PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK THE PHILIPPINES OECD 2011

PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK THE PHILIPPINES OECD 2011
TABLE OF CONTENTS 3
Table of Contents
About the Global Forum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Information and methodology used for the peer review of the Philippines. . . . . . 9
Overview of the Philippines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General information on the legal system and the taxation system . . . . . . . . . . . .11
Overview of the financial sector and relevant professions . . . . . . . . . . . . . . . . . 13
Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
A.2.Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 44
B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 49
C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . 59
C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . 63
C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 64
4 TABLE OF CONTENTS
Summary of Determinations and Factors Underlying Recommendations. . . . 67
Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . . 71
Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . . 72
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . . 74
ABOUT THE GLOBAL FORUM 5
About the Global Forum
This document is confidential and proprietary to OECD. Any unauthor-
ised disclosure, use or dissemination, either whole or partial, of this document
is prohibited.
The Global Forum on Transparency and Exchange of Information for Tax
Purposes is the multilateral framework within which work in the area of tax
transparency and exchange of information is carried out by over 100 jurisdic-
tions, which participate in the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of
the implementation of the international standards of transparency and exchange
of information for tax purposes. These standards are primarily reflected in the
2002 OECD Model Agreement on Exchange of Information on Tax Matters
and its commentary, and in Article 26 of the OECD Model Tax Convention on
Income and on Capital and its commentary as updated in 2004. The standards
have also been incorporated into the UN Model Tax Convention.
The standards provide for international exchange on request of foresee-
ably relevant information for the administration or enforcement of the domes-
tic tax laws of a requesting party. Fishing expeditions are not authorised but
all foreseeably relevant information must be provided, including bank infor-
mation and information held by fiduciaries, regardless of the existence of a
domestic tax interest.
All members of the Global Forum, as well as jurisdictions identified by
the Global Forum as relevant to its work, are being reviewed. This process is
undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions
legal and regulatory framework for the exchange of information, while Phase 2
reviews look at the practical implementation of that framework. Some Global
Forum members are undergoing combined Phase 1 and Phase 2 reviews.
The ultimate goal is to help jurisdictions to effectively implement the interna-
tional standards of transparency and exchange of information for tax purposes.
All review reports are published once adopted by the Global Forum.
For more information on the work of the Global Forum on Transparency
and Exchange of Information for Tax Purposes, and for copies of the pub-
lished review reports, please refer to www.oecd.org/tax/transparency.
EXECUTIVE SUMMARY 7
Executive summary
1. This report summarises the legal and regulatory framework for trans-
parency and exchange of information in the Philippines.
2. The Philippines consists of more than 7 000 islands occupying a strategi-
cally important location off the southeast coast of mainland Asia. With a popula-
tion of over 90 million people it is the 12
th
most populous country in the world.
3. As a member of the Global Forum since 2005, the Philippines has
participated in all of the Global Forums annual assessments. In 2009 it
undertook to amend its domestic laws by the end of the year to address
shortcomings, particularly in relation to access to bank information, and
thus bring its treaties in line with the international standard. To this end, the
Philippines enacted the Exchange of Information Act and its accompanying
regulations in 2010. Restrictions on access to bank information for exchange
purposes have now been removed and, on the whole, the Philippines now
meets the international standards for exchange of information (EoI).
4. The Philippines has a wide ranging treaty network with 37 DTCs cur-
rently in force that provide for the exchange of information. It is currently devel-
oping a model Tax Information Exchange Agreement (TIEA) with the goal of
expanding its exchange of information network. With a few exceptions, its trea-
ties meet the international standard for exchange of information. However, some
of the exceptions involve treaties with significant trading partners, although the
deficiencies in a number of cases arise because of impediments to exchange of
information in the case of the treaty partners, rather than the Philippines. Also,
the Philippines does not have a treaty with one of its major trading partners. This
report contains recommendations to address these issues.
5. The Philippines treaty network is complemented by wide-ranging
powers to access information, including ownership, identity and accounting
information. The authorities also have powers to compel production of this infor-
mation. These powers include general access powers under the income tax code
as well as specific powers granted by the Exchange of Information Act and its
accompanying regulations. The Philippines laws provide rights and safeguards to
persons who are the subject of EoI requests, including notification requirements.
8 EXECUTIVE SUMMARY
6. Regarding the availability of information, the legal and regulatory
framework is generally in place to ensure the maintenance of ownership and
identity information for all entities and arrangements. Domestic corporations
are required to keep a stock and transfer book with ownership information
as well as the records of all business transactions by the corporation and the
minutes of any meetings. The requirement to keep a record of all business
transactions and meeting minutes applies to foreign corporations as well,
although there is no requirement for a foreign corporation to keep a stock and
transfer book with ownership information.
7. In addition, domestic corporations, limited partnerships and partner-
ships (with a capital of more than PHP 3 000, approximately USD 66), are
required to register with the Securities Exchange Commission. In the case of
domestic corporations and limited partnerships, registration requires the dis-
closure of the identity of shareholders or partners and this information must
be updated annually. Separately, regulated entities such as banks, with the
exception of offshore banks, or corporations qualifying for certain incentives
are obliged to provide ownership information to the regulatory authorities or
the Board of Investments.
8. For tax purposes, all partnerships must keep a journal and ledger
or their equivalent and these books will necessarily show the identity of the
partners. Partners also have a duty to render on demand true and full infor-
mation on all things affecting the partnership to any partner.
9. The Philippines laws allow for the creation of trusts. Although no reg-
istration requirements exist, only a stock corporation or person authorised by
the Monetary Board to engage in a trust business may act as a trustee as part
of a trade or business. In this case, a trustee is subject to the AML laws and is
therefore subject to strict recordkeeping and identification requirements.
10. There are clear requirements in the Philippines for entities to maintain
accounts. However, with the exception of entities subject to the anti-money-
laundering (AML) laws, records are only required to be kept for three years,
falling short of the 5 year standard in the Terms of Reference. In addition, it is
unclear whether underlying documents must be maintained in the case of all
entities. The report, therefore, contains recommendations in this regard.
11. The Philippines response to the determinations, factors and recom-
mendations in this report, as well as the application of the legal framework
to the practices of its competent authority, will be considered in detail in the
Phase 2 Peer Review of the Philippines, which is scheduled for the first half
of 2013.
INTRODUCTION 9
Introduction
Information and methodology used for the peer review of the Philippines
12. The assessment of the legal and regulatory framework of the Philippines
was based on the international standards for transparency and exchange of infor-
mation as described in the Global Forums Terms of Reference, and was pre-
pared using the Global Forums Methodology for Peer reviews and Non-Member
Reviews. The assessment was based on the laws, regulations, and exchange-of-
information mechanisms in force or effect as at February 2011, other materials
supplied by the Philippines, and information supplied by partner jurisdictions.
13. The Terms of Reference break down the standards of transparency
and exchange of information into 10 essential elements and 31 enumer-
ated aspects under three broad categories: (A) availability of information;
(B) access to information; and (C) exchanging information. This review
assesses the Philippines legal and regulatory framework against these ele-
ments and each of the enumerated aspects. In respect of each essential ele-
ment, a determination is made that either (i) the element is in place, (ii) the
element is in place but certain aspects of the legal implementation of the
element need improvement, or (iii) the element is not in place. These deter-
minations are accompanied by recommendations on how certain aspects of
the system could be strengthened.
14. The assessment was conducted by a team which consisted of two
assessors and a representative of the Global Forum Secretariat: Mrs. Sylvia
Moses of the British Virgin Islands, Mr. Sergio Luis Prez Cruz of Mexico
and Ms. Amy ODonnell of the Global Forum Secretariat. The assessment
team examined the legal and regulatory framework for transparency and
exchange of information and relevant exchange-of-information mechanisms
in the Philippines.
10 INTRODUCTION
Overview of the Philippines
15. The Republic of the Philippines is an archipelago made up of 7 107
islands, located between China and Borneo, and approximately 800 km from
the Asian mainland. The 11 largest islands contain 94% of the Philippines
total land area. It benefits from its direct access to Asias main water bodies:
the South China Sea, the Philippine Sea, the Sulu Sea, the Celebes Sea and
the Luzon Strait.
16. The Philippines location on the Pacific Ring of Fire and its tropical
location make it prone to earthquakes and typhoons, but it also has significant
natural resources. Its mineral deposits are among the largest in the world, and
are particularly rich in gold and copper. They also include silver, nickel and
cobalt.
17. The Philippines is the 12
th
most populous country in the world with a
population of approximately 95 million people. Filipino and English are the
official languages.
18. About 11 million Filipinos live overseas, 3 million of whom are in the
US and an estimated 2 million in the Middle East, over half of whom reside in
Saudi Arabia. Remittances from Filipinos working overseas amount to around
USD 17.3B per year, accounting for 11% of the Philippines GDP in 2009.
19. The Philippines economy ranks 48
th
in the world in terms of size. Its
GDP in 2009 was USD 161 billion. Its currency is the Philippine peso (PHP),
45 Philippine pesos = 1US dollar (USD) as at February 2011.
20. The Philippines biggest trading partners are the US; Japan; China;
Singapore; Hong Kong, China; South Korea; Thailand and Malaysia. The
service sector contributes to about half of overall Philippine output, followed
by industry (mainly food processing, textiles, garments, electronics, auto
parts and business process outsourcing) then agriculture. The fastest growing
segment of the Philippine economy is business process outsourcing, for which
the Philippines accounts for almost 15% of the global market.
21. The Philippines has endeavoured to attract foreign investment into its
economy and foreign companies play a significant role in creating employ-
ment. Along with reforms such as trade liberalisation, privatisation and
economic deregulation, it has also accelerated the liberalisation of foreign
direct investment, most significantly by passage of the Foreign Investment
Act (FIA) in 1991. Now, foreign investment can be up to 100% in many sec-
tors, excepting financial services and other sectors specified on the Foreign
Investment Negative List. Prior to passage of the FIA, such investments
required prior approval from the Board of Investments (BOI), which regulates
and promotes investment in the Philippines. The negative list has decreased
over time and the sectors with remaining foreign ownership restrictions are
INTRODUCTION 11
limited to mass media, land ownership, natural resources, firms that supply
to government owned corporations or agencies and public utilities.
22. The BOI also prepares an annual investment plan, listing specific
areas of investment that can qualify for incentives. Incentives include income
tax holidays, tax credits on raw materials used in the manufacture, processing
or production of export products, deductions for infrastructure expenses for
businesses in less developed areas, and exemption of exports from certain
export taxes and duty fees. Enterprises not engaged in a preferred area of
investment can still be entitled to incentives if they are Filipino owned and
at least 50% of production is for export or if they are majority foreign-owned
and at least 70% of production is for export.
23. The Philippines Economic Zone Authority (PEZA), attached to
the Department of Trade and Industry (DTI), is the Philippine government
agency tasked to promote investment, extend assistance, register, grant
incentives to and facilitate the business operations of investors in export-
oriented manufacturing and service facilities inside selected areas throughout
the country. These areas are proclaimed by the President to be Economic
Zones or Ecozones. One-hundred percent foreign ownership is permitted
in Ecozones provided that total production is for export. Generally, PEZA
registered enterprises are granted income tax holidays for a period of 4 or
6 years, or can opt to be taxed at 5% on gross income earned.
General information on the legal system and the taxation system
24. The Philippines achieved independence in 1946. Previously, it was
colonised by Spain in the late 16
th
century and was subsequently ruled by
the United States. As a result, the governmental system resembles the US
in many ways, with some Spanish influences. Under the 1987 constitution
the Philippines is now a democratic republic with a presidential form of
government.
25. The 1987 constitution is the fundamental law of the land and cre-
ates three co-equal branches of government: the Executive, the Legislative
and the Judiciary. The executive branch consists of a President, elected for a
6 year term and serving as both chief of state and head of government. The
Legislative branch is made up of a bicameral Congress with a Senate and
House of Representatives. The Judicial Branch consists of a Supreme Court,
a Court of Appeals, regional and municipal trial courts and Anti-Graft Court
1

and a Court of Tax Appeals.
1. Also known as the Sandiganbayan, it was created to maintain integrity, honesty
and efficiency in government service (Philippines Constitution).
12 INTRODUCTION
26. The Philippines legal system is a blend of civil law and common law,
as well as indigenous law to a lesser extent. The civil law tradition comes
from Spain, while the common law tradition and jurisprudence was influ-
enced by the United States. The two main sources of law are statutes and case
law. Agencies are often given the power to promulgate rules and regulations,
which have the force and effect of law, so long as they are in pursuance of the
procedure or authority conferred upon the administrative agency by law.
27. Tax laws are contained within the National Internal Revenue Code
(NIRC), which is patterned after the US Internal Revenue Code. It underwent
substantial revision in 1997 with the passage of the Tax Reform Act. The Bureau
of Internal Revenue (BIR) administers taxation, including assessment, collec-
tion, processing and taxpayer assistance. The BIR is headed by a Commissioner
with jurisdiction to interpret the provisions of the Code and other tax laws and
with jurisdiction over assessments, refunds, penalties and fees.
28. Bills relating to the national internal revenue taxes originate from the
House of Representatives and are approved, modified or not approved by the
Senate (Sec. 24, Art. VI, Philippine Constitution).
29. The primary forms of taxation in the Philippines are the corporate
income tax, individual income tax, value added tax, excise tax and customs
duties. A corporation may be either a domestic or a foreign corporation. A for-
eign corporation is one that is incorporated under laws other than the Philippines
laws. It is considered a resident foreign corporation if it engages in trade or busi-
ness in the Philippines. Otherwise it is a non-resident foreign corporation.
30. The corporate tax in the Philippines applies to both domestic and for-
eign corporations, and the statutory rate is 30%. Philippine domestic corpo-
rations are taxed on worldwide income, while foreign corporations, whether
resident or non-resident, are taxed on income derived from sources within
the Philippines. Income is considered to be sourced in the Philippines if it is
derived from property or activities within the Philippines. A branch profits
tax of 15% is imposed on any profits remitted by a branch to its head office.
Individual income is taxed at a progressive rate, the highest rate being 32%.
31. The Philippines has a wide ranging treaty network and has concluded
40 bilateral income tax treaties, 37 of which are currently in force and con-
taining exchange of information provisions. Twenty-two of these treaties are
with OECD member countries, namely: Australia, Austria, Belgium, Canada,
Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Japan,
Korea (Rep.), the Netherlands, New Zealand, Norway, Poland, Spain, Sweden,
the UK and the US. In addition, it has concluded 4 treaties with G-20 countries
which are not members of the OECD, these being: Brazil, China, Indonesia
and Russia.
INTRODUCTION 13
Overview of the financial sector and relevant professions
32. The Securities and Exchange Commission (SEC) has jurisdiction
over corporations and partnerships and also acts as the registrar of companies
and partnerships. These are the main types of entities through which business
enterprises are carried on. Banks, quasi-banks and institutions that perform
similar functions are regulated by the Bangko Sentral ng Pilipinas (Central
Bank) or BSP, while the Insurance Commission regulates the operations of
insurance companies. Mutual funds are under the supervision of the SEC.
33. Regulated Entities in the Philippines can be banks or non-bank finan-
cial intermediaries (NBFIs). Banks can be either domestic, resident foreign
or offshore banks, with resident foreign banks including a branch office of
a foreign bank. The Philippines banking structure consists of the govern-
ment owned Central Bank, which acts as the governments fiscal agent and
administers the monetary and banking system, along with the following: 19
universal banks, 19 commercial banks, 74 thrift banks, 620 rural banks and
41 cooperative banks. Of these, 19 are foreign banks consisting of 5 universal
banks, 12 commercial banks and 2 thrift banks.
34. In addition to banks, there are 6 471 non-bank financial institutions
(NBFIs) under the supervision and regulation of the Central Bank, 14 of
which have quasi banking functions. The majority of NBFIs, however, are
pawnshops (6 328), most of which are stand-alone companies and are not sub-
sidiaries or affiliates of banks. The most common form of quasi-bank NBFIs
are investment houses and financing companies, although both can also
operate without quasi-banking functions. Many NBFIs are subsidiaries and
affiliates of banks, so there is some overlap. Non-bank financial institutions
without quasi-banking license and which are not subsidiaries or affiliates of
banks, are not within the supervision or regulation of the Central Bank.
35. The Philippines allows foreign banks to establish offshore bank-
ing units (OBUs) which are intended to encourage the flow of capital into
the Philippines. They are exempt from tax on income sourced outside the
Philippines. Income from foreign currency transactions with local banks is
subject to a final 10% tax rate. Non residents are exempt from income tax on
income they derive from transactions with OBUs. As of 30 June 2010, there
are only 5 offshore banks in the Philippines.
2
36. According to Financial Action Task Force (FATF), at June 2000, the
Philippines lacked a basic set of anti-money laundering regulations such as
customer identification and record keeping. Bank records had been subject
to excessive secrecy provisions. Moreover it did not have any specific leg-
islation to criminalise money laundering per se. However, in September
2. A Status Report on the Philippine Financial System, First Semester 2010, Schedule 1.
14 INTRODUCTION
2001 the Philippines enacted the Anti-Money Laundering Act (AMLA),
criminalising money laundering, introducing the mandatory reporting of
certain transactions and requiring customer identification. In 2003 this act
was amended and improved upon. On the basis of this progress, FATF de-
listed the Philippines from its Non-Cooperative Countries or Territories List
in February 2005 (FATF Annual and Overall Review of Non-Cooperative
Countries or Territories, 10 June 2005).
37. The Philippines has systems in place for the regulation of legal
and financial professionals. Any person duly admitted as a member of the
Philippine bar and who is in good and regular standing, is entitled to practice
law.
3
The Supreme Court promulgates rules concerning the admission to
the practice of law and the integrated bar.
4
For accountants, all applicants
for registration for the practice of accountancy are required to undergo a
licensure exam given by the Board of Accountancy (BOA) and are subject to
compliance with the requirements prescribed by the Professional Regulation
Commission (PRC). No person is allowed to practice accountancy without a
certificate of registration/professional license and a professional identification
card or a valid temporary/special permit from the BOA and PRC.
5
Recent developments
38. In March of 2010, the Philippines passed legislation, the Exchange of
Information Act (EOI Act), removing the restrictions in its domestic legisla-
tion on access to bank information for exchange purposes. In late September
2010, the Philippines adopted regulations to implement this legislation.
39. The Philippines is currently developing a model tax information
exchange agreement (TIEA) which would help it to more efficiently expand
its network of EOI arrangements.
3. Section 1, Rule 138, Philippine Rules of Court.
4. Section 5, Article VIII of the Philippine Constitution.
5. Sections 13 and 26 of the Philippine Accountancy Act of 2004 (Republic Act
No. 9298, 13 May 2004).
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 15
Compliance with the Standards
A. Availability of Information
Overview
40. Effective exchange of information requires the availability of reliable
information. In particular, it requires information on the identity of owners
and other stakeholders as well as information on the transactions carried out
by entities and other organisational structures. Such information may be kept
for tax, regulatory, commercial or other reasons. If the information is not
kept or it is not maintained for a reasonable period of time, a jurisdictions
competent authority may not be able to obtain and provide it when requested.
This section of the report assesses the adequacy of the Philippines legal and
regulatory framework on availability of information.
41. The Philippines has strong ownership reporting requirements for
domestic corporations, requiring registration with the SEC as well as the
filing of an annual General Information Sheet with the names, addresses and
nationalities of all stockholders. All domestic corporations are also required
to keep a stock and transfer book with ownership information, including on
new issuances, that is updated with every transfer of shares (Corporation
Code, Sec. 74).
42. There is no express provision in the Philippines law requiring a
nominee to maintain identity information in respect of the beneficial owner
of shares held unless the nominee is a covered institution for purposes of the
AMLA. The report makes a recommendation in this regard.
16 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
43. Although there is a requirement for resident foreign corporations car-
rying on business
6
in the Philippines to register with the SEC and with the
relevant agency in the case of regulated entities, there is no requirement to
provide ownership information to the government nor is there a requirement for
the foreign corporation itself to retain such information. A recommendation is
included on this point. Under the powers given in the NIRC, the Commissioner
could, however, require that a foreign corporation provide this information.
44. . While the Corporations Code does not specifically prohibit the issue
of bearer shares, share transfers must be recorded in the books of the corpora-
tion, including the names of the parties to the transaction.
45. Regulated Entities in the Philippines can be banks or non-bank financial
institutions (NBFIs). Banks can be either domestic, resident foreign or offshore
banks. In the case of domestic and resident foreign banks, the General Banking
Act imposes ownership reporting requirements to the regulatory authorities and
the Corporation Code would also impose obligations to keep records of owner-
ship. NBFIs have ownership reporting and recordkeeping requirements under
the Corporation Code. For offshore banks, although they must register with the
Central Bank, ownership retention or reporting is not required.
46. Partnerships
7
must register with the SEC and it is clear that in the
case of limited partnerships such registration must include the identity of all
partners. Partnerships are treated the same as corporations for tax purposes
and therefore have the same duty as corporations to keep a journal and ledger
under the NIRC which would necessarily include ownership and identity
information.
47. While anyone who is not legally impaired can act as a trustee, only a
stock company or person duly authorized by the Monetary Board to engage
in a trust business may act as a trustee as part of a trade or business (General
Banking Act, Sec. 79). In this case, the trustee is subject to the AMLA and
would therefore have strict recordkeeping and ownership requirements.
However, in the limited case of a trustee not engaged in a trade or business,
there are no clear statutory recordkeeping requirements.
48. The Philippines has laws in place with accounting requirements
for all entities with few exceptions. It also has a clear requirement to retain
records for 3 years. However, this falls short of the 5 year standard in the
6. The NIRC does not define this phrase, but courts have interpreted it to imply a
continuity of commercial dealings and arrangements, the performance of acts
or works or the exercise of some of the functions normally incidental to, and in
progressive prosecution of, the purpose and objects of the organization.
7. Only partnerships with capital greater than PHP 3 000 (approximately USD 66)
are required to register.
Terms of Reference. Additionally, it is unclear whether underlying documents
must be retained in the case of all entities. The report recommends that the
Philippines conform its accounting requirements with the international stand-
ards in this regard.
A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities.
Companies (ToR A.1.1)
Types of Companies
49. In the Philippines, a corporation is created by operation of law, having
powers expressly authorised by law. The Corporation Code of the Philippines
of 1980 (Corporation Code) is the central statute governing the establishment
and management of corporations in the Philippines.
50. Corporations may be either stock or non-stock corporations. Stock
corporations are those with capital stock divided into shares that are authorised
to distribute dividends or allotments of the surplus profits of the company.
Essentially anything else is a non-stock corporation. Non-stock corporations
may only be formed or organized for charitable, educational or religious pur-
poses and any profits earned must be incidental to the corporations operations,
may not be distributed and may only be used in furtherance of the corporations
main purpose. The remainder of the report deals only with stock corporations.
Company ownership and identity information required to be provided
to government authorities
51. All corporations organized under the Corporation Code must file
articles of incorporation with the Securities and Exchange Commission (SEC),
which contain the following:
the name of the corporation and the purpose(s) for which it is being
incorporated
the place where the principal office is to be located, which must be
within the Philippines
names, nationalities and residences of persons who shall act as direc-
tors or trustees
names, nationalities and residences of the original subscribers and
the amount subscribed by each (Corporation Code, Sec. 14)
52. In order to make any change to the articles of incorporation, a corpo-
ration must submit amended articles along with a copy of the original to the
SEC. Amendments take effect upon approval by the SEC or, if the SEC does
not act upon the submission within 6 months from the date of filing, then
from the date of filing (Corporation Code, Sec. 16).
53. Any articles of incorporation or amendment thereto of banks, bank-
ing and quasi-banking institutions, building and loan associations, trust
companies and other financial intermediaries, insurance companiesor other
corporations governed by special laws must be accompanied by a statement
from the appropriate government agency that the articles or the amendment
are in accordance with the relevant law (Corporation Code, Sec. 17, see also
section on Regulated Entities below).
54. Every corporation must also submit to the SEC an annual report of its
operations. This must include a financial statement of its assets and liabilities
for the previous fiscal year, approved by a certified public accountant in the
case of corporations with paid in capital greater than PHP 50 000, which is
approximately USD 1 100 (Sec. 141). This must be submitted within 30 days
from the date of the annual shareholders meeting. To satisfy Section 141,
the SEC requires a form called a General Information Sheet. For domestic
corporations, this sheet would include the names of all stockholders, their
nationality, current address and percentage ownership.
55. The NIRC also imposes information reporting requirements on
corporations. Every corporation, except foreign corporations not engaged in
trade or business in the Philippines (see Foreign Corporations below), must
file a quarterly income tax return (Sec. 52). This return must be filed by the
president, vice-president or other principal officer of the corporation and
must be sworn to by that officer as well as the treasurer or assistant treasurer.
This return does not, however, include ownership information.
56. In addition, every corporation subject to tax must register with the
appropriate Revenue District Officer within 10 days from the commence-
ment of business, before payment of any tax due or upon filing of a return,
statement or declaration as required by the NIRC (Sec. 236). This registra-
tion must contain the taxpayers name, place of residence, business and any
other information required by the Commissioner. Any corporation required to
register must also update its registration information specifying any change
(Sec. 236(E)).
57. There is no requirement under the NIRC to provide ownership infor-
mation on registration. However, pursuant to Section 5, the tax authorities
may ask for the information (see Part B of this report).
58. Corporations, both domestic and foreign, that enjoy benefits under
the Omnibus Investment Code Act of 1987 (OIC) are subject to additional
reporting requirements. The Board of Investments (BOI) regulates and
promotes investment in the Philippines and makes an annual list of invest-
ments that can qualify for certain incentives. For an entity to be eligible for
such incentives, it must register with the BOI and satisfy the board that at
least 60% of its ownership is held by Philippine nationals (OIC, Ch. 3, Art.
32). The form that an applicant must present to the Department of Trade and
Industry (DTI) to prove majority Filipino ownership includes the names, tax
identification numbers, and country of residence of all shareholders.
59. Ownership information would also be available to the government
through the Foreign Investments Act of 1991 (FIA). The FIA limits the
amount of foreign equity ownership for companies operating in certain sec-
tors, including in the financial services sector, as well as other sectors, as des-
ignated by the Foreign Investment Negative List. The Department of Trade
and Industry (DTI) is responsible for monitoring compliance with the FIA.
In order to determine compliance with the FIA, details of the legal owners of
companies operating in these sectors must be provided to the DTI.
60. The Business Names Act provides that every business, whether a
partnership, sole proprietorship or corporation and no matter what the nature
of the business activity must register with the DTI, the BIR and the city/
municipal government (RA 3883). A Certificate of Registration of Business
Name is valid for five years, and, upon expiration, the owner must apply
for renewal. A surcharge of PHP 100 (approximately USD 2) is imposed if
renewal is not made within 3 months from the date it lapses. Anyone wishing
to terminate the business name prior to the expiration of 5 years must file an
affidavit of cancellation with the DTI.
61. The DTI must be satisfied with the identity and citizenship of the
person or persons registering, before effecting any original or renewal
registration. It is not clear exactly how such identity is satisfied or whether
identity for a corporation would mean solely the applicant or would include
shareholders.
62. All businesses are also required to obtain a Permit to Operate (PTO)
from the city or municipal government where the business activity is to be
undertaken. In the case where a company is engaged in a business activity
regulated by law, the company would obtain a PTO from the agency that
regulates the industry.
Company ownership and identity information required to be held by
companies
63. The Corporation Code requires that every corporation, both foreign
and domestic: keep and carefully preserve at its principal office a record
of all business transactions and minutes of all meetings of stockholders or
members, or of the board of directors or trustees. Records of all business
transactions and minutes of the meetings must be open to inspection by any
director, trustee, stockholder, or member of the corporation (Sec. 74).
64. Domestic stock corporations must also keep a stock and transfer
book, with a record of all stocks in the names of the stockholders alphabeti-
cally arranged; the instalments paid and unpaidand the date of payment; a
statement of every alienation, sale or transfer of stock made, the date thereof,
and by and to whom made; and such other entries as the by-laws may pre-
scribe (Sec. 74).
65. No transfer of shares is valid until the transfer is recorded in the stock
and transfer book of the corporation. This book must be kept at the principal
office of the corporation or in the office of its stock transfer agent, which
must be in the Philippines, and must be kept open for inspection by any
director or stockholder of the corporation. There is nothing in the Corporate
Code that says for how long a stock and transfer record or other records must
be kept. The Philippines advises that it is implicit in Section 74 that the stock
and transfer record must be kept continuously from incorporation.
Nominees
66. There is no express requirement in the Philippines law for corpora-
tions to know the ultimate owner of shares in the case of nominee owner-
ship. The Philippines advises that as a practical matter a nominee would be
expected to know the next legal owner in a chain of ownership, however there
is no express provision stating this in the Philippines laws. Only in the case
of a covered institution for AML purposes (see AML section below) would
the identity of the nominee and the beneficial owner be required. A recom-
mendation has been made on this point.
67. In summary, with an exception in the case of some nominees, the
Philippines laws require the retention of information on identity and owner-
ship for domestic corporations.
Foreign Corporations
68. A foreign corporation is one formed, organized or existing under
any laws other than those of the Philippines and whose laws allow Filipino
citizens and corporations to do business in its own country or state. The
Corporation Code provides that the law governing foreign corporations crea-
tion, formation, dissolution and liquidation is the law of the country where
the corporation is established and organized.
69. Foreign corporations can take 3 different forms in the Philippines:
A branch office, organized and existing under foreign laws that car-
ries out the business activities of the head office and derives income
from the Philippines. If a foreign corporation/branch office is con-
sidered a domestic market enterprise (DME) it is required to have
minimum paid up capital of USD 200 000, which can be reduced if
the activity involves advanced technology or the company employs at
least 50 direct employees. If considered an export market enterprise
(EME), capital requirements are reduced. It is considered an EME if
60% of the products or services of that company will be exported.
8

Registration with the SEC is mandatory.
A Regional or Area Headquarters (RHQ), organized and existing
under foreign laws that does not derive income in the Philippines
and is fully subsidized by its foreign parent. It deals directly with
the clients of the parent company and does things like information
dissemination, acts as a communications center, promotes company
products and acts as a quality control of products for export. It must
have an annual inward remittance of USD 50 000 to cover its operat-
ing expenses and must register with the SEC.
A Regional Operating Headquarters (ROHQ) for a foreign company,
meaning a foreign business entity which is allowed to derive income
in the Philippines by performing certain qualified services to its
affiliates, subsidiaries or branches in the Philippines, the Asia-Pacific
Region and in other foreign markets. Such qualified services include
general business administration and planning, business planning and
coordination, sourcing and procurement of raw materials, corporate
finance advisory services, sales promotion, training and personnel
management and other prescribed services. An ROHQ must also
show proof of remittance of USD 200 000 upon registration.
70. RA 8756, which amended the Omnibus Investments Code Act (OIC)
in 1999, provides that a foreign corporation may only transact business in
the Philippines after obtaining a licence from the SEC and upon a favourable
recommendation of the Board of Investments. In addition, foreign banking,
financial and insurance corporations must also comply with the provisions
of existing laws applicable to regulated entities (Sec. 125 and see Regulated
Entities section below). A violation of any provision of the OIC can result in
a cancellation of a corporations license.
8. For reduction of required minimum paid up capital for DMEs, the company must
submit a certification to satisfy the requirement.
71. Under the Corporation Code,
9
a foreign corporation must submit to
the SEC a copy of its articles of incorporation and by-laws, which must be
certified. The application is under oath, and, unless it is already in its articles
of incorporation, must state:
date and term of incorporation;
the address, including the street number, of the principal office of the
corporation in the country or state of incorporation;
the name and address of its resident agent authorized to accept sum-
mons and process in all legal proceedings and, pending the establish-
ment of a local office, all notices affecting the corporation;
the names and addresses of the present directors and officers of the
corporation
72. If the articles of incorporation or by-laws of the foreign corporation
are amended, the corporation must file these changes within 60 days to the
SEC and with the appropriate government agency (Sec. 130).
73. A foreign corporation must have a resident agent in the Philippines,
who may be either an individual residing in the Philippines or a domestic
corporation lawfully transacting business in the Philippines (Sec. 127). The
corporation must file with the SEC a written power of attorney designating
this person as able to be served in all actions against the corporation.
74. Any foreign corporation doing business without a license can still
be sued or proceeded against in a legal action, but cannot maintain or inter-
vene in any action or proceeding in any court or administrative agency of the
Philippines (Sec. 133). The SEC may revoke the license of a foreign corpora-
tion if it fails to file its annual report (see paragraph 54) or pay any fees; fails
to appoint and maintain a resident agent; or fails, after change of its resident
9. In addition to registration requirements under the Corporation Code, which are the
same for all foreign corporations, RHQs and ROHQs must submit additional infor-
mation to the SEC. RHQs must submit a certificate from the Philippine Consulate or
a certification from the DTI or its equivalent in the firms home country saying that it
is an entity engaged in international trade with affiliate, subsidiaries or branch offices
in the Asia-Pacific region and other foreign markets. It must also supply an authen-
ticated certification from its principal officer that says it has been authorised by its
board of directors to establish a RHQ in the Philippines and proof of remittance of
USD 50 000 operating capital upon organization and then annually. An RHOQ must
also provide a certification from DTI or its equivalent and a certification from its
principal officer. In addition, this certification must specify that it will only engage
in qualified services and will not offer such services to entities other than their affili-
ates, branches or subsidiaries or solicit or market goods or services directly.
agent or address, to submit to the SEC a statement of such change; among other
reasons (Sec. 134).
75. In addition to its SEC licensing requirements, foreign corporations
must also submit a General Information Sheet to the SEC and a financial
statement stamped and received by the BIR within 120 days from the end of
the fiscal year. However, there is no requirement to identify the legal owners
of the foreign company under the Corporation Code. While, like a domestic
corporation, a foreign corporation is required to file a General Information
Statement annually with the SEC, the form for a foreign corporation is dif-
ferent from that of a domestic corporation and does not require the names,
addresses or nationalities of the corporations legal owners.
76. The Corporation Code provides that any foreign corporation doing
business in the Philippines shall be bound by all laws, rules and regulations
applicable to domestic corporations of the same class, except such only as pro-
vide for the creation, formation, organization or dissolution of corporations or
those which fix the relations, liabilities, responsibilities or duties of stockhold-
ers, members, or officers of corporations to each other or to the corporation
(Sec. 129). Although a foreign corporation would be required to keep a record
of all business transactions of the corporation and the minutes of any meetings,
it is not required to keep a stock and transfer book that records ownership.
77. Foreign corporations engaged in a trade or business in the Philippines
(resident foreign corporations) are subject to the same reporting require-
ments in the NIRC as are domestic corporations, meaning that they must file
quarterly income tax statements and register with a Revenue District Officer.
There is no requirement to report ownership information when registering
or filing returns. However, under Section 5 of the NIRC, the Commissioner
could ask for the names of the corporations owners.
78. In summary, foreign corporations, while required to register with the
SEC and BIR, are not required to maintain records of ownership or identity.
Regulated Entities
79. Regulated entities in the Philippines can be banks or nonbank finan-
cial institutions (NBFIs). Banks can be either domestic, resident foreign or
offshore banks. Domestic and resident foreign banks are governed by the
General Banking Law of 2000 (General Banking Act) and the Corporation
Code and regulated by the Central Bank, while offshore banks are authorised
under Presidential Decree No. 1034 (Offshore Bank Decree) and supervised
by the Central Bank. NBFIs are governed by the Corporation Code and other
acts depending on the services offered and regulated by both the Central
Bank and the SEC. Investment companies are a form of NBFI and manage
collective investment vehicles like mutual funds, which are governed by the
Corporation Code and the Investment Company Act of 1960.
10
80. An offshore bank (OBU) is a branch, subsidiary or affiliate of a for-
eign banking corporation which is duly authorised by the Central Bank to
transact offshore banking business in the Philippines. International financial
institutions may establish and manage offshore banks (OBUs), which may
provide all traditional banking services to non-residents in any currency other
than the Philippines peso. Banking transactions to residents are limited in
that they do not have full branch banking powers, such as peso deposit taking
and lending. They can engage in lending to Philippine residents, but only in
foreign currencies. According to the Central Bank there are only 5 offshore
banks currently operating in the Philippines and the total combined assets
of the Phillipines offshore banking sector represents only 0.4% of the total
assets of the Philippine banking system as a whole.
81. Domestic banks must be organized in the form of stock corporations
and are therefore subject to the same ownership, accounting and reporting
requirements as domestic corporations contained in the Corporations Code
and the NIRC (General Banking Act, Sec. 8). Pursuant to the Foreign Bank
Liberalization Act (RA 7721), the provisions of the Banking Act, insofar as
they do not conflict with RA 7721, apply to resident foreign banks. Therefore,
resident foreign banks would be bound by requirements in the Corporation
Code and the NIRC as well. NBFIs that are investment companies must be
organized as stock corporations in the Philippines; therefore, they are also
bound by the Corporation Code and the NIRC.
82. Pursuant to the Corporation Code, domestic and resident foreign banks
and NBFIs must register with the SEC. The SEC cannot register the articles of
incorporation of any regulated entity unless accompanied by a certificate of
authority issued by the Monetary Board. In issuing such certificate, the Board
can review the qualifications of bank directors and officers (General Banking
Act, Sec. 14). This is also true for foreign banks, which must also have an agent
in the Philippines authorised to accept summons and legal process (Sec. 76).
83. For investment companies, all members of the board must be citizens
of the Philippines (ICA, Sec. 15). All of the shares that an investment company
issues and distributes must be registered with the SEC (ICA, Sec. 7(b)(4)).
Investment companies appoint independent fund managers to manage mutual
10. Subject to the approval of the Monetary Board, banks can be authorised to
engage in the business of a trust company (Sec. 79). Trust companies are not
considered banks for purposes of the General Banking Act, but are nonetheless
also regulated by the Monetary Board (see Trust section below).
funds pursuant to the requirements of the SEC and these fund managers must
register with the SEC before assuming such position (ICA, rule 35-1).
84. For domestic banks, there are limitations on the amount of bank
equity that can be held by individual corporations and on foreign owned
voting stock. At least 60% must be owned by citizens of the Philippines,
with very few exceptions (General Banking Act, Sec. 11). In order to ensure
compliance with these limitations, in the event of any sale or transfer of
ownership, registration of voting trust agreements or any form of agreement
vesting the right to vote the voting shares of stock, the corporate secretary of
the regulated entity must ascertain the identity and citizenship of the person
either purchasing or exercising a right to a share and require the person to
submit proof of citizenship. The corporate secretary must also require the
transferee of the shares to execute an affidavit stating that he is a bona fide
owner of shares (Manual of Regulations for Banks (MORB) Sec. X126.2).
85. The Central Bank is the supervisory authority for offshore banks
and requires that OBUs apply to receive a certificate of authority to operate
in the Philippines. In applying for this certificate, the OBU must submit a
sworn statement of its head office, parent or holding company, supported by
a resolution of the board of directors that it will cover liquidity, operate with
prudence and maintain net funds of USD 1 million.
86. While the Central Bank requires domestic banks to submit a com-
plete list of stockholders and their holdings annually, OBUs are not required
to do so. Therefore, offshore banks would not be required to retain or report
ownership information to the regulatory authorities.
Service Providers and Anti-Money Laundering Laws
87. The Anti-Money Laundering Act of 2001(AMLA) amended the
Foreign Currency Deposit Act, which previously ensured almost absolute
confidentiality for foreign currency deposits in the Philippines banks by
prohibiting such deposits from being examined, inquired or looked into by
anyone without the written permission of the depositor. The AMLA created
the Anti-Money Laundering Council (AMLC) with the authority to examine
a deposit, with a court order, if the deposit is related to unlawful activities
enumerated in the Act.
88. Covered institutions for AMLA purposes include all entities super-
vised or regulated by the Central Bank. Specifically, this includes:
banks including domestic, resident foreign and offshore;
NBFIs both with and without quasi-bank functions;
trust companies;
insurance companies;
securities dealers, brokers and salesmen or any person rendering
services as investment agent, advisor, or consultant;
investment companies or similar enterprises regulated by the SEC;
mutual funds, investment companies and other similar entities;
foreign exchange corporations, money changers, money payment, remit-
tance, and transfer companies and other similar entities; and
other entities administering or otherwise dealing in currency, com-
modities or financial derivatives based thereon, valuable objects, cash
substitutes and other similar monetary instruments or property super-
vised or regulated by the SEC.
89. Stock transfer agents, or those principally engaged in the business of
registering stock transfers on behalf of a stock corporation, are both subject
to the AMLA and must also secure a license from the SEC (Sec. 74).
90. All covered institutions are required to establish and record the true
identity of all of their clients, based on official documents and must report all
transactions covered by the law to the AMLC (AMLA, Sec. 9(a)). Covered
institutions must also maintain a system to verify the true identity of their
clients based on official documents. A corporation must have a system to
verify a clients legal existence and organizational structure and identification
of all persons purporting to act on their behalf, as well as their authority for
doing so (Revised Implementing Rules and Regulations (RIRR), Rule 9.1.a).
A customer must open an account in the true and full name of the account
owner or holder and only with face-to-face contact (AMLA, Sec. 9(a)).
91. In the case of a customer who is acting as a trustee, nominee, agent or
in any capacity on behalf of another, covered institutions must verify and record
the true and full identity of both the person on whose behalf a transaction is
being conducted and the person acting on their behalf (RIRR, Rule 9.1.b).
92. The documents required for individual customers must be origi-
nals and documents of identity must be issued by an official authority and
bear a photograph of the customer, like an identity card or a passport. The
Regulations provide a list of minimum information and documents that
must be obtained from individual customers, which includes: name, present
and permanent address, nationality, contact information, tax identification
number, social security number, signature, source of funds and the names of
the beneficiaries in case of insurance contracts and whenever applicable
(Rule 9.1.c).
93. For corporate entities, the RIRR require that the minimum informa-
tion to be obtained before establishing a business relationship includes a list
of principal shareholders, defined as owning more than 2% of the shares,
verification of the authority and identification of the person acting on behalf
of the corporation and details of the beneficial owners, if any (Rule 9).
94. If a customer is a corporation, covered institutions must ensure that it
has not been or is not in the process of being dissolved or that its business or
operations are not in the process of being closed. The implementing rules and
regulations advise that dealings with shell companies should be undertaken
with extreme caution (Rule 9.1(d)).
95. Identity records must be maintained and stored for 5 years from
the date of transaction. The act imposes a penalty of imprisonment from 6
months to one year or a fine of not less than PHP 100 000 but not more than
PHP 500 000 (approximately USD 2 200 to 11 000) or both for failure to
keep records (Sec. 14). The RIRR also provide that the records on customer
identification, account files and business correspondence must be kept for at
least 5 years from the date the account is closed (Rule 9.2.c).
Bearer shares (ToR A.1.2)
96. While the Corporations Code does not specifically prohibit the issue
of bearer shares Section 63 of the Corporations Code provides that no transfer
of shares is valid, except as between the parties, until the transfer is recorded
in the books of the corporation showing the names of the parties to the trans-
action, the date of the transfer, the number of the certificate or certificates
and the number of shares transferred.
Partnerships (ToR A.1.3)
97. Partnerships in the Philippines are created by operation of law, pro-
ceeding from the concept that persons may combine their funds to engage
in the pursuit of a common business objective. A partnership is considered
a separate legal entity, apart from its partners. There are no specific govern-
ing laws for partnerships like for corporations. Instead, partnerships are
governed by and covered under Articles 1767 to 1867 of the Civil Code of
the Philippines of 1949 (Civil Code). These provisions govern all aspects of
partnerships, including their creation and obligations to the government
98. Partnerships may be either general or limited. A limited partnership
being one formed by two or more persons and having at least one general
partner and at least one limited partner, who is bound to the extent of his
capital contribution to the partnership.
99. Corporations can form partnerships with individuals or other cor-
porations provided that the following criteria are met: (i) authority to enter
into a partnership is expressly conferred by the charter or the articles of the
corporation; (ii) the nature of the business venture is in line with the busi-
ness authorized by the charter or articles of the corporation; and (iii) if it is a
foreign corporation, it obtains a license to transact business in the country in
accordance with the Corporation Code and the Foreign Investments Act.
11
100. The NIRC defines a corporation to include partnerships, both general
and limited (Sec. 22(B)). Therefore partnerships, like corporations, are taxed
at the entity level.
Ownership information provided to the government
101. A general partnership with capital of PHP 3 000 (approximately
USD 66) or more must register with the SEC and appear in a public instru-
ment (Civil Code, Art. 1772). The Philippines advises that the identity of
the partners is disclosed in this public instrument; however the law does
not expressly state this. Failure to register does not affect the liability of the
partners to third persons (Art. 1772). If there is a change in the members of
the partnership, the partnership is dissolved and the partnership must file an
amended instrument.
102. For limited partnerships, registration with the SEC is always required
and registration must include the names of all general and limited partners. A
limited partnership is formed by filing a record with the SEC stating:
the name of the partnership and character of the business;
the location of the principal place of business; and
the name and place of residence of each member, general and limited
partners being respectively designated (Art. 1884).
103. However, Art. 1884 of the Civil Code states that the partnership is
formed if there has been substantial compliance in good faith with the forgo-
ing requirements.
104. The record filed with the SEC must be amended when a person is
substituted as a limited partner or an additional limited partner or general
partner is admitted (Art. 1864). This certificate must be signed and sworn
to by all the members, and if a partner is added it must be signed by that
member and when substituted signed by the assigning partner (Art. 1865).
11. See SEC Opinion of 17 August 1995 and 1 December 1993. Prior to these rulings,
it was believed that corporations could not act as partners in a partnership.
105. An additional reporting requirement is found in the NIRC, which
provides that any person subject to any tax must register with the BIR before
commencing any business or before payment of any tax or filing a statement
or return under the NIRC. The information required includes the taxpayers
name, address and place of business, which would be the name of the partner-
ship, not its partners.
106. The NIRC further requires that partnerships file a quarterly income
tax return which must be sworn to by a principal officer and by the treas-
urer or assistant treasurer (Sec. 52(A)). According to the Philippines, each
individual partner must also make a return and therefore individual partners
would be identified. However, this is not expressly provided for in the law and
therefore the source of this duty is unclear.
Information required to be held by the partnership
107. The partnership must keep books at the principal place of business
of the partnership and every partner has a right to access, inspect and copy
them. Partners also have a duty to render on demand the true and full infor-
mation of all things affecting the partnership to any partner (Art. 1806).
Limited partners have the same rights as general partners in this regard (Art.
1851). Further, the NIRC obligations for corporations apply to partnerships
as well. Therefore all partnerships must keep a journal and ledger or their
equivalents. These books would necessarily show the identity of the partners.
108. Partnership books must be kept at the principal place of business
of the partnership, unless the partners agree otherwise (Civil Code, Art.
1805). The NIRC does not require partnerships to retain records within the
Philippines, but the records are subject to annual examination and inspection
by inland revenue officers and must therefore be readily available (Sec. 235).
109. In summary, all limited partnerships and all general partnerships
(with capital of PHP 3 000 or more) are required to register with the SEC.
Such registration would include ownership information, although this is not
expressly stated in the case of a general partnership. In addition, both general
partnerships and limited partnerships are required to retain ownership and
identity information themselves
Trusts (ToR A.1.4)
110. Trusts can be formed in the Philippines under Title V of the Civil
Code. This names the person who establishes the trust the trustor and defines
a trustee as one in whom confidence is reposed as regards property for
the benefit of another person (Art. 1440). The beneficiary is the person for
whose benefit the trust has been created.
111. Trusts are either express or implied, with express trusts created by
the intention of the trustor or of the parties and implied trusts coming into
being by operation of law (Art. 1441). An express trust can be created without
words. All that is required is sufficient proof that a trust is clearly intended.
Acceptance by a trustee is not necessary, whereas acceptance by the ben-
eficiary is, unless the trust does not impose an onerous condition on the
beneficiary, in which case his acceptance will be presumed without contrary
evidence (Art. 1446).
112. The Civil Code provides that anyone who is not legally impaired may
act as a trustee. However, only a stock company or person duly authorised by
the Monetary Board to engage in a trust business may act as a trustee as part
of a trade or business (General Banking Act, Sec. 79). Such companies are
subject to the requirements of the General Banking Act and regulated by the
Central Bank.
113. Citizens of the Philippines may also act as trustees for foreign trusts.
In the case of a trust company acting as a trustee for a foreign trust, it must
be authorized to engage in trust business as provided for under Section 79 of
the General Banking Act and would therefore be subject to the AMLA and
the General Banking Act. Those not acting as a trustee as part of a trade or
business would not be subject to these laws.
114. Trusts are separate entities for tax purposes, similar to a partnership
or a corporation (NIRC, Sec. 22). The tax is first paid on the net income of a
trust by the trustee. When distributed to the beneficiaries, the net income on
which the tax is paid is then free from tax. The imposition of the tax does not
change when the ultimate beneficiary is a person exempt from tax.
Information provided to the government
115. The Civil Code does not require a trustee to register a trust with the
government. In the case of a bank acting as a trustee, Central Bank rules and
regulations do not generally require banks to register their trust accounts with
the Central Bank, although they do subject trust entities to periodic examina-
tion and in the process, they are required to submit to examiners listings of
the trust accounts being handled by them. Requirements to provide informa-
tion to the government regarding banks acting as trustees are instead found in
the NIRC. Because the NIRC treats a trust the same as a corporation, a trust
must be registered with the appropriate Revenue District Officer within 10
days from the date of commencement, before payment of any tax due or upon
filing of a return, statement or declaration (Sec. 236). Such registration must
contain the trustees name and place of residence or business. Any person
required to register must update the registration information specifying any
change (Sec. 236(E)).
116. Section 65 of the NIRC provides that trustees and all persons acting
in a fiduciary capacity must file an income tax return for the person, trust or
estate for which they act. Details of the settlor or beneficiaries do not have to
be included on this return. However, pursuant to Section 5 of the NIRC, the
Commissioner could ask for this information.
Information held by the trustee
117. Trust companies or banks that act as trustees are covered institutions
for purposes of the AMLA and are therefore required to establish the true iden-
tity of their clients (see AML section above), which in this case would include
knowing the settlor and beneficiaries. However, while there is no requirement
in the Civil Code for a trustee to know the settlor and beneficiary, where the
Civil Code is silent or so far as it is not in conflict with the Civil Code, trustees
are also bound by common law duties or the general laws of trust. This refers
to general principles on trusts applied or acknowledged in other jurisdictions.
12

The Philippines advises that under the general laws of trusts, a trustee has a
duty to know the settlor and beneficiaries of a trust. Therefore, in the narrow
set of cases where a trustee is not acting as part of a trade or business, the only
requirement to maintain ownership or identity information is under the general
laws of trusts. The extent to which this limits the effectiveness of exchange of
information in practice will be considered in the Phase 2 Peer Review.
118. The mechanisms described in this section ensure the availability of
information on trusts, whether Philippines or foreign law trusts, where sig-
nificant elements of the trust such as a resident professional trustee, are con-
nected with the Philippines. Nevertheless, it is conceivable that a trust could
be created under the laws of the Philippines which has no other connection
with the Philippines. In that event there may be no information about the trust
available in the Philippines.
119. There do not appear to be sanctions for non compliance with the
Civil Code. There are sanctions for non-compliance with the NIRC, which
would be the same as for corporations and partnerships. In addition, the
sanctions for non-compliance with the AMLA are the same as for other enti-
ties. For banks acting as trustees, in addition to sanctions under the Banking
Act, there are sanctions for non-compliance with the Manual of Regulations
for Banks (MORB) that vary based on the offence and can range from
PHP 10 000 to 30 000 per day of the violation (approximately USD 220 to
670) and from reprimand for those responsible to revocation of a trust license.
12. The Philippines courts often refer to US laws in their opinions. See, for example,
Roa, Jr. v. Court of Appeals (123 SCRA 1) and Josue Arlegui v. Court of Appeals
(G.R. No. 126437, March 6, 2002) where the Philippines Supreme Court resorted to
US law and jurisprudence in the resolution of certain questions pertaining to trusts.
Foundations (ToR A.1.5)
120. Foundations exist in the Philippines in the form of non-stock corpora-
tions, subject to the Corporation Code. The NIRC provides a definition for
private foundation in Section 34, which says that a private foundation is a
non-government organization which is a not-for-profit domestic corporation
and may only be established for scientific, educational or religious purposes.
Such entities are the same as non-stock corporations under the Corporation
Code discussed in paragraph 50 above.
Enforcement provisions to ensure availability of information
(ToR A.1.6)
121. Jurisdictions should have in place effective enforcement provisions
to ensure the availability of information, one possibility among others being
sufficiently strong compulsory powers. However, this would also include pun-
ishments and fines for violation of its laws. In most cases, the Philippines has
in place strong compulsory powers. Most of its powers are derived from the
NIRC Section 5, under which the Commissioner may compel information from
a taxpayer. This is the subject of further discussion in Part B of this report.
122. For NIRC purposes, corporations, partnerships and trusts are treated
the same, therefore the same penalties for noncompliance would apply for each.
For a failure to pay a tax owed, in addition to the amount due, civil penalties
can be imposed on taxpayers. Penalties of an additional 25% of the amount due
are imposed in the following cases: failure to file a return, filing a return with
the wrong internal revenue officer, failure to pay the deficiency tax within the
time prescribed or failure to pay the tax shown (Sec. 248). For a wilful neglect
to file the return, or for a false or fraudulent return, the penalty is 50%.
123. In the case of failure to file an information return, statement or list or
to keep any record or supply information required the penalty is PHP 1 000
for each failure, not to exceed PHP 25 000 (approximately USD 22 to 560)
(Sec. 254).
124. In addition, any person who wilfully attempts to evade taxes can on
conviction also be punished by a fine not less than PHP 30 000 and not more
than PHP 100 000 (approximately USD 670 to 2 200) as well as imprisonment
from 2 years to 4 years. For failure to pay a tax, keep any record or supply
correct and accurate information the penalty on conviction, in addition to
other penalties, is PHP 10 000 (approximately USD 220) and imprisonment
from 1 to 10 years. For a corporation or general partnership liable for any act
or omission penalized under the code, in addition to the penalties imposed,
the responsible corporate officers, partners or employees are liable on con-
viction for a punished by a fine of PHP 50 000 to 100 000 (approximately
USD 1 100 to 2 200)(Sec. 256).
125. Any financial officer or certified public accountant who, pursuant
to the NIRC Sec. 232(A,) is responsible for examining and auditing books of
accounts and who wilfully falsifies a report or statement or renders a state-
ment that has not been verified by him personally or certifies financial state-
ments containing an essential misstatement of fact or omission will be liable
upon conviction and punished by a fine from PHP 50 000 to 100 000 (approxi-
mately USD 1 100 to 2 200) and suffer imprisonment of 2 to 6 years; in addi-
tion, his license as a CPA will be revoked (Sec. 257). The penalty is the same
for any person who examines and audits books without being a CPA, offers
to sign and certify financial statements without an audit, offers accounting
services not in conformity with the NIRC, or knowingly makes a false entry
in books of accounts or records, keeps two or more sets of such records or fails
to keep books of accounts in a native language or wilfully attempts to evade
or defeat any tax. If the person is not a citizen of the Philippines, conviction
under the code results in immediate deportation after serving any sentence.
126. For corporations and partnerships subject to the Corporation Code, a
violation, such as a refusal to allow someone with the right to examine records
to examine the records of business transactions or failure to keep a stock
transfer book under Section 74, is punishable by a fine of PHP 1 000 to 10 000
(approximately USD 22 to 220) or imprisonment for not less than 30 days but
not more than 5 years, or both. A person who refuses to allow someone to
examine records is also liable to that person for damages. If the corporation
commits the violation, the SEC may dissolve the corporation (Sec. 144).
127. For foreign corporations, the SEC may revoke its license if it fails to
file its annual report or pay any fees; fails to appoint and maintain a resident
agent; or fails, after change of its resident agent or address, to submit to the
SEC a statement of such change, among other reasons (Sec. 134).
128. The AMLC has the power to require covered institutions to submit
identity documents. However, it must obtain a court order allowing the
inquiry into or examination of bank accounts or investments, except in the
case of unlawful activity pertaining to certain crimes like kidnapping, drugs
or terrorist financing (AMLA, Sec. 11).
129. The AMLA has a detailed set of penalties that apply to covered insti-
tutions. Any person who knows that a monetary instrument or property is
required to be disclosed to the AMLC and fails to do so can face imprisonment
from 6 months to 4 years and/or a fine of PHP 100 000 to 500 000 (approxi-
mately USD 2 200 to 11 000). The same penalty is possible for a failure to keep
records as well as for malicious reporting, defined as when a person who with
malice, or in bad faith, reports or files a completely unwarranted or false infor-
mation relative to money laundering transactions against any person.
130. The AMLA carries strict penalties for failure to comply with an
AMLC Resolution or court order directing the production of bank records.
Pursuant to Rule 14.1d, the AMLC can impose fines upon any covered insti-
tution, its officers and employees, or any person who violates its provisions
of between PHP 100 000 and 500 000 (approximately USD 2 200 to 11 000).
131. For corporations, partnerships or any juridical person, the penalty is
imposed on the responsible officers. If the person is a juridical person, the
court may suspend or revoke its license. If the offender is an alien, in addi-
tion to these penalties, he shall be deported without further proceedings after
serving the sentence. Any public official or employee who is called to testify
and refuses to do so is also subject to penalties under the AMLA, however it
is unclear what these penalties are.
132. The EOI Act imposes penalties where an officer, owner, agent, man-
ager, director or officer-in-charge of any bank or financial institution who is
required in writing by the commissioner to supply information and wilfully
refuses to do so can be fined from PHP 50 000 to 100 000 (approximately
USD 1 100 to 2 200) and/or be imprisoned for 2 to 5 years (Sec. 6).
133. Section 66 of the General Banking Act also provides that penalties in
the New Central Bank Act are applicable to domestic and foreign banks and
NBFIs. Penalties range depending on the offense. For example, any person
who refuses to file a required report or permit a lawful examination is subject
to a fine of PHP 50 000 to 100 000 (approximately USD 1 100 to 2 200), and/
or imprisonment of 1 to 5 years (Sec. 34). For making a false statement the
penalty increases to PHP 100 000 to 200 000 (approximately USD 2 200 to
4 400) and/or imprisonment of up to 5 years. For a violation of the act, the
penalty is PHP 50 000 to 200 000 (approximately USD 1 100 to 4 400) and/
or imprisonment for 2 to 10 years. There are also administrative sanctions for
the above offenses, including fines, suspension of privileges, suspension of
lending and revocation of license. The Monetary Board may also suspend any
director or officer.
134. The effectiveness of these provisions will be evaluated in the context
of the Philippines Phase 2 Review.
Determination and factors underlying recommendations
Determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
recommendations
Recommendations
Nominees that are not covered
institutions for anti-money laundering
purposes are not required to maintain
ownership and identity information in
respect of all persons for whom they
act as legal owners.
An obligation should be established
for all nominees to maintain relevant
ownership information where they act
as legal owners on behalf of any other
person.
Companies incorporated outside
of the Philippines but having their
effective management in the
Philippines, which gives rise to a
permanent establishment, are not
required to provide or maintain
information identifying any owners.
The availability of information
that identifies the owners of such
companies will generally depend on
the law of the jurisdiction in which the
company is incorporated and so may
not be available in all cases.
In such cases, the Philippines should
ensure that ownership and identity
information is available.
A.2.Accounting records
Jurisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
General requirements (ToR A.2.1)
NIRC
135. The NIRC is the main source of accounting obligations for corpora-
tions, partnerships or persons required by law to pay internal revenue taxes
and requires them to keep a journal or ledger of their equivalents. Because
the definition of person includes a trust, these accounting requirements would
also apply to trusts (Sec. 22(A)), although an additional obligation to keep all
accounts arises under the common law as one of the duties of a trustee.
136. There is an exemption for entities whose quarterly sales, earnings,
receipts or output are less than PHP 50 000 (approximately USD 1 100). In
this case, entities may keep a simplified set of bookkeeping records where
in all transactions and results of operations are shown and from which all
taxes due the government may readily and accurately be ascertained and
determined any time of the year.
137. If a taxpayers gross quarterly sales, earnings, receipts or output is
greater than PHP 150 000 (approximately USD 3 300), the NIRC directs that
its books of accounts be audited and examined yearly by an independent
Certified Public Accountant.
13
In addition, the income tax returns of such
taxpayers must be accompanied by an Account Information Form (AIF) con-
taining information from certified balance sheets, profit and loss statements,
schedules listing income-producing properties and the corresponding income
therefrom and other relevant statements (Sec. 232(A)). Entities subject to this
section of the NIRC may keep subsidiary books of account, as their business
may require, however these books will be considered part of the taxpayers
accounting system and subject to the same rules and regulations as apply to
the journal or ledger (Sec. 233).
138. Although the NIRC doesnt specifically require that entities retain
accounting records in the Philippines, these are subject to annual examina-
tion and inspection by inland revenue officers and must therefore be readily
available (Sec. 235).
139. In the case of partnerships, the NIRC further provides that a person
who retires from a partnership must, within 10 days from the date of retire-
ment or within such period as the Commissioner allows, submit their books
of account, including subsidiary books and other accounting records to the
Commissioner for examination. Partnerships contemplating dissolution must
notify the Commissioner and cannot be dissolved until cleared of any tax
liability.
Civil Code
140. In addition to a duty to keep partnership accounts under the NIRC, a
partnership also has a duty under the Civil Code. Article 1806 provides that
partners are required to render true and full information of all things affect-
ing the partnership to any partner or the legal representative of any deceased
partner or of any partner under legal disability. Further, a limited partner
would have the same rights as a general partner in a limited partnership to
demand full information on all things affecting the partnership and a formal
13. The NIRC defines Independent Certified Public Accountant as an accountant
who possesses the independence as defined in the rules and regulations of the
Board of Accountancy promulgated pursuant to Presidential Decree No. 692,
otherwise known as the Revised Accountancy Law (Sec. 232(B)).
account of partnership affairs whenever circumstances render it just and rea-
sonable (Art. 1851).
141. The Civil Code further provides that partnership books must be kept
at the principal place of business of the partnership, unless the partners agree
otherwise (Art. 1805).
Corporation Code
142. The Corporation Code also creates a duty for corporations to keep
accounts, arising from the duty for every corporation to submit to the SEC an
annual report of its operations. This must include a financial statement of its
assets and liabilities for the previous fiscal year, approved by a certified public
accountant in the case of entities with paid in capital greater than PHP 50 000
(approximately USD 1 100) (Sec. 141).
143. In addition, Section 74 of the Corporation Code requires all stock
corporations to keep a stock and transfer book. Aside from records of owner-
ship, this book must also record the installments paid and unpaid on all stock
and a statement of every alienation, sale or transfer of stock made, the date
thereof, and by and to whom made.
144. Failure to keep a stock ledger under Section 74 is punishable by a fine
of PHP 1 000 to 10 000 (approximately USD 22 to 220) or imprisonment for
30 days to 5 years, or both. If the corporation commits the violation, the SEC
may dissolve the corporation (Sec. 144).
AMLA
145. Covered institutions under the AMLA have a duty to keep records of
all transactions. The Revised Implementing Rules and Regulations (RIRR),
most recently supplemented by Circular No. 706 issued by the Central Bank
on 5 January 2011, define transaction as any act establishing any right or
obligation or giving rise to any contractual or legal relationship between
the parties thereto. It also includes any movement of funds by any means
with a covered institution (Section X803(E)). The regulations specify that
records of transactions must be kept such that any account, relationship or
transaction can be reconstructed as to enable the AMLC and/or the courts to
establish an audit trail. However, the requirements to maintain records for
AML purposes may not capture all relevant accounting records, including
underlying documentation, consistent with the Terms of Reference.
146. Additionally, both the General Banking Act at Section 87 and the
MORB require trust departments of banks to keep books and records on
trusts separate and distinct from the books and records of its other businesses
(MORB, Sec. X421). It also requires that a trustee banks books and records
contain full information relative to each trust. These records must be kept as
to allow inspection by Central Bank examiners or submission of information
or reports as may be required by the competent authorities. The banks trust
department is also required to adopt appropriate systems, internal control
procedures and audit trail mechanisms to ensure that the correct amount of
final tax is withheld or exempted from such accounts.
147. Further, MORB Section X425.1 requires banks acting as trustees
to render reports on the trust accounts to the party in interest or the court
concerned or any party designated by court order. The report must be in such
form as to apprise the party concerned of the significant developments in the
administration of the account and must consist of a balance sheet, income
statement, schedule of earning assets of the account and any investment
activity. The reports must be prepared at least once every quarter.
148. Offshore banks are subject to two sets of accounting requirements.
Because offshore banks are liable for a tax of 10% on income from transac-
tions with Philippine residents and must also substantiate any exclusion from
income tax liability, they are subject to requirements contained in the NIRC,
including the requirement to file an annual return. They must also keep a jour-
nal and ledger pursuant to the NIRC. In addition, offshore banks are regulated
by the Central Bank and subject to its regulations. Specifically, Section 57 of
the Manual of Regulations for Foreign Exchange Transactions provides that
OBUs shall maintain an accounting system in accordance with guidelines
prescribed by the [Central Bank]. Periodically, or as required, existing reports
shall continue to be submitted in the prescribed forms to the [Central Bank].
Underlying documentation (ToR A.2.2)
149. Accounting records should further include underlying documents
such as invoices, contracts, etc. and should reflect details of (i) all sums
of money received and expended and the matters in respect of which such
expenditure takes place, (ii) all sales and purchases and other transactions;
and (iii) the assets or liabilities of the relevant entity or arrangement.
150. The Philippines law is not entirely clear on the underlying docu-
ments that must be retained. While under the NIRC, an entity would have
to have a record of its assets or liabilities and sums of money received and
expended, there is no requirement to keep invoices or contracts, for example.
The Philippines advises that they interpret the NIRC to require underlying
documentation to be preserved to support entries in the journal and ledger,
otherwise there is no basis on which to verify these entries. However, this
requirement is not expressly stated in the law.
151. In addition, there is a requirement under section 34(A)(1) of the NIRC
that in order for a taxpayer to claim an ordinary and necessary trade, business
or professional expense, the taxpayer must substantiate with sufficient evi-
dence, such as official receipts or other adequate records, the amount of the
expense and its direct connection to the conduct of the trade or business. This
would not, however, encompass all the underlying documents envisaged by
the Terms of Reference.
152. In addition, the Philippines points to Revenue Regulation V-1, which
was issued in 1947 and regards bookkeeping, for the standard to retain
underlying documents. The regulations provide that if a person is engaged
in any taxable business, the original of each sales invoice or receipts for each
sale or transfer of merchandise or for services rendered must be kept and
preserved in his place of business for a period of five years from the date of
the invoice or receipt. While this regulation may require retention of invoices
and receipts in most circumstances, it is not clear that it would apply to all
relevant entities, nor is it clear that it would require the retention of all under-
lying documents in line with the Terms of Reference.
153. While the Corporate Code does require detailed books to be kept for
corporations, it is unclear what the underlying document requirements are.
The Civil Code does not provide for the specific type of accounting records
that a partnership must keep. The Philippines advises that the nature of the
records would depend on the nature of the business.
154. For regulated entities, the MORB provides in Subsection X185.1
that all banks must maintain proper and adequate accounting records which
should be kept up-to-date and must contain sufficient detail so that an audit
trail can be established. However, the MORB does not specify what these
records must include. The Central Bank does specify that rural and coopera-
tive banks must keep tickets and supporting papers and official receipts,
but there is no similar requirement for other banks.
Document retention (ToR A.2.3 and A.2.4)
155. The NIRC requires that books of account and records be kept until
the last day prescribed in Section 203 of the NIRC, which deals with statutes
of limitations (Sec. 235). Section 203 provides that the statute of limitations
is 3 years after the last day prescribed by law for the filling of the return.
Therefore, a taxpayer subject to the accounting requirements of the NIRC
must keep these records for 3 years after the date of filing of the return. This
can be extended for up to 10 years for a fraudulent return. In addition, the
underlying documents referred to in Revenue Regulation V-1 (mentioned
above) requires that underlying documents be retained for 5 years.
156. Although the NIRC does not explicitly require corporations to keep
their accounting records within the Philippines, these are subject to annual
examination and inspection by Inland Revenue officers and must therefore be
readily available (Section 235).
157. The Philippines advises that information held by government agen-
cies, such as the tax authorities, the SEC or the BOI is held indefinitely.
158. The Civil Code provides that partnerships must retain records at the
principal place of business of the partnership, unless the partners have agreed
otherwise (Art. 1805). This is true for both general and limited partnerships.
It does not specify for how long these records must be maintained.
159. For AML purposes, the AMLA requires that records of all transac-
tions of covered institutions must be kept for 5 years from the date of the
transactions. The Regulations also provide that the records on customer
identification, account files and business correspondence must be kept
for at least 5 years from the date the account is closed (Rule 9.2.c). 160.
Therefore, although there are clear requirements in the Philippines for enti-
ties to maintain accounting records, such records are only required to be kept
for three years and it is unclear whether underlying documents must also be
maintained, in line with the Terms of Reference.
Determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
recommendations
Recommendations
Although, there is a requirement for
most businesses to retain invoices
and receipts for transactions, there
is no express requirement that all
relevant entities and arrangements
keep all underlying documentation.
Introduce consistent obligations for all
relevant entities and arrangements to
maintain underlying documents, in line
with the Terms of Reference
There is currently no express
obligation for entities, other than
covered institutions for AML purposes,
to maintain accounting records for a
minimum 5 year period
The record keeping requirements for
all relevant entities should require
retention of records for a minimum
5 year period.
A.3. Banking information
Banking information should be available for all account-holders.
Record-keeping requirements (ToR A.3. 1)
158. Banks and financial institutions are regulated by the Central Bank
and are subject to both the General Banking Act and the Corporation Code
and are covered institutions for purposes of the AMLA. Obligations to retain
records on accounts are found in the AMLA.
159. Covered institutions under the AMLA have a duty to keep records of
all transactions. The Revised Implementing Rules and Regulations (RIRR),
most recently supplemented by Circular No. 706 issued by the Central Bank
on 5 January 2011, define transaction as any act establishing any right or
obligation or giving rise to any contractual or legal relationship between the
parties thereto. It also includes any movement of funds by any means with a
covered institution (Section X803(E)). The regulations specify that records
of transactions must be kept such that any account, relationship or transac-
tion can be reconstructed as to enable the AMLC and/or the courts to estab-
lish an audit trail.
160. Records of transactions of covered institutions must include the
full and true identity of the owners or holders of the accounts involved in the
covered transactions and all other customer identification documents.
161. Records must be maintained and stored for 5 years from the date
of transaction. The AMLA imposes a penalty of imprisonment from 6
months to one year or a fine of not less than PHP 100 000 but not more than
PHP 500 000 (approximately USD 2 220 to 11 100) or both for failure to keep
records (Sec. 14).
Determination
The element is in place.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 43
B. Access to Information
Overview
162. A variety of information may be needed in a tax enquiry and jurisdic-
tions should have the authority to obtain all such information. This includes
information held by banks and other financial institutions as well as infor-
mation concerning the ownership of companies or the identity of interest
holders in other persons or entities, such as partnerships and trusts, as well
as accounting information in respect of all such entities. This section of the
report examines whether the Philippines legal and regulatory framework
gives the authorities access powers that cover the right types of persons and
information and whether rights and safeguards would be compatible with
effective exchange of information.
163. The Philippines tax authorities have sufficient powers to obtain own-
ership, identity, and accounting information and have measures to compel
the production of such information. These powers were previously limited
by bank secrecy laws, with two very limited exceptions allowing access in
the case of death of a taxpayer or a taxpayer who files for compromise of his
tax liability for financial incapacity. The Exchange of Information on Tax
Matters Act of March 2010 (EOI Act) and the Regulations to accompany the
EOI Act of September 2010 (EOI Regulations) removed the restrictions on
access to bank information.
164. The ability of the Philippines tax authorities to obtain information
for EOI purposes is derived from its general access powers under the NIRC,
coupled with the authority provided by the relevant EOI agreements. These
powers may be exercised for the purpose of ascertaining the correctness of
any return, in making a return where none has been made, in determining
or collecting any persons internal revenue tax liability, or in evaluating tax
compliance. No domestic interest requirement exists for the Philippines com-
petent authority to exercise their information gathering powers.
165. The Philippines domestic law provides rights and safeguards to
taxpayers who may be the recipient of an EOI request from the Philippines
44 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
tax authorities, including notification requirements. Their scope appears to
be in line with the rights and safeguards provided for under the international
standard for exchange of information.
B.1. Competent Authoritys ability to obtain and provide information
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information).
Ownership and identity information (ToR B.1.1) and accounting
records (ToR B.1.2)
166. The Commissioner of Internal Revenue is the competent authority for
exchange of information purposes. The Commissioner also has broad powers
under the NIRC to interpret tax laws and to decide tax cases. Specifically,
Section 4 provides that the power to interpret the NIRC and other tax laws is
exclusive to the Commissioner, subject to review by the Secretary of Finance.
The Commissioner also has the power to decide disputed assessments, refund
taxes, fees or other charges and impose penalties, among other powers.
167. The powers available to the Philippines tax authorities are found
in Section 5 of the NIRC. It gives the Commissioner the power to obtain
information and to summon, examine and take testimony of persons in
ascertaining the correctness of any return, or in making a return when none
has been made, or in determining the liability of any person for any internal
revenue tax, or in collecting any such liability or in evaluating tax compli-
ance. Pursuant to this the Commissioner may do the following:
A) Examine any book, paper, record or other data which may be relevant
or material to such inquiry.
B) Obtain on a regular basis from any person other than the person whose
internal revenue liability is subject to audit or investigation, or from
any office or officer of the government (including the Central Bank)
any information, including costs and volume of production, receipts or
sales and gross incomes of taxpayers, and the names, addresses, and
financial statements of corporations, mutual fund companies, insur-
ance companies, regional operating headquarters of multinational
companies, joint accounts, associations, joint ventures of consortia and
registered partnerships and their members.
C) To summon the person liable for tax or required to file a return, or
that persons officer or employee or any person having possession,
custody or care of the books of accounts and other accounting records
containing entries relating to the business of the person liable for tax,
or any other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the summons
and to produce such books, papers, records or other data, and to give
testimony; and
D) To take such testimony under oath.
E) To cause revenue officers and employees to make a canvass from
time to time of any revenue district and inquire after and concerning
all persons owning or having the care, management or possession of
any object with respect to which a tax is imposed.
168. Therefore, the Commissioner has access to both ownership informa-
tion and accounting records under Section 5. In addition, the Commissioner
can obtain any information and compel testimony from the person liable
for tax or his officer or employee.
169. For domestic tax purposes, books and records of a taxpayer can only
be examined and inspected by internal revenue officers once a year (NIRC,
Sec. 235). However, exceptions apply in the following cases:
fraud, irregularity or mistakes, as determined by the Commissioner;
the taxpayer requests reinvestigation;
verification of compliance with withholding tax laws and regulations;
verification of capital gains tax liabilities; and
in the exercise of the Commissioners power under Section 5(B) to
obtain information from other persons.
170. The BIR applies the restriction in relation to the examination of books
and records contained in Section 235 only to cases of domestic tax. It does not
limit the Commissioners Section 5 access powers for EOI purposes. While
there might have been a theoretical possibility of challenging this interpreta-
tion in the past, the passage of the EOI Act and its regulations make it clear
that the Commissioner can access information for EOI purposes at any time.
Use of information gathering measures absent domestic tax interest
(ToR B.1.3)
171. Prior to passage of the EOI Act and its subsequent Regulations, there
was some ambiguity as to whether the Commissioners access to information
could be impeded by a domestic tax interest. Such ambiguity arose from the
fact that Section 5 of the NIRCs powers could be interpreted to be limited
to access for purposes of a Philippines tax by the following statement: In
ascertaining the correctness of any return, or in making a return where none
has been made, or in determining the liability of any person for any internal
revenue tax or in collecting any such liability, or in evaluating tax compli-
ance, the Commissioner is authorized [emphasis added].
172. The Philippines advised that this statement never served as an
impediment to access to information absent a domestic tax interest. In fact,
the Philippines tax authorities interpret the statement in evaluating tax
compliance to mean that the Philippines tax authorities are able to access
information concerning both resident and non-resident persons, whether
or not subject to tax liability in the Philippines, in order to evaluate their
tax compliance. Section 2 of the EOI Regulations, serves to support the
Philippines interpretation stating that, in addition to the powers granted to the
Commissioner by the tax code, the Commissioner is authorized to obtain
any information (), as may be required to respond to a request pursuant
to an international convention or agreement on tax matters to which the
Philippines is a signatory or part to [emphasis added].
173. Therefore, the EOI Regulations make clear that the Commissioners
powers to obtain any information apply to execute a request for exchange of
information in compliance with tax treaty obligations, regardless of whether
the Philippines needs the information for its own tax purposes.
Compulsory powers (ToR B.1.4)
174. The EOI Act and its Regulations give the BIR Commissioner broad
powers to compel information. Whereas the actual tax returns were not avail-
able previously to a foreign tax authority pursuant to an EOI request, now the
President, upon recommendation of the Commissioner, may make income tax
returns of specific taxpayers who are the subject of a request for exchange of
information open to inspection (EOI Act, Section 4).
175. Enforcement provisions to compel the production of information
from banks or financial institutions can be found in the EOI Act as well.
The Act says that any officer, owner, agent, manager, director or officer-
in-charge of any bank or financial institution that refuses a request from
the Commissioner to supply information is subject to a fine of PHP 50 000
to 100 000 (approximately USD 1 100 to 2 200) or imprisonment of two to
five years or both (Sec. 6).
176. Under Section 266 of the NIRC, any person who, being duly sum-
moned to appear to testify or to appear and produce books of accounts,
records, memoranda or other papers, or to furnish information as required
under the pertinent provisions of the Code, who neglects to do so is,
if convicted, subject to a fine of PHP 5 000 to 10 000 (approximately
USD 1 100 to 2 200) and imprisonment of one to two years.
Secrecy provisions (ToR B.1.5)
177. Although the Philippines has strong bank secrecy laws that were
previously an impediment to the effective access to information, with the
passage of the EOI Act and its Regulations, the bank secrecy laws no longer
restrict access to bank information for exchange of information purposes.
178. The Philippines has a history of strong bank secrecy laws. In 1972, the
Philippines passed the Foreign Currency Deposit Act, which ensured almost
absolute confidentiality for foreign currency deposits in the Philippines banks.
Under the act, such deposits could not be examined, inquired or looked into by
the Philippines authorities without the written permission of the depositor.
179. The AML Act of 2001, as amended, created an exception to this act.
Since its passage, the Anti-Money Laundering Council (AMLC) can now
examine a deposit, with a court order,
14
if the deposit is related to unlawful
activities enumerated in the AMLA.
15
180. Further progress was made with the EOI Act, which amended section
6(F) of NIRC. Previously, the only reasons for which the Commissioner could
inquire into the bank deposit account of a taxpayer was for a decedent to
determine his gross estate or for any taxpayer who has filed for a compromise
of his tax liability for financial incapacity. However, the EOI Act amended
this section to say that, notwithstanding the Foreign Currency Deposit Act,
the Commissioner can now inquire into bank deposits and other related
information held by financial institutions and may do so, additionally when:
(3) A specific taxpayer or taxpayers subject of a request for the
supply of tax information from a foreign tax authority pursuant
to an international convention or agreement on tax matters to
which the Philippines is a signatory or a party of: Provided,
That the information obtained from banks and other financial
institutions may be used by the Bureau of Internal Revenue for
tax assessment, verification, audit and enforcement purposes.
14. Information can be obtained without a court order in certain instances, including
cases of kidnap or ransom, dangerous drugs, terrorism, hijacking and destructive
arson.
15. An additional exception to the Philippines bank secrecy laws was created with
an Amendment to the Philippine Deposit Insurance Corporation (PDIC) Charter
(R.A. No. 9576), which provides that the Central Bank may inquire into or exam-
ine deposit accounts and all information related thereto in case there is a finding
of unsafe or unsound banking practice.
181. The Philippines advises that the language: Provided, That the infor-
mation obtained from banks and other financial institutions may be used
by the Bureau of Internal Revenue for tax assessment, verification, audit
and enforcement purposes is intended to give the BIR the authority to use
for its own domestic tax purposes the information obtained for exchange of
information purposes after sharing it with a treaty partner. This position is
further supported by Section 3 of the EOI Regulations, which authorise the
BIR to use, for tax assessment, verification, audit and enforcement purposes,
any information obtained from financial institutions pursuant to a request for
exchange of information under an international convention or agreement on
tax matters.
182. The EOI Regulations further clarify that there is no longer a restric-
tion on access to bank information for exchange of information purposes
according to an international agreement. Section 2 provides that pursuant to
Section 3 of the EOI Act, for the purpose of complying with an international
agreement, the Commissioner has the power to obtain any information,
including but not limited to bank deposits and other related information
held by financial institutions, as may be required to respond to a request
pursuant to an international convention or agreement on tax matters to
which the Philippines is a signatory or a party to [emphasis added]. The
Philippines supports that these regulations have the force of law because the
Commissioner has broad powers under Section 4 of the NIRC to interpret the
tax laws.
183. This means that, pursuant to the NIRC, the Philippines tax authorities
may undertake enquiries or obtain information, including bank information,
that is required only for the purposes of a tax liability in another country
with which the Philippines has an exchange of information agreement. It is
also clear that information which is in the possession of the Philippines tax
authorities, information which may be required for the Philippines tax pur-
poses or information which is publicly available can also be exchanged.
184. As regards attorney client privilege, under the Rules of Court in the
Philippines, an attorney cannot, without the consent of his client, be exam-
ined as to any communication made by the client to him, or his advice given
thereon in the course of or with a view to professional employment (emphasis
added). The Code of Professional Responsibility at Canon 15 further provides
that a lawyer shall be bound by the rule on privileged communication in
respect of matters disclosed to him by a prospective client. On its face, this
could be broader than the standard envisaged by the Terms of Reference,
which protects communications which are produced for the purposes of
seeking or providing legal advice. In a court case on the matter involving
information regarding the sale of property, the court found that under the
Rules of Court, an attorney cannot refuse to disclose the amount of the sale or
account for the proceeds of property, as this information would not be consid-
ered privileged (A.C. No. 4426, February 17, 2000). However, the Philippine
Supreme Court found in Regala v. Sandiganbayan (No. 105938 September
20, 1996) that attorneys assisting in incorporating companies for a client,
including acting as nominee shareholders, did not have a duty to disclose the
names of their clients in certain circumstances. In this case, the court held
that although, as a general rule, the identity of the client is not a privileged
matter, the rule is qualified by important exceptions, including where a strong
probability exists that revealing the clients name would implicate that client
in the very activity for which he sought the lawyers advice.
185. It is, therefore, unclear whether attorney-client privilege is an impedi-
ment to the exchange of information in practice. This issue will be followed
up in the Phase 2 review of the Philippines.
Determination
B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)
186. Requests for information in the Philippines that are pursuant to an
international convention or agreement on tax matters must go through the
International Tax Affairs Division (ITAD) of the BIR. A revenue official is
forbidden from communicating directly with the competent authority without
prior approval of the Commissioner (EOI Regulations, Sec. 8).
187. Pursuant to the EOI Act, a request for information must clearly state:
The identity of the person under examination or investigation;
A statement of the information being sought including its nature and
the form in which the treaty partner prefers to receive it;
The tax purpose for which the information is being sought;
Grounds for believing that the information requested is held in the
Philippines or is in the possession or control of a person within the
jurisdiction of the Philippines;
To the extent known, the name and address of any person believed to
be in possession of the requested information;
A statement that the request is in conformity with the law and admin-
istrative practices of the said foreign tax authority, such that if the
requested information was within the jurisdiction of the said foreign
tax authority then it would be able to obtain the information under
its laws or in the normal course of administrative practice and that
it is in conformity with an international convention or agreement on
tax matters;
A statement that the requesting foreign tax authority is also allowed
under its domestic laws to exchange or furnish the information sub-
ject of the request; and
A statement that the requesting foreign tax authority has exhausted
all means available in its own territory to obtain the information,
except those that would give rise to disproportionate difficulties.
188. Under Section 8 of the EOI Act, the Commissioner must notify a tax-
payer in writing when a foreign tax authority requests information held by a
financial institution pursuant to a tax convention or agreement to which the
Philippines is a signatory. The EOI Regulations further specify that the noti-
fication must take place within 60 days of receipt of a request from a foreign
tax authority (Sec. 10).
189. Section 10 of the EOI Regulations states that the taxpayer must
be notified when a foreign tax authority is requesting information. The
Philippines advises that the 60-day notification requirement does not delay
exchange of information as the Philippines tax authorities are allowed to
exchange information during that time period, even before actually notifying
the taxpayer. There does not appear to be a similar notification requirement
for requests concerning information held by non-financial institutions.
Determination
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 51
C. Exchanging Information
Overview
190. Jurisdictions generally cannot exchange information for tax purposes
unless they have a legal basis or mechanism for doing so. In the Philippines,
the legal authority to exchange information derives from bilateral mecha-
nisms (double tax conventions) as well as from domestic law. This section
of the report examines whether the Philippines has a network of information
exchange that would allow it to achieve effective exchange of information in
practice.
191. The Philippines has an extensive treaty network that allows for
exchange of information for tax purposes with all relevant partners. The
Philippines has double tax conventions (DTCs) containing exchange of infor-
mation provisions in force with 37 jurisdictions. Amongst those jurisdictions
are 22 OECD member countries
16
and five G-20 countries which are not
members of the OECD, namely Brazil, China, India, Indonesia and Russia.
The Philippines advised that it has recently concluded negotiations with
Brunei Darussalam.
192. International agreements in the Philippines become effective through
a series of procedures. First, negotiations are concluded after the issuance of
full powers or special authority by the President to negotiate an agreement.
When the agreement is signed it is then ratified by the President and requires
the concurrence of the Senate. Next, a notification of such ratification is
issued and the agreement enters into force according to its terms.
193. A binding treaty or international agreement becomes part of the law
of the land, and has equal standing with domestic legislative enactments.
When the two are in conflict, an interpretation that will reconcile both the
treaty and the statute is resorted to. When the conflict is irreconcilable, a
16. Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France,
Germany, Hungary, Italy, Japan, Korea (Rep.), the Netherlands, New Zealand,
Norway, Poland, Spain, Sweden, the United Kingdom and the United States.
52 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION
choice is made: a treaty may repeal a statute and a statute may repeal a treaty.
Both are subject to invalidation if they are in conflict with the Constitution,
which is the highest law of the land.
194. Despite its extensive network of treaties, until recently, exchange of
information with the Philippines was constrained by its domestic laws. In
particular, there was no access to bank accounts for any tax purposes, but for
two very limited circumstances.
195. In April 2009, the Philippines endorsed the OECD standards and
undertook to amend its laws to comply with the international standards
for exchange of information. Most notably, in May of 2010, the Exchange
of Information Act became law. This law, together with its corresponding
regulations which were adopted in September 2010, amend the NIRC to
ensure that tax authorities have power to obtain information for exchange of
information purposes to the same extent that they can obtain information for
domestic tax purposes. Combined, they also give the tax authorities power
to access bank information for the purposes of responding to a request for
exchange of information from a treaty partner.
196. All exchange of information provisions in the Philippines DTCs con-
tain confidentiality provisions to ensure that the information exchanged will
be disclosed only to persons authorised by the agreements. While each of the
articles might vary slightly in wording, these provisions generally contain all
of the essential aspects of Article 26(2) of the Model Tax Convention. This
is reinforced by the confidentiality provisions under the Philippines recently
adopted domestic laws.
197. The DTCs concluded by the Philippines ensure that the contracting
parties are not obliged to provide information which would disclose trade,
business, industrial, commercial or professional secrets or trade process or to
make disclosures which would be contrary to public policy. There are no legal
restrictions on the ability of the Philippines competent authority to respond
to requests within 90 days of receipt by providing the information requested
or by providing an update on the status of the request.
C.1. Exchange of information mechanisms
Exchange of information mechanisms should allow for effective exchange of information.
Foreseeably relevant standard (ToR C.1.1)
198. The international standard for exchange of information envisages
information exchange to the widest possible extent. Nevertheless, it does
not allow for fishing expeditions, i.e. speculative requests for information
that have no apparent nexus to an open inquiry or investigation. The balance
between these two competing considerations is captured in the standard of
foreseeable relevance which is included in paragraph 1 of Article 26 of the
OECD Model Tax Convention set out below:
The competent authorities of the contracting states shall
exchange such information as is foreseeably relevant to the car-
rying out of the provisions of this Convention or to the adminis-
tration or enforcement of the domestic laws concerning taxes of
every kind and description imposed on behalf of the contracting
states or their political subdivisions or local authorities in so far
as the taxation thereunder is not contrary to the Convention. The
exchange of information is not restricted by Articles 1 and 2.
199. Thirty-fve of the thirty-seven DTCs concluded by the Philippines provide
for the exchange of information that is necessary for carrying out the provisions
of the Convention or of the domestic tax laws of the Contracting States. The
commentary to Article 26 of the OECD Model Tax Convention, paragraph 5, refers
to the standard of foreseeable relevance and states that the contracting States may
agree to an alternative formulation of this standard that is consistent with the scope
of the Article, for instance by replacing foreseeably relevant with necessary or
relevant. In view of this recognition, all but two of the Philippines DTCs meet
the foreseeably relevant standard. Two of the Philippines DTCs
17
only provide
for the exchange of information necessary for carrying out the provisions of the
convention. These treaties, therefore, are not to the standard.
200. In the Philippines DTCs with India, Indonesia, Thailand and the
United States, there is the possibility of routine exchange of information, in
addition to exchange of information upon request.
18
201. In its DTC with the Netherlands, the Philippines has agreed to a stand-
ard of exchange of such information (being information which such authori-
ties have in proper order at their disposal[emphasis added]. Similarly, the
Exchange of Letters for its DTC with Switzerland provides for the exchange of
such information (being information which is at its disposal under its taxa-
tion laws in the normal course of administration. This language imposes a
significant restriction, as it can effectively limit the information that can be
17. DTCs with Germany and Brazil are limited to the convention (see paragraph 203).
18. For example, in the Philippines-India DTC, it states that: the exchange of
information or documents shall be either on a routine basis or on request with
reference to a particular case or both. It then instructs the competent authorities
to consult and agree on a list of information or documents to be furnished on a
routine basis.
exchanged to information that is already available to the tax authorities. As a
result the report includes a recommendation to update these treaties.
In respect of all persons (ToR C.1.2)
202. For exchange of information to be effective it is necessary that a
jurisdictions obligation to provide information is not restricted by the resi-
dence or nationality of the person to whom the information relates or by the
residence or nationality of the person in possession or control of the informa-
tion requested. For this reason, the international standard for exchange of
information envisages that exchange of information mechanisms will provide
for exchange of information in respect of all persons.
203. Article 26(1) of the OECD Model Tax Convention indicates that [t]
he exchange of information is not restricted by Article 1, which defines
the personal scope of application of the Convention and indicates that it
applies to persons who are residents of one or both of the Contracting States.
Seventeen
19
of the Philippines 37 DTCs with EOI provisions do not contain
this sentence.
204. However, in all but three of these DTCs, Article 26(1) applies carrying
out the provisions of the Convention or of the domestic laws of the Contracting
States or statutory provisions against tax avoidance concerning taxes cov-
ered by the Convention. As a result of this language, these DTCs would not
be limited to residents because all taxpayers, resident or not, are liable to the
domestic taxes listed in Article 2. Exchange of information in respect of all
persons is thus possible under the terms of these DTCs.
205. In contrast, under Article 26(1) of the DTCs with Brazil and Germany,
the information that can be exchanged is limited to information necessary
for carrying out such DTCs, and does not extend to the domestic laws of the
contracting States. As a result of the limitation on the exchange of informa-
tion to residents of either contracting State, these two DTCs do not meet the
international standard.
Exchange information held by financial institutions, nominees,
agents and ownership and identity information (ToR C.1.3)
206. Jurisdictions cannot engage in effective exchange of information if
they cannot exchange information held by financial institutions, nominees or
persons acting in an agency or a fiduciary capacity. Both the OECD Model
19. Belgium, Brazil, Canada, France, Germany, India, Japan, Malaysia, the
Netherlands, New Zealand, Pakistan, Vietnam, Poland, the United States, the
United Kingdom, Thailand and Singapore.
Convention and the Model Agreement on Exchange of Information, which
are the authoritative sources of the standards, stipulate that bank secrecy
cannot form the basis for declining a request to provide information and that
a request for information cannot be declined solely because the information
relates to an ownership interest.
207. The Philippines DTCs contain no restrictions on exchange of infor-
mation based on what entity has the information. However, none of its
DTCs contain language similar to Article 26(5) of the OECD Model Tax
Convention, which provides that a contracting state may not decline to supply
information solely because the information is held by a bank, other financial
institution, nominee, or person acting in an agency or a fiduciary capacity or
because it relates to ownership interests in a person.
208. The absence of this paragraph does not automatically create restric-
tions on exchange of bank information. The Commentary to Article 26(5) indi-
cates that while paragraph 5, added to the Model Tax Convention in 2005,
represents a change in the structure of the Article, it should not be interpreted
as suggesting that the previous version of the Article did not authorise the
exchange of such information. The Philippines has access to bank informa-
tion and information held by fiduciaries for tax purposes in its domestic law
(see Part B above), and is able to exchange this type of information when
requested.
20
209. According to Tax Co-operation 2010: Towards a Level Playing
Field Assessment by the Global Forum on Transparency and Exchange
of Information for Tax Purposes, an additional 26 treaty partners of the
Philippines
21
reported that information held by banks and fiduciaries can be
exchanged without limitations under their domestic laws. The DTCs con-
cluded with such jurisdictions will not require the inclusion of Article 26(5) of
the OECD Model Tax Convention to be considered as meeting the standard.
210. However, four of the Philippines treaty partners Austria, Belgium,
Malaysia and Singapore either currently have or have just removed restric-
tions on access to bank information under their domestic laws, that apply
in the absence of a specific DTC provision requiring such access for EOI
20. Section 3 of the EOI Act and section 2 of the Regulations on the EOI Act provide
that the Commissioner shall provide tax information from banks and financial
institutions as part of an exchange of information agreement upon request, pro-
vided that the requesting jurisdiction provides evidence to demonstrate foresee-
able relevance.
21. Australia, Brazil, Canada, China, Czech Republic, Denmark, Finland, France,
Germany, Hungary, India, Indonesia, Israel, Italy, Japan, (Republic of) Korea,
the Netherlands, New Zealand, Norway, Poland, Russia, Spain, Sweden, the
United Arab Emirates, the United Kingdom and the United States.
purposes. Therefore, those DTCs need to be updated to include a provision
similar to Article 26(5) of the OECD Model Taxation Convention before
exchange of banking information can actually take place. At least one of
these jurisdictions has contacted the Philippines to renegotiate its DTC
to meet the international standard and did not yet receive a response. The
Philippines should continue to renegotiate such DTCs to include a provision
similar to Article 26(5) of the OECD Model Taxation Convention.
211. It is also noted that some of the Philippines other treaty partners may
not be able to access bank information or information held by fiduciaries for
the purpose of EOI in the absence of a provision similar to Article 26(5) of
the OECD Model Tax Convention. A practical assessment of whether the
absence of this provision imposes an impediment to the exchange of informa-
tion will be made in the Phase 2 Peer Review of the Philippines.
Absence of domestic tax interest (ToR C.1.4)
212. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes. An
inability to provide information based on a domestic tax interest requirement
is not consistent with the international standard. Contracting parties must use
their information gathering measures even though invoked solely to obtain
and provide information to the other contracting party.
213. Only three of the Philippines DTCs with Romania, Russia and the
United States
22
contain explicit language obliging the treaty parties to use infor-
mation-gathering measures to exchange requested information without regard to
a domestic tax interest. The remaining 34 DTCs do not contain such a provision.
214. Therefore, in order to determine whether there is a domestic tax inter-
est that would impede exchange of information, one must look to the laws
of the jurisdiction. The EOI Regulations appear to remove any ambiguity
about whether a domestic tax interest limitation may have existed (see Part B
above). Furthermore, 28 treaty partners
23
of the Philippines reported in 2010
22. In Article 26(3) of the DTCs with Romania and Russia and Article 26(4) of the
DTC with the United States, the Philippines agreed to the following language: A
contracting state may obtain information from or with respect to its residents or
corporation in accordance with this paragraph for the sole purpose of assisting
the other Contracting State in the determination of the taxes of that other State.
23. Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark,
Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan,
(Republic of) Korea, Malaysia, the Netherlands, New Zealand, Norway, Poland,
Spain, Sweden, the United Arab Emirates and the United Kingdom.
that information can be exchanged regardless of the existence of a domestic
tax interest. Therefore, the Philippines DTCs with such jurisdictions should
be considered as meeting the international standard for exchange of informa-
tion, even in the absence of Article 26(4).
24
215. A domestic tax interest requirement may however exist for some of
the Philippines other six treaty partners which were not covered in the 2010
assessment report.

In such cases, the absence of a specific provision requiring
exchange of information unlimited by domestic tax interest may serve as a
limitation on the exchange of information which can occur under the relevant
DTC. A practical assessment of whether the absence of a provision similar
to Article 26(4) of the OECD Model Taxation Convention in such DTCs
imposes an impediment to the exchange of information may be made in the
Phase 2 Peer Review of the Philippines.
Absence of dual criminality principles (ToR C.1.5)
216. The principle of dual criminality provides that assistance can only be
provided if the conduct being investigated (and giving rise to an information
request) would constitute a crime under the laws of the requested country if it had
occurred in the requested country. In order to be effective, exchange of informa-
tion should not be constrained by the application of the dual criminality principle.
217. None of the Philippines DTCs are limited to cases that have dual crimi-
nality. Nor are there provisions in the domestic laws of the Philippines that would
lead to any such restriction.
Exchange of information in both civil and criminal tax matters
(ToR C.1.6)
218. Information exchange may be requested both for tax administration
purposes and for tax prosecution purposes. The international standard is not
limited to information exchange in criminal tax matters but extends to infor-
mation requested for tax administration purposes (also referred to as civil
tax matters).
24. Paragraph 19.6 of the commentary to Article 26(4) states Paragraph 4 was added
in 2005 to deal explicitly with the obligation to exchange information in situations
where the requested information is not needed by the requested State for domes-
tic tax purposes. Prior to the addition of paragraph 4 this obligation was not
expressly stated in the Article, but was clearly evidenced by the practices followed
by member countries which showed that, when collecting information requested
by a treaty partner, Contracting States often use the special examining or investi-
gative powers provided by their laws for purposes of levying their domestic taxes
even thought they do not themselves need the information these purposes.
219. There is no distinction drawn in any of the Philippines DTCs between
civil and criminal matters as far as taxation is concerned. Most DTCs concluded
by the Philippines are entitled Convention for avoidance of double taxation and
prevention of fiscal evasion. In addition, the first paragraph of the exchange of
information provision in DTCs concluded with 19 treaty partners
25
specifically
mentions that the information exchange will occur inter alia for the prevention
of fraud or evasion of such taxes. Nothing in the Philippines laws would prevent
the Philippines from exchanging information in both civil and criminal matters.
Provide information in specific form requested (ToR C.1.7)
220. The majority of the Philippines DTCs make no reference to the spe-
cific form of the exchange of information. Only the DTCs with Romania and
the United States explicitly provide for the form in which information may
be provided. Those DTCs specify that: () depositions of witnesses and
copies of unedited original documents (including books, papers, statements,
records, accounts or writings) may be provided by the competent authority of a
Contracting State if specifically requested by the competent authority of the other
Contracting State.
221. The DTCs with Denmark, Hungary, Romania, Spain, Vietnam, India
and (Republic of) Korea provide that the competent authorities shall consult
to develop appropriate methods and techniques for exchange of information.
In force (ToR C.1.8)
222. Exchange of information cannot take place unless a jurisdiction has
exchange of information arrangements in force. Where exchange of informa-
tion agreements have been signed the international standard requires that
jurisdictions must take all steps necessary to bring them into force expedi-
tiously. The Philippines has 37 DTCs in force which contain exchange of
information provisions.
In effect (ToR C.1.9)
223. For information exchange to be effective the parties to an exchange
of information arrangement need to enact any legislation necessary to comply
with the terms of the arrangement. In 2010, the Philippines enacted the EOI
Act and promulgated its accompanying Regulations to allow for exchange of
information in all cases and to comply with the terms of its DTCs.
25. Belgium, Canada, Czech Republic, Denmark, France, Germany, Hungary, India,
Indonesia, Israel, (Republic of) Korea, the Netherlands, Nigeria, Romania,
Singapore, Spain, the United Kingdom, the United States and Vietnam.
Determination
This element is in place, but certain legal aspects of the legal
implementation of this element require improvement.
Factors underlying
recommendations
Recommendations
Two DTCs limit exchange of information
to the carrying out of the provisions of
the Convention and do not extend to
the administration and enforcement of
domestic laws of the contracting states.
Two other DTCs limit exchange of infor-
mation to information already at the
disposal of tax authorities.
The Philippines should continue to
negotiate with existing partners (or
take steps to expedite entry into force
of) new DTCs and protocols where
the existing DTCs do not meet the
Four DTCs concluded by the
Philippines with jurisdictions which
were not able to access informa-
tion held by banks or fiduciaries
do not contain a provision similar
to Article 26(5) OECD Model Tax
Convention, resulting in an impediment
to the effective EOI for tax purposes.
The Philippines should work with the
relevant DTC partners to incorporate
Article 26(5) OECD Model Tax
Convention into these DTCs.
C.2. Exchange of information mechanisms with all relevant partners
The jurisdictions network of information exchange mechanisms should cover
all relevant partners.
224. Ultimately, the international standard requires that jurisdictions
exchange information with all relevant partners, meaning those partners
who are interested in entering into an information exchange arrangement.
Agreements cannot be concluded only with counterparties without economic
significance. If it appears that a jurisdiction is refusing to enter into agree-
ments or negotiations with partners, in particular ones that have a reasonable
expectation of requiring information from that jurisdiction in order to prop-
erly administer and enforce its tax laws it may indicate a lack of commitment
to implement the standards.
225. The Philippines currently has DTCs containing exchange of infor-
mation provisions in force with all of but one of its major trading partners:
Hong Kong, China. In addition, under DTCs with two major trading partners,
Malaysia and Singapore, banking information may not be exchanged before
these DTCs are updated to include a provision similar to Article 26(5) OECD
Model Tax Convention. It is recommended that the Philippines actively seek
to negotiate or renegotiate treaties with these three major partners.
226. During the course of this review, comments were sought from the
jurisdictions participating in the Global Forum and one jurisdiction advised
the assessment team that it contacted the Philippines to renegotiate its DTC
to meet the international standard and did not receive a response. No jurisdic-
tion has advised that it was interested in entering into an EOI agreement with
the Philippines but that the Philippines had refused to negotiate or enter into
such an agreement with it.
Determination
This element is in place, but certain legal aspects of the legal
implementation of this element require improvement.
Factors underlying
recommendations
Recommendations
Although the Philippines has a wide
treaty network, it does not have a
DTC with one of its important trade
partners and does not have DTCs to
the standard with two of its important
trade partners.
The Philippines should continue
to develop its EOI network with all
relevant partners.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received.
227. Governments would not engage in information exchange without the
assurance that the information provided would only be used for the purposes
permitted under the exchange mechanism and that its confidentiality would
be preserved. Information exchange instruments must therefore contain
confidentiality provisions that spell out specifically to whom the information
can be disclosed and the purposes for which the information can be used. In
addition to the protections afforded by the confidentiality provisions of infor-
mation exchange instruments countries with tax systems generally impose
strict confidentiality requirements on information collected for tax purposes.
228. The text of Article 26(2) of the OECD Model Tax Convention reads:
Any information received under paragraph 1 by a Contracting
State shall be treated as secret in the same manner as informa-
tion obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment or collection
of, the enforcement or prosecution in respect of, the determination
of appeals in relation to the taxes referred to in paragraph 1, or
the oversight of the above. Such persons or authorities shall use
the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.
Information received: disclosure, use, and safeguards (ToR C.3.1)
Double tax conventions
229. All the Philippines DTCs have confidentiality provisions, based on
the 1963 OECD Draft Convention or the 1977 OECD Model Convention,
to ensure that the information exchanged will be disclosed only to persons
authorised by the DTCs. While each of the exchange of information provi-
sions might vary slightly in wording,
26
most of these provisions generally take
the following form, which contain all of the essential aspects of paragraph 2
of Article 26 of the OECD Model Tax Convention:
Any information received by a Contracting State shall be treated
as secret in the same manner as information obtained under the
domestic laws of that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies) concerned
with the assessment or collection of, the enforcement or prosecu-
tion in respect of, or the determination of appeals in relation to, the
taxes covered by the Agreement. Such persons or authorities shall
use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.
230. However, fifteen DTCs depart from this text. The confidentiality
provisions of the DTCs with Canada and Singapore restrict the disclosure of
information to persons or authorities concerned with the assessment or collec-
tion of the taxes subject to such DTCs, while all the other DTCs concluded by
the Philippines implicitly or explicitly allow the information exchanged to be
disclosed to courts or to person or authorities concerned with the enforcement
of or litigation with respect to the taxes covered by such DTCs. Moreover,
those two DTCs and the DTCs concluded with 13 other treaty partners
27
do
not specify that the information exchanged can be disclosed in public court
proceedings or in judicial decisions. This could be restrictive as it could lead to
26. The Philippines-United States DTC uses a completely different language, but the
confidentiality obligations under this DTC also meet the standard.
27. Australia, Belgium, Brazil, France, Germany, Indonesia, Japan, Malaysia, the
Netherlands, Nigeria, Pakistan, Thailand and the United Kingdom.
information being inadmissible in court. The practical impact of this restric-
tion on the effectiveness of access to information should be monitored in the
Phase 2 review of the Philippines. In any case, this provision would benefit
from being improved at the occasion of a more general upgrading of those
DTCs.
231. Many of the Philippines DTCs require the information exchanged to be
treated as secret in the same manner as information obtained under the domes-
tic law. However, nine of the Philippines DTCs (with Belgium, Brazil, Canada,
China, France, Germany, Indonesia,
28
Japan, and Malaysia) do not specifically
refer to the confidentiality duties under the domestic laws of the contracting
States. This deviation from Article 26(2) of the OECD Model Tax Convention
does not allow for the disclosure of information, other than to persons or authori-
ties referred to in the relevant article, and does not prevent the enforcement of
the confidentiality provisions under domestic laws. Nevertheless, it would also
benefit from being improved at the occasion of more general upgrading of those
DTCs as it appears to be inconsistent with the recently enacted EoI legislation.
The Philippines legislation
232. The Philippines added Section 7 of the EOI Act in order to ensure its
own citizens that the information exchanged would be treated as confiden-
tial by a foreign treaty partner. Section 7 states that in the case of a request
from a foreign tax authority for tax information held by banks and financial
institutions, the exchange of information shall be done in a secure manner
to ensure confidentiality thereof under such rules and regulations as may
be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner. The EOI Regulations reinforce the treaty obligations concern-
ing confidentiality by providing that: Any information received by a foreign
tax authority from the BIR pursuant to an international convention or agree-
ment on tax matters shall be treated by the authority as absolutely confidential
in nature in the same manner as information obtained by the latter under its
laws and regulations, and shall be disclosed only to persons or authorities,
including courts or administrative bodies, involved in the assessment or col-
lection of, the enforcement or prosecution in respect of, or the determination of
appeals in relation to, the taxes covered by such conventions or agreements
(Sec. 6). However, this language may have no practical effect for confidentiality
purposes because it is not binding on the foreign tax authorities.
233. Section 5 of the EOI Act also amended Section 270 of the NIRC to
provide that any officer or employee of the BIR, except as allowed under the
Section 6(F) of the NIRC, who: divulges to any person or makes known in
any other manner than may be provided by law information regarding the
28. Reference is to the 1981 DTC, which is in force.
business, income or estate of any taxpayer, the secrets, operation, style or
work, or apparatus of any manufacturer or producer, or confidential infor-
mation regarding the business of any taxpayer, knowledge of omission is
punishable with a fine of PHP 50 000 to 100 000 (approximately USD 1 100
to 2 200) and/or imprisonment for two to five years.
All other information exchanged (ToR C.3.2)
234. Confidentiality rules should apply to all types of information exchanged,
including information provided in a request, information transmitted in response
to a request and any background documents to such requests. The Philippines
domestic laws, specifically the EOI Act, refer to any information and do not
differentiate between types of information.
Determination
This element is in place.
C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and safe-
guards of taxpayers and third parties.
235. The international standard allows requested parties not to supply
information in response to a request in certain identified situations where an
issue of trade, business or other legitimate secret may arise. Among other rea-
sons, an information request can be declined where the requested information
would disclose confidential communications protected by the attorney-client
privilege. Attorney-client privilege is a feature of the legal systems of many
countries.
236. However, communications between a client and an attorney or other
admitted legal representative are, generally, only privileged to the extent
that, the attorney or other legal representative acts in his or her capacity as
an attorney or other legal representative. Where attorney-client privilege is
more broadly defined it does not provide valid grounds on which to decline
a request for EOI. To the extent, therefore, that an attorney acts as a nominee
shareholder, a trustee, a settlor, a company director or under a power of attor-
ney to represent a company in its business affairs, EOI resulting from and
relating to any such activity cannot be declined because of the attorney-client
privilege rule.
Exceptions to requirement to provide information (ToR C.4.1)
237. All the Philippines DTCs contain a provision which ensures that the
contracting States are not obliged to provide information which would dis-
close any trade, business, industrial, commercial or professional secret, trade
process or information the disclosure of which would be contrary to public
policy. The EOI Act does not contain exceptions for attorney-client privilege.
238. However, under the Rules of Court in the Philippines, attorney-client
privilege is respected. Specifically, an attorney cannot, without the consent of his
client, be examined as to any communication made by the client to him, or his
advice given thereon in the course of or with a view to professional employment.
While, as discussed in section B.1.4, the Philippines attorney-client privilege
standard could be over-broad on its face, it is unclear whether this would con-
stitute an impediment to the exchange of information in practice. This should,
therefore, be a subject of further review in the Phase 2 review of the Philippines.
Determination
This element is in place.
C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements
in a timely manner.
Responses within 90 days (ToR C.5.1)
239. In order for exchange of information to be effective it needs to be pro-
vided in a timeframe which allows tax authorities to apply the information to
the relevant cases. If a response is provided but only after a significant lapse of
time the information may no longer be of use to the requesting authorities. This
is particularly important in the context of international cooperation as cases in
this area must be of sufficient importance to warrant making a request.
240. None of the Philippines DTCs specify a timeframe for a response
to a request for information. However, both the EOI Act and its Regulations
provide that the Commissioner must respond as promptly as possible to the
request and must confirm receipt of a request in writing to the requesting
foreign tax authority and shall notify the latter of deficiencies in the request,
if any, within 60 days from receipt of the request. This would clearly meet the
standard for response within 90 days. A review of the practical ability of the
Philippines tax authorities to respond to requests in a timely manner will be
conducted in the course of its Phase 2 review.
Organisational process and resources (ToR C.5.2)
241. It is important that a jurisdiction have appropriate organisational
processes and resources in place to ensure a timely response. The EOI
Regulations provide that requests must go through the International Tax
Affairs Division (ITAD) of the BIR. A revenue official or employee cannot
communicate directly with a competent authority or foreign tax authority
without prior approval from the Commissioner. ITAD is responsible for com-
pliance with a request and verifies all requests. A review of the organisational
process and resources in the Philippines will be the subject of further review
in Phase 2.
Absence of restrictive conditions on exchange of information
(ToR C.5.3)
242. Exchange of information should not be subject to unreasonable,
disproportionate or unduly restrictive conditions. As noted in Part B of this
Report, there are no aspects of the Philippines domestic laws that appear to
impose additional restrictive conditions on exchange of information. Likewise,
the Philippines DTCs do not contain such restrictive conditions.
243. Specifically, the Philippines procedures pursuant to the EOI Act
and Regulations provide for unrestricted exchange of information. After the
ITAD evaluates a request, the Commissioner must inform any financial insti-
tution concerned of the request in writing. That institution has 15 days from
receipt of the notice to provide the information. If the institution is unable to
provide the information, it must state the reasons for failure to do so and may
request not more than 30 days of additional time.
244. As noted in paragraph 238, both the EOI Act and its Regulations
require that the Commissioner confirm receipt of a request in writing to the
requesting foreign tax authority, noting any deficiencies in the request within
60 days from receipt of the request.
245. With regard to taxpayer notification, Section 10 of the EOI Regulations
requires that a taxpayer be notified within 60 days when a foreign tax author-
ity is requesting information held by a financial institution. The Philippines
advises that its tax authorities must not wait to exchange information during
that time period, and may give over information before actually notifying the
taxpayer. There does not appear to be a similar notification requirement for
requests concerning information held by non-financial institutions.
246. Therefore, the Philippines domestic legislation and processes seem to
allow for exchange of information without unreasonable, disproportionate or
unduly restrictive conditions. However, a review of the practical application of
the processes and the resources available to the Philippines will be conducted
in the context of its Phase 2 review.
Determination
The assessment team is not in a position to evaluate whether this
element is in place, as it involves issues of practice that are dealt with in
the Phase 2 review.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 67
Summary of Determinations and Factors
Underlying Recommendations
Determination Factors underlying
recommendations
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities
and arrangements is available to their competent authorities (A.1)
In place, but certain
aspects of the legal
implementation of
the element need
improvement.
Nominees that are not covered
institutions for anti-money
laundering purposes are not
required to maintain owner-
ship and identity information in
respect of all persons for whom
they act as legal owners.
An obligation should be
established for all nominees
to maintain relevant
ownership information where
they act as legal owners on
behalf of any other person.
Companies incorporated
outside of the Philippines but
having their effective manage-
ment in the Philippines, which
gives rise to a permanent
establishment, are not required
to provide or maintain informa-
tion identifying any owners.
The availability of information
that identifies the owners of
such companies will generally
depend on the law of the juris-
diction in which the company
is incorporated and so may not
be available in all cases.
In such cases, the Philippines
should ensure that ownership
and identity information is
available.
68 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
recommendations
Recommendations
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
and arrangements (A.2)
The element is in
place, but certain
implementation of
the element need
improvement.
There is no express
requirement that all
relevant entities and
arrangements keep underlying
documentation.
Introduce consistent
obligations for all relevant
entities and arrangements
to maintain underlying
documents, in line with the
Terms of Reference
There is currently no express
obligation for entities, other
than covered institutions for
AML purposes, to maintain
accounting records for a
minimum 5 year period
The record keeping
requirements for all relevant
entities should require
retention of records for a
minimum 5 year period.
Banking information should be available for all account-holders (A.3)
The element is in
place.
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information). (B.1)
The element is in
place.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information. (B.2)
The element is in
place.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 69
recommendations
Recommendations
Exchange of information mechanisms should allow for effective exchange of
information (C.1)
The element is in
place, but certain
implementation of
the element need
improvement.
Two DTCs limit exchange of
information to the carrying out of
the provisions of the Convention
and do not extend to the admin-
istration and enforcement of
domestic laws of the contracting
states. Two other DTCs limit
exchange of information to infor-
mation already at the disposal of
tax authorities.
The Philippines should
continue to negotiate with
existing partners (or take
steps to expedite entry into
force of) new DTCs and
protocols where the existing
DTCs do not meet the
Four DTCs concluded by
the Philippines with jurisdic-
tions which were not able to
access information held by
banks or fiduciaries do not
contain a provision similar to
Article 26(5) OECD Model Tax
Convention, resulting in an
impediment to the effective EOI
for tax purposes.
work with the relevant DTC
partners to incorporate
Article 26(5) OECD Model
Tax Convention into these
DTCs.
The jurisdictions network of information exchange mechanisms should cover all relevant
partners (C.2)
The element is in
place, but certain
implementation of
the element need
improvement.
Although the Philippines has
a wide treaty network, it does
not have a DTC with one of
its important trade partners
and does not have DTCs to
the standard with two of its
important trade partners.
continue to develop its EOI
network with all relevant
partners.
The jurisdictions mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received. (C.3)
The element is in
place.
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties. (C.4)
The element is in
place.
70 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
recommendations
Recommendations
The jurisdiction should provide information under its network of agreements in a timely
manner. (C.5)
The assessment team
is not in a position to
evaluate whether this
element is in place, as
it involves issues of
practice that are dealt
with in the Phase 2
review.
ANNEXES 71
Annex 1: Jurisdictions Response to the Review Report*
The Philippine Government would like to express its deepest gratitude
to the OECD Global Forum Secretariat, particularly to Ms. Amy ODonnell,
as well as to the Peer Review Assessment Team, Mrs. Sylvia Moses of the
British Virgin Islands and Mr. Sergio Luis Prez Cruz of Mexico, for their
work on the Philippines Peer Review Report that was recently approved.
The Philippines is very pleased with the professional, thorough and pleasant
cooperation between its different government agencies involved in assess-
ment process and the assessment team. The Philippines is also pleased with
the outcome of the review.
The Philippines recognizes that there are a few items outstanding which
still need to be addressed. One of the recommendations is to amend the reten-
tion period for accounting records to conform to the international standard
of 5 years. Although, as mentioned in the report, the Philippines already has
an existing regulation which recommends a retention period of 5 years for
certain underlying documents, the Philippines will be issuing a new regula-
tion which would require all underlying documents to be maintained for the
recommended period.
In recognizing the importance of exchanging information with our
treaty partners to combat international tax evasion, and to ensure the proper
enforcement and administration of tax laws, the Philippines is currently
drafting its own TIEA model, for which the Philippines will soon request the
help of the Global Forum Secretariat. The Philippines hopes to sign agree-
ments with a number of international partners as soon as possible.
* This Annex presents the Jurisdictions response to the review report and shall
not be deemed to represent the Global Forums views.
72 ANNEXES
Annex 2: List of all Exchange-of-Information Mechanisms
in Force
Jurisdiction Type of EoI
Arrangement
Date Signed Date Entered Into
Force
1 Australia DTC 11 May 1979 17 June 1980
2 Austria DTC 9 April 1981 1 April 1982
3 Bangladesh DTC 8 September 1997 24 October 2003
4 Bahrain DTC 7 November 2001 14 October 2003
5 Belgium DTC 2 October 1976 9 July 1980
6 Brazil DTC 29 September 1983 7 October 1991
7 Canada DTC 11 March 1976 21 December 1977
8 China DTC 18 November 1999 23 March 2001
9 Czech Republic DTC 13 November 2000 23 September 2003
10 Denmark DTC 30 June 1995 24 December 1997
11 Finland DTC 13 October 1978 1 October 1981
12 France DTC 9 January 1976 24 August 1978
13 Germany DTC 22 July 1983 14 December 1984
14 Hungary DTC 13 June 1997 7 February 1998
15 India DTC 12 February 1990 21 March 1994
16 Indonesia DTC 18 June 1981 20 May 1982
17 Israel DTC 9 June 1992 27 May 1997
18 Italy DTC 5 December 1980 15 June 1990
19 Japan DTC 13 February 1980 20 July 1980
20 Korea DTC 21 February 1984 9 November 1986
21 Malaysia DTC 27 April 1982 27 July 1984
22 Netherlands DTC 9 March 1989 20 September 1991
23 New Zealand DTC 29 April 1980 14 May 1981
ANNEXES 73
Jurisdiction Type of EoI
Arrangement
Date Signed Date Entered Into
Force
24 Norway DTC 9 July 1987 23 October 1997
25 Pakistan DTC 22 February 1980 24 June 1981
26 Poland DTC 9 September 1992 7 April 1997
27 Romania DTC 18 May 1994 27 November 1997
28 Russia DTC 26 April 1995 12 September 1997
29 Spain DTC 14 March 1989 12 September 1994
30 Singapore DTC 1 August 1977 16 November 1977
31 Sweden DTC 24 June 1998 1 November 2003
32 Switzerland DTC 24 June 1998 30 April 2001
33 Thailand DTC 14 July 1982 11April 1983
34 United Arab Emirates DTC 21 September 2003 2 October 2008
35 United Kingdom DTC 10 June 1976 23 January 1978
36 United States DTC 1 October 1976 16 October 1982
37 Vietnam DTC 14 November 2001 29 September 2003
74 ANNEXES
Annex 3: List of all Laws, Regulations
and Other Relevant Material
Exchange of Information on Tax Matters Act (EOI Act) of 2010
Exchange of Information Regulations
Foreign Investment Act of 1991
The Philippines Constitution
National Internal Revenue Code (NIRC)
Anti-Money Laundering Act (AMLA) of 2001, as amended
The Philippines Accountancy Act of 2004
The Corporation Code of the Philippines of 1980
The Omnibus Investment Code Act of 1987, as amended
General Banking Law of 2000 (General Banking Act)
Foreign Bank Liberalization Act
Investment Company Act of 1960
Foreign Currency Deposit Act
Manual of Rules on Banking
Business Names Act
Civil Code of the Philippines of 1949
New Central Bank Act
AML Revised Implementing Rules and Regulations (RIRR)

Uploaded by

Document Information

Copyright

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Uploaded by

Copyright:

PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK THE PHILIPPINES OECD 2011

You might also like