Transfer Pricing Reminders After ITR Filing in the Philippines: What Taxpayers Need to Know

With the 2025 Income Tax Return (ITR) season successfully concluded, finance teams and taxpayers are reminded that transfer pricing compliance remains a crucial responsibility post-filing. Experts emphasized several critical points that organizations must address immediately to avoid penalties and risks during audits.

One primary requirement is the timely filing of the Related Party Transaction (RPT) Form, or BIR Form No. 1709. Taxpayers covered under Revenue Regulations (RR) No. 34-2020 must submit this form by April 30, the same deadline as submitting ITR attachments for calendar-year taxpayers. Failure to file on time can result in penalties, including a P1,000 fine for late submissions.

Villafranca stresses the importance of an annual verification process. A taxpayer’s classification or financial situation may have changed compared to the previous year, potentially triggering new filing obligations. Examples include companies newly classified as large taxpayers, those now enjoying tax incentives, or those recording consecutive net operating losses.

Even taxpayers not required to submit the RPT Form must adequately disclose this in their Notes to Financial Statements to ensure complete transparency.

Beyond the form itself, proper Transfer Pricing Documentation (TPD) remains vital. While only mandatory for some taxpayers, preparing contemporaneous documentation is highly advisable for all. This documentation proves that related party transactions adhere to the arm’s length principle, a key standard evaluated during BIR audits. TPD must be ready and available for submission within 30 days of a BIR request during an audit.

Additionally, Villafranca advises that companies must regularly update their TPD. Changes in internal operations, such as new business strategies, restructuring, or the acquisition of intangible assets, along with external factors like new laws, economic shifts, or technological advancements, mean that old TPDs may no longer be sufficient or accurate.

An updated benchmarking analysis, performed annually, ensures that comparables are still relevant and accurately reflect current market conditions, helping mitigate risks of adjustments and penalties.

Another major compliance checkpoint is ensuring that related party agreements reflect actual business conduct. Discrepancies between contractual terms and real-world practices can trigger the BIR to disregard existing contracts and re-characterize transactions, leading to possible adjustments. Regular internal audits and updates to agreements and transfer pricing policies are highly recommended.

While ITR filing may seem like the conclusion of annual tax compliance, Villafranca warns that transfer pricing obligations must be continuously monitored throughout the year. Proactively managing TPD, RPT filings, and contractual alignment will safeguard taxpayers from penalties and strengthen their position during future audits.

Tax compliance is a year-round commitment, not a once-a-year task.

Read More: Philippine Tax Compliance Goes Digital with New Rules

For further details, clarification, contributions, or any concerns regarding this article, please get in touch with us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that our privacy policy will handle all inquiries.