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Here are FAQs that are now clarified by the BIR

A1: A taxpayer is required to file an RPT Form if the following conditions are present:

1. It is required to file an Annual Income Tax Return (AITR);
2. It has transactions with a domestic or foreign related party during the concerned taxable period; and
3. It falls under any of the following categories:

1. Large taxpayers
2. Taxpayers enjoying tax incentives
3. Taxpayers reporting net operating losses for the current taxable year and the immediately preceding two (2) consecutive taxable years
4. A related party that has transactions with (a), (b) or (c).

Q8: If a domestic party had transactions with a nonresident foreign related party that reported net operating losses for the current taxable year and the last two immediately preceding taxable years, is the former required to file an RPT Form?

A8: Since the nonresident foreign related party is not required to file an RPT Form, the domestic party is likewisehot required to file an RPT Form. To determine whether a taxpayer is required to file an RPT Form pursuant to Section 2(d) of RR No. 34-2020, the transacting taxpayer must veriff first if its related party is required to file an RPT Form for falling under categories a to c. Again, the conditions enumerated in Question No. 1 should be present.

Q14: Suppose A Co. is not required to file the RPT but has satisfied the materiality thresholds under Section 3 of RR No. 34-2020. Is it required to prepare a TPD?

A14: Sections 2 and 3 of RR No. 34-2020 are interrelated. Section 2 enumerates the taxpayers who are required to file the RPT Form while Section 3 provides the conditions to be met by these taxpayers before they may be obliged to prepare a TPD.

The enumeration under Section 2 is exclusive such that all taxpayers not included therein are not required to file the RPT Form. A taxpayer who is required under Section 2 to file the RPT Form shall only prepare its TPD if it satisfies any of the conditions set out under Section 3. If the taxpayer is not required to file the RPT Form then it is not also mandated to prepare a TPD.

         Nothing prevents any taxpayer, however, from preparing a TPD and presenting the same during audit to prove that its related party transactions were conducted at arm’s length. Though not required to prepare a TPD under RR No. 34-2020, it still needs to reasonably assess and prove whether its dealings with related parties adhere to the arm’s length principle. After all, the burden of proof rests upon the taxpayer.