Report of Audit Examiners on Taxable Transactions of Residents for Purposes of the Exchange of Information Program under the Philippine Tax Treaties

February 27, 1985 REVENUE MEMORANDUM ORDER NO. 07-85 SUBJECT : Report of Audit Examiners on Taxable Transactions of Residents for Purposes of the Exchange of Information Program under the Philippine Tax Treaties TO : All Revenue Service Chiefs, Division Chiefs, Regional Directors, Revenue District Officers, Revenue Examiners and Others Concerned The successful implementation of the Exchange of Information Program under Philippine tax treaties with other countries depends largely on the reporting of revenue examiners charged with audit functions on any taxable transaction of resident's of our treaty partners which could be of interest to such treaty countries. THE EXCHANGE OF INFORMATION PROGRAM UNDER TAX TREATIES Double taxation agreements provide for an exchange of information between treaty partners. This is an essential part of the treaty in order that it can carry out its main objective, which is to facilitate international movement of capital, technology and persons by eliminating double taxation without creating loopholes for fraud or evasion of such taxes. This Office is strongly committed to implement that Exchange of Information Program. It has adopted the policy of providing information on an automatic and regular basis to our treaty partners so that we could expect similar actions from them. Experience has shown the inadequacy of tax administrations that rely solely on information from within their borders to deal with problems of international tax evasion. The cooperation of all countries concerned is required. Thus, any taxable transaction which revenue officials and examiners may uncover during the performance of their duties that could be of interest to any of our tax treaty partners should be reported for transmittal to such countries . Hereunder are guidelines on how to report the required information. 1. Taxable transactions defined . - For purposes of the Exchange of Information Program, taxable transactions are understood to mean activities or dealings of a resident of a treaty country conducted or undertaken in the Philippines, which result in a tax liability or a tax consequence of such resident in his home country. They include but are not limited to the following: a) Transactions relevant to the treaty itself, such as, claims for exemption from, or a refund of, Philippine income taxes like capital gains on sale of shares of stocks of a Philippine corporation. b) Activities that adversely affect or distort the correct implementation of the treaty, including patterns or techniques employed to avoid or evade income taxes. cd i c) Income derived in the Philippines by such residents amounting to US $200 or more in a calendar year which is exempted from Philippine tax: by virtue of the treaty, such as, remuneration from personal services performed in the Philippines for less than 183 days, or where the total remuneration earned does not exceed the amount prescribed by the applicable treaty; or by virtue of the National Internal Revenue Code or special laws, such as the items excluded from gross income under Section 29 (a) of the said Code, or sweepstakes winnings exempted under a special law. d) Acquisition of a real property by purchase, inheritance, bequest or gift, where the value of such property is P100,000 or over; e) Creation, termination or liquidation of a corporation, a branch, an office; or opening or creation, or closing of a trust, etc; f) Payments on damages, insurance policies and other similar compensations received in connection with trade or business activities; and g) Such other transactions or activities of similar nature. 2. Taxable transactions which need not be reported . - Transactions, contracts, and activities which gave rise to an income subject to tax in the Philippines and for which an income tax return is required to be filed, need not be reported by revenue examiners. The Revenue Information Systems Services, Incorporated will gather and transmit these data. The income referred to in this paragraph includes, dividends, interest, royalties, rentals, compensation (including wages, salaries, fees and commission) and other similar items. cd 3. Our tax treaties are with the following countries: Country Date of Effectivity a. Sweden January 1, 1970 b. Denmark January 1, 1974 c. Singapore January 1, 1977 d. Canada January 1, 1977 e. France January 1, 1978 f. United Kingdom January 29, 1978 g. Pakistan January 1, 1979 h. Australia January 1, 1980 i. Japan January 1, 1981 j. Belgium January 1, 1981 k. New Zealand January 1, 1982 l. Finland January 1, 1982 m. Indonesia January 1, 1983 n. Austria January 1, 1983 o. United States January 1, 1983 p. Thailand January 1, 1983 q. Malaysia January 1, 1985 r. Federal Republic of Germany January 1, 1985 3. Procedure . - All reports on taxable transactions under the Exchange of Information Program must be filed in BIR Form No. TC-004. Revenue examiners making the report shall accomplish the said Form, and transmit the same to their superiors indicated therein. Revenue examiners from the National Office not under the supervision of the Sector Operations Office or the National Assessment Office shall transmit their reports to the Revenue Service Chief, Legal Office. A copy of the duly accomplished Form shall be attached to and made part of the docket of the case. The aforementioned Service Chiefs, shall evaluate the reports and forward the same to the Commissioner, Attention: The Chief, International Taxation Division. acd Be guided accordingly. RUBEN B. ANCHETA Acting Commissioner ATTACHMENT BIR FORM NO. I.C. - OO4 EXCHANGE OF INFORMATION PROGRAM (Information on Taxable Transactions for Transmittal) ____________________ Date The Commissioner of Internal Revenue Diliman, Quezon City, Metro Manila Attn.: Internal Taxation Division The taxable transaction hereinbelow described is respectfully submitted for transmittal to our treaty partner. 1. Country ______________________________________________ (Where the information is to be transmitted) 2. Taxpayer involved ______________________________________ (name) Address: (Foreign) (Local) __________________ __________________ __________________ __________________ __________________ __________________ 3. Nature and kind of taxable transaction (Brief description) - 4. Taxable year/s involved 5. Reason/s why the information could be of interest to the treaty country ------------------------- ------------------------- 6. Supporting documents (if any) ------------------------- ------------------------- (If available, the copies of the documents must be attached) ________________________________ Name of Official submitting the information Position __________________________ Indorsed __________________ ___________________________ Chief of Division Revenue District Officer (In the National Office) Revenue District No. ____ Date ___________________________ _______________________________ Regional Director Revenue Region No. _____ Date ___________________________ COMMENTS & RECOMMENDATION ___________________________ Chief, Sector Operations Office, National Assessment Office, or the Legal Office Date _______________________