BIR Form 1709: Who Must File the Related Party Transactions Form

BIR Form No. 1709, or the Related Party Transaction (RPT) Form, is filed by taxpayers that meet three conditions at the same time: they are required to file an Annual Income Tax Return (AITR); they had transactions with a domestic or foreign related party during the taxable period; and they fall under any of the categories in Section 2 of Revenue Regulations (RR) No. 34-2020 — large taxpayers, taxpayers enjoying tax incentives, taxpayers reporting net operating losses for the current and the immediately preceding two consecutive taxable years, or a related party transacting with any of them.

The three conditions for filing

Revenue Memorandum Circular (RMC) No. 54-2021, which clarifies certain provisions of RR No. 34-2020, states that all three conditions must be present before the RPT Form is required. A taxpayer that files an AITR and has related party transactions but does not fall under any of the four categories is not required to file the form.

The categories are:

• Large taxpayers. RMC No. 54-2021 states that a large taxpayer is a taxpayer who has been classified and duly notified by the Commissioner of Internal Revenue for having satisfied any or a combination of set criteria prescribed in the regulations, and that notification may be made via registered mail, publication, or any other mode of service. A taxpayer who meets the set criteria but was not notified by the Commissioner cannot be considered a large taxpayer.
• Taxpayers enjoying tax incentives, such as Board of Investments-registered or economic zone enterprises enjoying an Income Tax Holiday or subject to a preferential income tax rate.
• Taxpayers reporting net operating losses for the current taxable year and the immediately preceding two consecutive taxable years.
• Related parties that have transactions with any of the above.

Who counts as a related party

Under RR No. 2-2013, two or more enterprises are associated — also referred to as related parties — if one participates directly or indirectly in the management, control, or capital of the other, or if the same persons participate directly or indirectly in the management, control, or capital of the enterprises. Control covers any kind of control, direct or indirect, whether or not legally enforceable, and is deemed present if income or deductions have been arbitrarily shifted between enterprises.

A controlled transaction means any transaction between two or more associated enterprises. RR No. 2-2013 applies to both cross-border transactions and domestic transactions between associated enterprises.

Taxpayers that are not required to file

RMC No. 54-2021 states that taxpayers who are exempt from income tax under the Tax Code or special laws are not required to file an RPT Form, regardless of whether such taxpayer had dealings with a related party that falls under the covered categories. Post-employment benefit plans are likewise not required to file if their related party transactions consist only of contributions from their sponsor employers.

A corporate taxpayer subject to the regular corporate income tax that merely has transactions subject to a preferential income tax rate under tax treaties or the Tax Code is not required to file, provided it does not fall under the other categories. Similarly, a domestic party transacting with a nonresident foreign related party that reported net operating losses is not required to file, since the nonresident foreign related party itself is not required to file.

Filing the form and its attachments

The RPT Form is downloadable from the BIR website as BIR Form No. 1709. Under RMC No. 76-2020, it is filed manually — together with the AITR and other required attachments — at the Large Taxpayers Division or Revenue District Office where the taxpayer is registered, on or before the statutory due date. For electronic filing and payment system filers, the hard copy must be submitted manually and stamped received within fifteen days from the statutory due date or the actual date of electronic filing of the AITR, whichever comes later.

A taxpayer required to file the RPT Form must disclose all related party transactions irrespective of amount; the materiality threshold matters only in determining who must prepare transfer pricing documentation. Similar transactions with the same related party may be aggregated, but no less than the actual amounts must be declared, since the form contains a perjury clause.

RMC No. 54-2021 also states that failure to provide any material information means the Bureau will regard the RPT Form as not duly filed, and the penalty for failure to file such information return will be imposed.

Frequently asked questions

Is BIR Form 1709 required for all taxpayers with related party transactions?

No. The RPT Form is required only if the taxpayer files an AITR, has related party transactions, and falls under any of the categories in Section 2 of RR No. 34-2020 — large taxpayer, taxpayer enjoying tax incentives, taxpayer with net operating losses for the current and two preceding years, or a related party transacting with them.

Is there a minimum amount of related party transactions before the RPT Form must be filed?

None. A taxpayer required to file the RPT Form must disclose all related party transactions regardless of amount. The materiality thresholds under RR No. 34-2020 apply only to the preparation of transfer pricing documentation.

Who is a large taxpayer for purposes of BIR Form 1709?

A taxpayer classified and duly notified by the Commissioner of Internal Revenue for having satisfied the set criteria under the governing revenue regulations. Meeting the criteria without notification from the Commissioner is not enough.

Practical takeaways

• Filing BIR Form 1709 requires all three conditions: an AITR filing requirement, related party transactions, and falling under one of the four categories in RR No. 34-2020.
• Related parties include entities linked by participation in management, control, or capital — direct or indirect — and control may be deemed present where income or deductions were arbitrarily shifted.
• Tax-exempt corporations and post-employment benefit plans funded only by sponsor contributions are not required to file.
• All related party transactions must be disclosed regardless of amount; only the preparation of transfer pricing documentation depends on materiality thresholds.
• The form is filed manually at the taxpayer's Large Taxpayers Division or Revenue District Office, with different deadlines for manual and electronic filers.

Primary sources

The rules discussed above are drawn from the following issuances, embedded here in full for your reference.

RR No. 2-2013 — Prescribes the transfer pricing guidelines (Published in Manila Bulletin on January 25, 2013) Digest | Full TextOpen in Law LibraryDownload PDF

RMC No. 76-2020 — Clarifies certain issues on the filing of BIR Form No. 1709 (Related Party Transaction Form), and its attachments Digest | Full Text | Annex AOpen in Law LibraryDownload PDF

RMC No. 54-2021 — Clarifies certain provisions of Revenue Regulations No. 34-2020 Digest | Full TextOpen in Law LibraryDownload PDF

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.