Audit Guidelines and Procedures on the Proper Determination of the Income Tax Liability of Philippine Branches and Liaison Offices of Multi-National Enterprises (MNEs) Engaged in Soliciting Orders, Purchaser, Service Contracts, Trading, Construction and Other Activities in the Philippines

March 21, 1995REVENUE AUDIT MEMORANDUM ORDER NO. 1-95SUBJECT:Audit Guidelines and Procedures on the Proper Determination of the Income Tax Liability of Philippine Branches and Liaison Offices of Multi-National Enterprises (MNEs) Engaged in Soliciting Orders, Purchaser, Service Contracts, Trading, Construction and Other Activities in the Philippines.   TO:All Internal Revenue Officers, Employees and Others Concerned I. RATIONALEWhereas Revenue Audit Memorandum Order (RAMO) No. 1-86 dated April 25, 1986 imposes income tax on the gross income generated from constructive trading and commission income derived from brokering activities of Philippines branches of MNEs engaged in trading activities.Whereas RAMO No. 1-86 makes no recognition of such factors as the nature of item traded, the risk involved and participation of the local branch;Whereas the implementation of RAMO No. 1-86 makes use of much approximations and estimates;Therefore, this Order is issued to revise RAMO No. 1-86 and to cover taxation of Philippine branches and liaison offices of MNEs engaged in soliciting orders, purchases, services contracts, trading, construction and other activities.With this Order, taxation of Philippine branches and liaison offices of MNEs engaged...