Prescribing Revised Procedures in Requesting Information from Tax Treaty Partners Pursuant to the Philippine Tax Treaties

July 28, 1997 REVENUE MEMORANDUM ORDER NO. 42-97 SUBJECT : Prescribing Revised Procedures in Requesting Information from Tax Treaty Partners Pursuant to the Philippine Tax Treaties TO : All Internal Revenue Officers Concerned I. OBJECTIVES: At present, the Philippines has twenty-four (24) effective tax treaties with other countries. These treaties provide for exchange of information procedures, wherein the competent authority of each treaty country can request for information from his counterpart for the purpose of assessment, collection, enforcement and/or prosecution of income tax cases. This Order is therefore issued to: 1. Keep the Bureau abreast of developments occurring in other countries which are relevant to the administration of our tax laws. 2. Prescribe standard procedures in requesting information from tax treaty partners. II. POLICIES: To achieve the above objectives, the following policies are hereby prescribed: A. The information which may be requested shall include but is not limited to the following: 1. Any information necessary for the proper determination/assessment of the income tax of taxpayers such as: a. Name of a particular Filipino citizen, his investments, real property interest and income in that country; b. Confirmation of whether or not a particular person claiming for a tax treaty benefit is in fact a resident of that country; c. The true beneficial owner of a dividend, interest, or royalty held by a nominee or trustee; d. 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 sale of tangible goods, interest or loans, royalties, payment for services rendered and others; e. Income of public entertainers paid by a resident of a treaty-country for services rendered in the Philippines. 2. Any information which will help in the administration of our Income Tax Laws even if it does not concern 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. B. The above information may be requested from any of the following countries: 1. Denmark 13. Austria 2. Singapore 14. United States of America 3. Canada 15. Thailand 4. France 16. Germany 5. United Kingdom 17. Malaysia 6. Pakistan 18. Korea 7. Australia 19. Sweden 8. Japan 20. Italy 9. Belgium 21. The Netherlands 10. New Zealand 22. Brazil 11. Finland 23. Spain 12. Indonesia 24. India C. All request for information from tax treaty partners shall be coursed through International Tax Affairs Division (ITAD) prior to approval of the Commissioner. D. Under no circumstances shall a revenue official communicate directly to the competent authority and/or representative of a treaty country on matters to these requests for information. III. PROCEDURES: A. Requesting Party 1. Accomplish BIR Form TC-003 (form attached) to request for information with a treaty counterpart country; 2. Forward duly accomplished TC-003 to immediate superior approval; 3. Forward approved BIR Form TC-003 to ITAD for processing. B. ITAD 1. Receive duly approved TC-003 from requesting party; 2. Prepare necessary communication/memo-request for information to the concerned authority of the treaty counterpart country; 3. Forward communication/memo-request to the Office of the Commissioner thru channels, for review and signature; 4. Receive from the office of the Commissioner signed communication/memo-request and forward the same to the treaty counterpart country thru the General Services Division; 5. Receive and forward to requesting party response/reply on the request made. IV. REPEALING CLAUSE: This Order amends RMO Nos. 4-83 and 50-89 and all other issuances or portion thereof inconsistent herewith. V. EFFECTIVITY: This Order takes effect immediately. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue