For the purpose of tax determination, the Department may:

1. Disregard any transaction with no tax effect; and

2. Reclassify transactions whose form does not reflect their substance and put them in their real form.

The Department may make a tax assessment due on the taxpayer using the estimated tax method according to facts and circumstances pertaining to the taxpayer if the taxpayer fails to file its declaration on time, to keep precise accounts, books, and records, or to comply with the form, declaration form, and method required in its books and records.

The Department may reallocate revenues and expenses in transactions among related parties or parties under the same body, so as to reflect the returns that would have resulted if the parties were independent and unrelated.

A taxpayer may not deduct a loss resulting from the transfer of properties between it and a party related thereto. Unless otherwise provided for by this Law, the loss deduction shall be suspended until the related party disposes of the properties to another unrelated party.

If an individual taxpayer splits its income and divides it with another person, the Department may adjust the tax base of the taxpayer and that of the other person to prevent any reduction in the due tax.

For the purpose of this Article, income splitting means:

1. Transfer of income, directly or indirectly, from one person to another related thereto.

2. Transfer of properties, including money, directly or indirectly, from one person to another related thereto, which leads to the other person's realization of an income from such properties, if the reason or one of the reasons for the transfer is to lower the total tax due upon the income of the transferor or the transferee.

The Department may consider the value given by the transferee in determining whether the taxpayer is seeking to split income.