Guidelines provide three (3) phases of the transfer pricing audit procedures as follows:
The Revenue Officer should likewise meet with the taxpayer to discuss audit findings on all issues before finalization of the report.
C. The Guidelines also provided transfer pricing methods which are consistent with the methods identified in the Philippine Transfer Pricing Guidelines, but with more detailed explanation together with several examples on its application. These methods are used in the test of application of arm's length principle by way of determining which is the most appropriate to the facts and conditions of the transactions.
D. The transfer pricing audit shall likewise cover business restructuring within a multinational group, intra-group services, intangible asset transactions, cost contribution arrangements, and interest payment transactions.
E. In instances where the Revenue Officer has found that a price in a controlled transaction is not compliant with the arm's length principle, he may make an adjustment to reflect the arm’s length price or interest rate for that transaction by substituting or imputing the price, or interest, as the case may be.
The Revenue Officers are required to make and submit a report upon completion of the audit or investigation.
You may access the RAMO below.
This RAMO is effective immediately after its approval.
Please be guided accordingly.
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