Tax Alert No. 36 [Revenue Regulations (RR) No. 11-2022 dated 29 June 2022]

27 Jul 2022

Prescribing the Guidelines and Procedures for the Spontaneous Exchange of Taxpayer Specific Rulings

RR No. 11-2022 has been issued to prescribe the guidelines and procedures for the spontaneous exchange of information on taxpayer-specific rulings (the “transparency framework”) with the tax authorities of potential exchange jurisdictions.

The framework provides timely access of the rulings’ information that have been granted to the foreign related party or a permanent establishment (PE) of their resident taxpayer which may aid in conducting risk assessments.

In the Philippines, the provisions on Exchange of Information (EOI) of our DTAs, mandating the competent authorities of Contracting States to exchange information necessary for carrying out the provisions of domestic laws concerning the taxes on which the DTA applies are followed.

The ITAD through its EOI Section shall exchange information with the tax authorities of potential exchange jurisdictions. The rulings which are within the scope of the transparency framework include the following:

Type of Ruling	Potential Exchange Jurisdictions
Rulings related to certain preferential regimes	Countries of residence of all related parties (subject to a 25% threshold) with which the taxpayer enters into a transaction for which a preferential treatment is granted or which gives rise to income from related parties benefiting from a preferential treatment; and/or, Residence country of the ultimate parent company and the immediate parent company.
Cross-border unilateral Advance Pricing Agreements (APAs) and other cross-border unilateral tax ruling covering transfer pricing or the application of transfer pricing principles	Countries of residence of all related parties with whom the taxpayer enters into transactions that are covered by the APA or cross-border unilateral tax ruling; and/or, Residence country of the ultimate parent company and immediate parent company.
Cross-border rulings giving a unilateral downward adjustment to the taxpayer’s taxable profits in the country giving the ruling	Countries of residence of all related parties with whom the taxpayer enters into transactions covered by the ruling; and/or, Residence country of the ultimate parent company and the immediate parent company.
PE rulings	Residence country of the head office or the country of the PE, as the case may be; and/or, Residence country of the ultimate parent company and the immediate parent company.
Related party conduit rulings	Country of residence of any related party making direct or indirect payments to the conduit; Country of residence of the ultimate beneficial owner, which in most cases will be the ultimate parent company of payments made to the conduit; and/or, Residence country of the ultimate parent company and the immediate parent company.

The past rulings that need to be exchanged are those that pertain to PE or concerning the existence or absence of PE of a foreign enterprise in the Philippines, which were issued within the following periods:
- On or after 1 January 2015 but before 1 September 2017; or,
- On or after 1 January 2012 but before 1 January 2015, provided that these are still in effect as of 1 January 2015.

All rulings issued after the defined periods for past rulings are deemed “future rulings”.