The Advance Pricing Agreement: What it means for businesses

The Bureau of Internal Revenue (BIR) has announced that it will conduct a public consultation on the draft Revenue Regulations governing the Advance Pricing Agreement (APA) on Aug. 28, 2025. This marks a significant step forward in the Philippines' efforts to modernize its transfer pricing framework and align with international best practices.

- PAUL VINCES C. LEORNA

The journey toward an APA regime has been long. In 2013, the BIR issued Revenue Regulations (RR) No. 2-2013, formally introducing the concept of APAs through its Transfer Pricing Guidelines. However, progress since then has been limited, with few public developments on APA implementation.

Despite the delay, the BIR has taken several measures to strengthen transfer pricing compliance and safeguard the tax base against profit shifting. These include Revenue Audit Memorandum Order (RAMO) No. 1-2019, which established standardized audit procedures for related party and intra-firm transactions and RR No. 34-2020, along with its subsequent amendments, which require taxpayers to file BIR Form No. 1709 (Information Return on Related Party Transactions).

Currently, the Philippines remains one of the few Southeast Asian countries without a fully operational APA program. In contrast, Singapore (the first in the region to implement APA in 2006), Indonesia, Vietnam, Malaysia, and Thailand have developed and/or established active APA regimes.

WHAT IS AN APA?

RR No. 2-2013 defines APA as a facility available to taxpayers engaged in cross-border transactions. It is an agreement entered into between the taxpayer and the BIR to determine in advance an appropriate set of criteria (e.g., transfer pricing method, comparables and appropriate adjustments thereto) to ascertain the transfer prices of controlled transactions over a fixed period. The purpose of an APA is to reduce the risk of transfer pricing examinations and double taxation.