Draft APA Blueprint: What taxpayers can expect

TAXWISE OR OTHERWISE JOYCE ANNE BOALOY

- JOYCE ANNE BOALOY

ith the prevalence of transfer pricing (TP) regimes, keeping up with new rules and guidelines is becoming more crucial. Recently, the Bureau of Internal Revenue (BIR) released draft Revenue Regulations (RR) outlining the proposed implementation of Advance Pricing Agreements (APA) in the Philippines.

Following the release of the draft, the BIR held a public consultation to gather comments from taxpayers.

APA is an arrangement relevant to controlled transactions between related parties that determines an appropriate set of criteria (e.g., TP method, comparables, appropriate adjustments) to set reasonable transfer pricing for those controlled transactions. ‘The draft RR provides that APAs can be valid for a fixed period of up to five years in the Philippines.

APA is a voluntary application by a taxpayer to help mitigate TP audit risk and to reduce the likelihood of double taxation. If the terms and conditions of the APA are met, the covered transactions are shielded from audit and TP adjustments by the tax authorities in the relevant jurisdictions.

‘The APA process, as outlined in the draft RR, consists of five stages: (1) Early engagement and pre-filing, (2) Formal filing of an APA, (3) Review of the APA application and negotiation, (4) Formal agreement, and (5) Implementation and compliance monitoring. The BIR is targeting a 12-24-month timeline to conclude APA applications (whether unilateral, bilateral, or multilateral), depending on case complexity and taxpayer cooperation.