Related party transaction form: No longer required, for some

On July 8, 2020, upon the recommendation of the Commissioner of Internal Revenue, the Secretary of Finance issued Revenue Regulations (RR) 19-2020, which was published in a newspaper of general circulation on July 10, 2020.

The intention of the requirements mandated by RR 19-2020 may have been noble — i.e., to arrest the further abuse of related party transaction (RPT) by taxpayers looking to avoid taxes by concluding transactions with their related parties at unreasonable prices, which result in an erosion of the tax base. But upon scrutiny of the regulation, it appears it has made it more difficult for affected taxpayers to satisfy the Bureau of Internal Revenue’s (BIR) compliance requirements, on top of other requirements, since it was issued and worded in broad strokes and covered a large number of taxpayers whose RPTs may not be significant at all. Add to that the fact that the regulation runs counter to the mandate of the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, especially during this time of the coronavirus disease 2019 (Covid-19) pandemic.