Atty. Jonathan P. Capanas, CPA Dean, School of Law University of San Jose-Recoletos Cebu City
Revenue Regulations No. 4-2013 –
Machine Identification No. and sticker for the
use of CRM and/or business/sale machine
generating receipts and invoices.
(Related issuances : RR 11-2004, RMO 9-2006 and RMO 19-2007)
Revenue Regulations No. 9-2013 –
payment of the amount offered as
application will be entertained.(related issuance: RR 30-2002)
Revenue Regulations No. 12-2013 –
Requirements for deductibility of certain
income payments. “No withholding, no
deduction.”(related issuance: RR 2-98)
Revenue Regulations No. 4-2012 –
abatement or cancellation of internal revenue
liabilities (penalties and/or interest due to
“Failure to beat bank cut-off”)
Revenue Regulations No. 8-2012 –
benefits, clothing allowance increased to
P5,000.(related issuances: RR 10-2018, RR 5-2008, RR 5-2011)
Revenue Regulations No. 12-2012 –
depreciation expense on vehicles as well as
the corresponding input taxes.
Revenue Regulations No. 13-2012 –
treatment of adjacent residential lots, House
and lot or other residential dwelling.(related issuance: RR 16-2005)
Revenue Regulations No. 14-2012 –
treatment of interest income on financial
instruments & other related transactions.
Revenue Regulations No. 15-2012 – Guidelines on the accreditation of Printers.
Revenue Regulations No. 18-2012 – Guidelines on the issuance of Authority To Print (ATP)
Revenue Memorandum Order No. 2-2013 –
Prescribes the policies, guidelines and
procedures in processing specific requests
for information pursuant to the exchange of
information provision of the tax treaties.
(Related law: RA 10021, the Exchange of Information Act of 2010)
Revenue Memorandum Order No. 20-2013 –
Policies and guidelines in the issuance of tax
exemption rulings to exempt organizations
under Section 30 of the Tax Code.
Revenue Memorandum Order No. 21-2013 –
Policies and guidelines on the issuance of
ATRIG.(related issuances: RMO 35-2002, RMO 20-2006)
Revenue Memorandum Circular No. 3-2013 –
clarification pertaining to some issues on
depreciation expense limit involving vehicle.
(related issuance RR12-2012)
Revenue Memorandum Circular No. 4-2013 – Requiring Tax-exempt hospitals to secure revalidated tax-exempt ruling or certificate.
Revenue Memorandum Circular No. 6-3013 –
Clarifies taxpayers’ concerns on audit program & their responsibility in engaging tax agents/practitioners. (related issuance: RR 11-2006)
Revenue Memorandum Circular No. 9-2013 -
Clarifies the taxability of association dues, membership fees and other assessments/charges collected by the Homeowners Associations.
(related law: RA 9904, Magna Carta for Homeowners and Homeowners Association)
Revenue Memorandum Circular No. 11-2013 –
BIR Priority Programs for CY 2013.
Revenue Memorandum Circular No. 16-2013 –
Clarifying the tax implications and recording
of deposits/cash advances not covered by
Revenue Memorandum Circular No. 37-2013 –
publishes the full text of DOF Order No.
17-2013 establishing the priority program for
the Bureau of Customs.
Revenue Regulations No. 38-2013 –
notices/declarations and similar documents
on the audit/assessment process.(related issuances: RMC 6-2013, RMO 45-2010, RMO 88-2010)
Revenue Memorandum Circular No. 39-2013-
clarifies the guidelines on the receipt of
protest letter on final Assessment Notices &
Final Decision on Disputed Assessments.
(related issuance: RR 12-99)
Revenue Memorandum Circular No. 50-2013 –
clarifies about the “Tentative Income Tax
Return” being filed by the taxpayer.
Revenue Memorandum Circular No. 53-2013 –
Taxability of donations given to Homeowners
Revenue Memorandum Circular No. 55-2013 –
Reiterates the taxpayers’ obligations in
relation to online business transactions.
Revenue Regulations No. 2-2013 –
Pricing Guidelines.(related issuances: RMC 26-2008 interim transfer pricing guidelines, RAMO 1-98 audit guidelines, RMO 36-2010 Conglomerate audit for TY 2009, RMO 23-2009 Audit of selected TPs by the NID, RMO 26-84 determination of transfer pricing)
As published, it has 23 pages
Section 1 - Objectives & Scope
Section 2 - Purpose of the Regulations
Section 3 - Authority of the Commissioner to allocate income and deductions Section 4 - Definition of terms
Section 5 - Arm’s length principle Section 6 - Comparability analysis
Section 7 - Identification of tested party and the appropriate transfer pricing
Section 8 – Determination of the arm’s length results.
Section 9 - Comparability adjustment
Section 10 - Arm’s length pricing methodologies Section 11 - Advance pricing arrangements and mutual agreement procedure Section 12 - Documentation
Section 13 - Penalties
Section 14 -Transitory provisions Section 15 - Separability clause Section 16 - Repealing clause Section 17 - Effectivity
1. Comparable transaction
2. Comparable uncontrolled transaction 3. Associated enterprises
5. Controlled transaction
6. Independent enterprises or parties 7. Advance Pricing Arrangement (APA) 8. Mutual Agreement Procedure (MAP)
Requires the transaction with a related party
to be made under comparable conditions and circumstances as a transaction with an independent party.
It is founded on the premise that where
market forces drive the terms and conditions agreed in an independent party transaction, the pricing of the transaction would reflect the true economic value of the contributions made by each entity in that transaction.
Step 1: Conduct comparability analysis Step 2: Identify the tested party and the
appropriate transfer prising method Step 3: Determine the Arm’s Length results
To present a logical and persuasive basis to demonstrate that transfer prices set between associated enterprises conform to the principle.
a. Comparable Uncontrolled Price (CUP)
b. Resale Price Method (RPM) c. Cost Plus Method (CPM) d. Profit Split Method (PSM)
Avon Products Mftg, Inc. vs. CIR
CTA Case No. 6802, Aug. 31, 2006
Domestic selling price is not a benchmark
price for export sales because the export &
domestic markets are two different markets.
Lower export sales prices are not attributable
to the relationship between the Petitioner and
the Buyers but to the competitive market.
The CTA finds the petitioner’s evidence
sufficient to establish its position that the
prices of its export sales may be lower than
its local sales, taking into account
respondent’s lack of evidence to support his
Transactions with affiliates are inter-related
transactions & must be considered as arm’s length transactions.
Arms-length pricing is the price an unrelated
party would have paid under similar circumstances for the property involved in a
transaction between two or more
organizations, trades or businesses owned or controlled directly or indirectly by the same interests .
“We are not convinced that the manner of
imposing "imaginary" income against petitioner is justifiable under the present
situation. As correctly explained by
petitioner, there are factors to be considered in determining the application of arm's length pricing.”
The CIR has no authority to make an
imputation of an imaginary interest income because his power to distribute, apportion and allocate do not include the power to impute an "arms-length" interest rate or imaginary interest income.
It correctly averred that respondent adopted the
"comparable uncontrolled price method" in determining the arm's-length pricing of its products. Under the method, the arm's-length price of a sale between group members (controlled sale) is equal to the price paid in comparable sales in which the sellers and the buyers are not members of the same controlled group (uncontrolled sales), with certain adjustments. (Vol. 12 Merten's Law of Federal Income Taxation, $451.55, p. 164)
By provision of law, uncontrolled sales are considered
comparable to controlled sales if the physical property and circumstances involved in the uncontrolled sales are identical to the physical property and circumstances involved in the controlled sales, or if such properties and circumstances are so nearly identical that any differences either have no effect on price, or such differences can be reflected by a reasonable number of adjustments to the price of uncontrolled sales. . . . Some of the differences which may affect the price of property are differences in the quality of the product, terms of sale, intangible property associated with the sale, time of sale, and the level of the market and the geographic market in which the sale takes place . . . “(U.S. Treasury Regulations 1, Section 482-2(e)(2))
In conclusion, respondent gathered her findings in an
arbitrary, unreasonable and capricious manner. There was no apparent attempt to verify with technical circumspection the comparability of the products in question. It can be gleaned readily from the facts that the physical property and circumstances in the processing and sale of petitioner's products are not "identical" or "so nearly identical that any difference can either have no effect on price, or such difference can be reflected by a reasonable number of adjustments to the price" of Pfizer's products. (U.S. Treasury Regulations, ibid) By the adjective "identical" or the phrase "so nearly identical," the compared products must be exactly or essentially alike. (Merriam Webster's Dictionary.) Even if penicillin could be established to be a part of vigofac, it would remain physically distinct and beyond compare with aurofac. This also applies with minocycline and doxycycline.
In other words, comparability must be based
on generic similarity before any adjustments can be considered. Those adjustments for nearly identical products could either refer to addition of ingredients such as vitamins, minerals and amino acids, or differences in the production process and the like but the main component or essential materials between the compared products must be a like.