The Bureau of Internal Revenue (BIR) has announced that it will conduct a public consultation on the draft Revenue Regulations governing the Advance Pricing Agreement (APA) on Aug. 28, 2025. This marks a significant step forward in the Philippines’ efforts to modernize its transfer pricing framework and align with international best practices.
The journey toward an APA regime has been long. In 2013, the BIR issued Revenue Regulations (RR) No. 2-2013, formally introducing the concept of APAs through its Transfer Pricing Guidelines. However, progress since then has been limited, with few public developments on APA implementation.
Despite the delay, the BIR has taken several measures to strengthen transfer pricing compliance and safeguard the tax base against profit shifting. These include Revenue Audit Memorandum Order (RAMO) No. 1-2019, which established standardized audit procedures for related party and intra-firm transactions and RR No. 34-2020, along with its subsequent amendments, which require taxpayers to file BIR Form No. 1709 (Information Return on Related Party Transactions).
Currently, the Philippines remains one of the few Southeast Asian countries without a fully operational APA program. In contrast, Singapore (the first in the region to implement APA in 2006), Indonesia, Vietnam, Malaysia, and Thailand have developed and/or established active APA regimes.
WHAT IS AN APA?
RR No. 2-2013 defines APA as a facility available to taxpayers engaged in cross-border transactions. It is an agreement entered into between the taxpayer and the BIR to determine in advance an appropriate set of criteria (e.g., transfer pricing method, comparables and appropriate adjustments thereto) to ascertain the transfer prices of controlled transactions over a fixed period. The purpose of an APA is to reduce the risk of transfer pricing examinations and double taxation.
There are two kinds of APA: unilateral APA, and bilateral or multilateral APA. A unilateral APA involves only the taxpayer and BIR, while a bilateral/multilateral APA involves the Philippines and one or more of its treaty partners. A bilateral or multilateral APA is authorized under the Mutual Agreement Procedure (MAP) Article of the 37 Philippine tax treaties.
It is not a mandatory requirement for taxpayers to avail of an APA for their controlled transactions. If a taxpayer avails of an APA, it may choose freely between a unilateral and bilateral/multilateral APA. If a taxpayer does not choose to enter into an APA and its transactions are subject later to transfer pricing adjustments, it may still invoke the MAP Article to resolve double taxation issues.
APA PROCESS
As of writing, the draft Regulation on APA is not yet available. However, the APA process typically follows a structured, multi-phase approach. While the exact steps may vary slightly by jurisdiction, the following outline reflects best practices from Southeast Asian countries and international standards: pre-filing consultation; formal application submission; acceptance and review; information gathering and analysis; negotiation; agreement and execution; implementation and monitoring; and renewal or revision.
The BIR is expected to adopt a similar phased approach.
DURATION OF APA
The time it takes to finalize an APA can vary significantly depending on the jurisdiction, complexity of the transactions, and whether the APA is unilateral, bilateral, or multilateral. Based on OECD statistics, the global average for a bilateral APA to finalize is just over three years. Similarly, in the ASEAN region, the average duration to finalize an APA is two to five years.
WHAT’S IN IT FOR THE TAXPAYERS
The implementation of an APA program by the BIR offers Philippine taxpayers several meaningful benefits. First and foremost, it provides certainty and predictability in how transfer pricing methods will be treated, thus, helping businesses avoid unexpected tax assessments. By agreeing on pricing methods in advance, taxpayers can significantly reduce the risk of audits and adjustments.
For multinational enterprises, APAs also help prevent double taxation, which ensures that income isn’t taxed more than once across jurisdictions. While the APA process requires upfront effort, it ultimately leads to lower compliance costs, as annual reporting becomes more streamlined and focused.
Finally, the APA program positions the Philippines more competitively within the region. As neighboring countries already offer APAs, having a robust program in place can boost investor confidence and make the country a more attractive destination for cross-border investments.
TAKEAWAY
With the holding of public consultation, the Philippines is a step closer to moving toward implementing a formal APA program. This consultation signals a shift toward aligning with international best practices and offers taxpayers a valuable opportunity to shape the framework that will govern how transfer pricing is managed in the country. For businesses, it’s a chance to engage early, prepare strategically, and potentially benefit from a more predictable and cooperative tax environment.
We hope the upcoming public consultation on the APA will serve not just as a procedural formality, but as a meaningful dialogue between the BIR and stakeholders. This is a valuable opportunity for businesses, tax professionals, and industry groups to share insights, raise concerns, and help shape a framework that promotes fairness, transparency, and certainty in transfer pricing compliance.
Let’s Talk TP is an offshoot of Let’s Talk Tax, a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Paul Vinces C. Leorna is a manager from the Tax Advisory & Compliance Practice Area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.