The BIR
has issued the following guidelines and procedures in the processing of
requests for information pursuant to the exchange of information provision of
Philippine tax treaties, in relation to Republic Act No. (RA) 10021 (otherwise
known as the Exchange of Information Act of 2010), as implemented by Revenue
Regulations No. (RR) 10-2010.
Scope and
coverage of exchange of information
The
exchange of information covers any information that is necessary or foreseeably
relevant to the administration or enforcement of the domestic laws of the
contracting parties concerning income taxes and other taxes covered by the
terms of exchange of information agreements.
A request
for information may include, among others, information such as the fiscal
residence of the taxpayer, tax status of a legal entity, income and expenses shown
in the income tax returns, business records, formation documents of an entity,
banking records, accounting records, and the price for goods in a transaction
between independent companies in both states.
The scope
of information is not limited to taxpayer-specific information but also includes
information related to tax administration and compliance such as statistics,
tax administration trends, laws, and court decisions.
Limitations
to the exchange of information
The
obligation for exchange of information is mandatory and is not limited to
information contained in the tax files of the BIR. When a request for information
is received by the BIR, the bureau has to take action to obtain the information
requested if it is not available on its tax files. However, the BIR is not bound
to go beyond its own internal laws and administrative practice in putting information
at the disposal of the requesting state.
Instances
where the obligation to exchange information is lifted and request for
information may be declined include:
(a) when
the requesting party would not be able to obtain the information it is asking
for under similar circumstances under its own laws or administrative practice;
(b) when
the information being asked for relates to years not covered by double taxation
agreements or taxes not covered;
(c) if
disclosure of information would be contrary to public policy;
(d) when
the information being asked for relates to administration enforcement of a
provision of the tax laws that would discriminate against a national of the requested
party as compared with a national of the applicant party in the same
circumstances; and
(e) when
the information is subject to legal privilege.
Procedures
for responding to a request for information
The
international standard for processing request for information is 90 days from receipt
of request by the tax authority.
The 90-day
period may be extended where there are difficulties encountered in obtaining
and providing the information. In this regard, the Commissioner or his/her duly
authorized representative shall inform the requesting foreign tax authority of
the obstacles encountered in obtaining the information and reasons for failure
to provide the information.
With
respect to requests for information held by banks or financial institutions,
the Commissioner or his/her duly authorized representative shall, within 60
days from receipt of all requested information, send notice to the concerned
taxpayer that he/it/is or was the subject of a request for information by the
foreign tax authority.
Confidentiality
of information
All
taxpayer information obtained pursuant to a request for exchange of information
is confidential and may only be disclosed in accordance with Philippine law.
Generally,
the exchange of information article in the Philippine double taxation agreements
(DTAs) provides that any information received by the BIR shall be treated as
secret in the same manner as information obtained under the domestic laws of
the Philippines, and shall be disclosed only to persons or authorities (including
courts and administrative bodies) concerned with the assessments or collection
of, the enforcement or prosecution in respect of, or the determination of
appeals in relation to taxes on income. However, some of the Philippines’ DTAs,
such as Canada and Singapore, have even more restrictive confidentiality
provisions, i.e., it only allows disclosure after sign off by the Commissioner
or his/her duly authorized representative for this purpose.
BIR
treatment of requested information
The
gathering of information by the BIR for a foreign tax authority pursuant to a request
for information does not constitute an actual investigation of the concerned
taxpayer nor does it authorize the BIR to issue corresponding letters of authority
on the request, unless warranted.
However,
information supplied by a bank or a financial institution to the BIR may be
used by it in its own assessment, verification, and audit of the taxpayer whose
account and his or its transactions are made known to the BIR. The BIR is also
not precluded from carrying out subsequent investigation on taxpayers whose
transactions with foreign taxpayers were the subject of examination by foreign
tax authorities.
(Revenue
Memorandum Order No. 02-2013, February 18, 2013)
Tax
Brief – March 2013
Punongbayan
and Araullo
