Who Must File BIR Form 1709? Related Party Transactions and Transfer Pricing Documentation

BIR Form 1709 — the Related Party Transactions (RPT) Form — is required from a taxpayer filing an Annual Income Tax Return (AITR) that either holds a tax incentive, reported net operating losses for three straight years, or is a related party transacting with a taxpayer in either category. Filed with the AITR under Revenue Regulations (RR) No. 34-2020, it discloses related-party dealings and supports the BIR’s transfer pricing review — with no minimum peso amount below which a transaction can be left off.

What Is BIR Form 1709? #

BIR Form 1709 is the Information Return on Related Party Transactions, a schedule filed alongside a taxpayer’s Annual Income Tax Return that lists every transaction conducted with domestic or foreign related parties during the taxable year. RR No. 34-2020, issued December 18, 2020 and effective December 23, 2020, streamlined the form and clarified the transfer pricing documentation (TPD) a covered taxpayer keeps on hand to support it. Attorney and adviser roundups from Grant Thornton, PwC, Forvis Mazars, and KPMG have consistently summarized the regulation’s purpose the same way since it took effect.

According to PwC Philippines’ Tax Alert No. 92, which summarized RR No. 34-2020 shortly after issuance, the form exists:

“…to allow the BIR to verify that taxpayers are reporting their related party transactions at arm’s length prices and improve and strengthen the Bureau’s transfer pricing risk assessment and audit functions.”

That framing matters for how strictly the disclosure rule is applied: BIR Form 1709 is not a formality bolted onto the AITR — it is the data source the Bureau’s transfer pricing unit uses to flag returns for closer review, which is also why the form asks for full detail rather than summary totals.

Who Must File BIR Form 1709? (Worked Example) #

Three categories of AITR filer are covered: taxpayers holding a tax incentive, taxpayers with three consecutive years of net operating losses, and any related party that transacted with a taxpayer in either group. A taxpayer that fits none of the three generally has no BIR Form 1709 obligation for the year, even if it has related parties on its books, provided it had no reportable transactions with a covered counterparty.

The three filer categories are:

• Taxpayers enjoying a tax incentive — a BOI-registered enterprise, a PEZA or other economic-zone enterprise, or any taxpayer with an Income Tax Holiday (ITH) or a preferential income tax rate.
• Taxpayers reporting net operating losses for the current taxable year and the two immediately preceding consecutive taxable years (three years running).
• Any related party that had transactions with a taxpayer falling under either category above — even if that related party itself holds no incentive and has no losses.

Consider “Company A,” a Philippine subsidiary of a foreign manufacturing group. Company A holds a five-year Income Tax Holiday under a Board of Investments registration, and it pays its foreign parent a ₱15,000,000 annual management and technical service fee. Company A must file BIR Form 1709 with its AITR for two independent reasons that each would have been sufficient alone: it is an incentive holder, and it has a related-party transaction. The full ₱15,000,000 fee goes on the form — there is no minimum amount that would let a portion of it go undisclosed.

Now suppose Company A also has a wholly domestic sister company, Company B, that buys inventory from Company A during the year and holds no tax incentive of its own and has never reported a net loss. Company B still must file its own BIR Form 1709, because it is “a related party with transactions” with Company A, an incentive holder — the trigger runs through the counterparty’s status, not the filer’s own. Related entities transacting with an incentive holder cannot assume the filing obligation stops with the incentive holder itself.

For how BIR Form 1709 sits alongside a corporation’s other Annual Income Tax Return attachments, see BIR Form 1702 Attachments: What Corporations Must Submit With Their Annual Income Tax Return; for the individual-filer side of AITR attachments generally, see BIR Form 1701 Attachments: What to Submit With Your Annual Income Tax Return.

What Counts as a Related Party Transaction? #

A related party transaction is any transfer of resources, services, or obligations between a reporting entity and a related party, whether or not a price is charged. This covers the range accounting rules typically capture: sales and purchases of goods, management and technical service fees, loans and other financing arrangements, cost-sharing and cost-allocation agreements, leases, and guarantees. RR No. 34-2020 does not confine “related party” to the parent-subsidiary relationship in the worked example above — it also reaches sister companies, entities under common control, and other affiliates as defined under applicable accounting and tax rules.

Because the disclosure obligation is transaction-based rather than relationship-based, a single BIR Form 1709 filing typically itemizes multiple counterparties and multiple transaction types in the same taxable year, not just one line per related entity.

The Key Management Personnel Exemption #

Transactions between key management personnel (KMP) and the reporting entity are not required to be reported on BIR Form 1709. KMP generally means the individuals with authority and responsibility for planning, directing, and controlling the entity’s activities — directors and senior officers acting in that capacity. A routine bonus, salary, or benefit paid to a director in their KMP role sits outside the form’s scope, even though it technically flows between the entity and someone who could otherwise be considered a related party under broader accounting definitions.

Returning to Company A: if one of its directors receives a standard year-end bonus as part of ordinary compensation, that payment is a KMP transaction and does not need to appear on Company A’s BIR Form 1709 — a materially different outcome from the ₱15,000,000 management fee paid to its foreign parent, which must be disclosed in full. The distinction turns on whether the counterparty is being paid in a KMP capacity or as a separate related entity (a parent, subsidiary, or affiliate) engaged in a commercial transaction.

No Minimum Threshold: Disclose Everything #

Once a taxpayer falls into one of the three covered categories, every related-party transaction for the year must be disclosed on BIR Form 1709 — there is no peso amount small enough to be exempt. This is a common misreading of the form: filers sometimes assume an immaterial or de minimis transaction can be left off, by analogy to materiality thresholds used elsewhere in financial reporting. RR No. 34-2020 does not carry such a threshold for BIR Form 1709 itself; the completeness of the disclosure is what the form is designed to test.

In the worked example, that means Company A’s ₱15,000,000 management fee is reported at its full value, and if Company A also had a much smaller, incidental transaction with the same or another related party during the year — a shared-services reimbursement, a minor equipment lease — that transaction goes on the form too. Filers who maintain a running log of related-party dealings throughout the year, rather than reconstructing the list at filing time, are far less likely to miss a small transaction that still needs to be disclosed.

How Form 1709 Is Filed #

BIR Form 1709 is filed together with the taxpayer’s Annual Income Tax Return, not as a separate or later submission. The underlying transfer pricing documentation supporting the disclosed transactions — the analysis showing the related-party pricing reflects an arm’s-length standard — is not attached automatically at filing; it is kept on hand and produced within the period the BIR sets when it requests it, typically in connection with a Letter of Authority or other examination. This mirrors the practice already described for corporate filers in BIR Form 1702 Attachments, where BIR Form 1709 is one of several schedules that can accompany a corporation’s AITR depending on its facts for the year.

Because accounting firms and in-house tax teams often manage BIR Form 1709 across a group of related entities at once — an incentive-holding parent and several sister companies that each trigger their own filing obligation — keeping each entity’s related-party transaction log current throughout the year, rather than assembling it retroactively each filing season, is what keeps the disclosure complete.

Summary #

BIR Form 1709 is not a universal AITR attachment — it is triggered by one of three conditions under RR No. 34-2020: holding a tax incentive (BOI, PEZA, ITH, or a preferential rate), reporting net operating losses for three consecutive years, or transacting with a taxpayer that falls into either group. Once triggered, every related-party transaction for the year must be disclosed regardless of size, with the single carve-out for transactions involving key management personnel acting in that capacity. Filers assembling a group’s AITR attachments should treat BIR Form 1709 as its own checklist item alongside the audited financial statements and SAWT covered in BIR Form 1702 Attachments and BIR Form 1701 Attachments.