Enjoining Revenue Officials to Avail of the Exchange of Information Provision of RP Tax Treaties

November 17, 1982 REVENUE MEMORANDUM ORDER NO. 04-83 SUBJECT : Enjoining Revenue Officials to Avail of the Exchange of Information Provision of RP Tax Treaties TO : All Revenue Service Chiefs, Regional Directors, Division Chiefs, Revenue District Officers, Fieldmen and Others Concerned In view of the increasing internationalization of economic relations, it is essential that the Bureau keep abreast of developments obtaining in other countries which are relevant to the administration of our tax laws. Therefore, where the needed information is available in countries with which the Philippines has tax treaties, all revenue officials are hereby enjoined to request for such information, under the exchange of information provisions of our tax treaties. I. Information which may be requested . - The information which may be requested includes but is not limited to the following: a. Any information necessary for the proper determination/assessment of the income tax of taxpayers. This includes - (1) Name of a particular Filipino citizen, his investments, real property interest and income in that country; (2) Confirmation of whether or not a particular person claiming for a tax treaty benefit is in fact a resident of that country; (3) The true beneficial owner of a dividend, interest, or royalty held by a nominee or trustee; (4) Information needed for the proper allocation of taxable profits and expenses between a related company in that country and in the Philippines. This refers to transfer pricing, i.e., the nature and amount of expenses, prices, and charges by a head office, parent company or any other controlling or controlled corporation which are charged, wholly or partially, to its branch, subsidiary, or controlled corporation in the Philippines. The transaction may cover - a. sales of tangible goods, b. interest on loans, c. royalties, d. payment for services rendered, and e. others; and (5) Income of public entertainers paid by a resident of a treaty country for services rendered in the Philippines. b. Any information which will help in the administration of our income tax laws even if there is no question on the application of any particular provision in the Convention between the Philippines and with our tax treaty partners, such as, laws, administrative rulings, court decisions, official publications and others. acd ILLUSTRATIVE CASE : 1. A Philippine company supplies goods to an independent company in a treaty country. Information may be requested from that treaty country re: the price paid in that country, to verify the price stated in the tax return of the Philippine company. 2. A Philippine company sells goods through a company in a third state (possibly a tax haven country) to a company in a treaty country. The companies may or may not be associated and there is no tax convention between the Philippines and the third state nor between our treaty partner with that third state. Information may be requested from our treaty partner about the price paid by the company in that country to ensure the correct assessment of the profits of the Philippine company. 3. Information may also be requested from our treaty partner about the prices charged by a company or group of companies in that country even if Philippine companies have no business dealings with their companies, to check, by direct comparison, the prices charged by Philippine companies (e.g., prices charged by company or a group of company in a dominant position). II. Countries where information may be requested . - Information may be requested from the following countries: C o u n t r y Date of Effectivity of Treaty 1. Sweden January 1, 1970 2. Denmark January 1, 1974 3. Singapore January 1, 1977 4. Canada January 1, 1977 5. France January 1, 1978 6. United Kingdom January 29, 1978 7. Pakistan January 1, 1979 8. Australia January 1, 1980 9. Japan January 1, 1981 10. Belgium January 1, 1981 11. New Zealand January 1, 1982 12. United States of America January 1, 1983 13. Indonesia January 1, 1983 14. Finland January 1, 1982 15. Austria January 1, 1983 III. Procedure . - All request for information must be filed in BIR Form No. TC-003. Revenue officials making the request shall accomplish the said form, secure the endorsement of their superior indicated therein and transmit the same to the Revenue Service Chief (Sector Operation Office, or National Assessment Office or Legal Office) having supervision over them. Revenue officials from the National Office not under the supervision of any of the said Service Chiefs shall course their request to the Revenue Service Chief, Legal Office. The Service Chief concerned shall then indicate in the form his comments and recommendation and submit the same to the Commissioner for his consideration. If the recommendation is favorable, there should be attached to the form, a draft letter-request of the Commissioner to the competent authority of the country where the request is addressed. cd Please be guided accordingly. RUBEN B. ANCHETA Acting Commissioner BIR FORM NO. TC-003 REQUEST FOR INFORMATION FROM A FOREIGN COUNTRY ____________________ DATE The Commissioner of Internal Revenue Diliman, Quezon City The information hereinbelow described is requested. 1. Country where the information may be obtained. ______________________ 2. Name of Taxpayer involved (if any). ________________________________ 3. Nature and kind and information requested. ___________________________ _______________________________________________________________ ______________________________________________________________ 4. Purpose: _______________________________________________________ 5. Is the information requested not available locally: _______________________ Reason: ________________________________________________________ 6. Approximate date when the information is needed: ______________________ Approximate date when the need will prescribed: _______________________ ________________________ (Official Requesting) Position ___________________ Recommended by: _______________________ ______________________ District Director Regional Director Date ___________________ Date __________________ COMMENTS AND RECOMMENDATION __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ ___________________________ The Chief, Sector Operations Office National Assessment Office or Legal Office Date _______________________