July 30, 2014

REVENUE REGULATIONS NO. 05-14

SUBJECT : Amending Revenue Regulations No. 17-2013 Dealing with the

"Preservation of Books of Accounts and Other Accounting
Records"

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Section 2 of Revenue Regulations No. 17-2013 is

hereby amended to read as follows:

"SEC. 2. Retention Periods. — All taxpayers are required to

preserve their books of accounts, including subsidiary books and other
accounting records, for a period of ten (10) years reckoned from the day
following the deadline in filing a return, or if filed after the deadline, from the
date of the filing of the return, for the taxable year when the last entry was made
in the books of accounts: Provided that, within the first five (5) years reckoned
from the day following the deadline in filing a return, or if filed after the
deadline, from the date of the filing of the return, for the taxable year when the
last entry was made in the books of accounts, the taxpayer shall retain
hardcopies of the books of accounts, including subsidiary books and other
accounting records. Thereafter, the taxpayer may retain only an electronic copy
of the hardcopy (paper) of the books of accounts, subsidiary books and other
accounting records in an electronic storage system which complies with the
requirements set forth under Section 2-A hereof. aHcACT

The term "other accounting records" includes the corresponding

invoices, receipts, vouchers and returns, and other source documents supporting
the entries in the book of accounts.

The term "last entry" refers to a particular business transaction or an

item thereof that is entered or posted last or latest in the books of accounts when
the same was closed.

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 The foregoing notwithstanding, if the taxpayer has any pending protest
or claim for tax credit/refund of taxes, and the books and records concerned are
material to the case, the taxpayer is required to preserve his/her/its books of
accounts and other accounting records until the case is finally resolved.

Finally, unless a longer period of retention is required under the NIRC or

other relevant laws, the independent Certified Public Accountant (CPA) who
audited the records and certified the financial statements of the taxpayer,
equally as the taxpayer, has the responsibility to maintain and preserve
electronic copies of the audited and certified financial statements including the
audit working papers for a period of ten (10) years from the due date of filing
the annual income tax return or the actual date of filing thereof, whichever
comes later." DCaEAS

SECTION 2. A new Section is hereby inserted after Section 2 of Revenue

Regulations No. 17-2013 to read as follows:

"SEC. 2-A. Electronic Storage System. — An electronic storage system

to be used by the taxpayer or independent CPA for preserving books of accounts
and other accounting records shall:

1) Ensure an accurate and complete transfer of the images of

the hardcopy of the books of accounts, including
subsidiary books and other accounting records to an
electronic storage media; and

2) Index, store, preserve, retrieve, and reproduce the

electronically stored images of the hardcopy of the books
of accounts, subsidiary books and other accounting
records. ACaTIc

The electronic storage system must include:

1) Reasonable controls to ensure the integrity, accuracy, and

reliability of the electronic storage system;

2) Reasonable controls to prevent and detect any

unauthorized creation of, addition to, alteration of,
deletion of, or deterioration of electronically stored books
of accounts, subsidiary books and other accounting
records;

3) An inspection and quality assurance program evidenced

by regular evaluations of the electronic storage system,
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 including periodic checks of electronically stored books
of accounts, subsidiary books and other accounting
records;

4) A retrieval system that includes an indexing system; and

5) The ability to reproduce legible and readable hardcopies

of electronically stored books of accounts, subsidiary
books and other accounting records. LLpr

All books of accounts, subsidiary books and other accounting records

reproduced by the electronic storage system must exhibit a high degree of
legibility and readability when displayed on a video display terminal and when
reproduced in hardcopy.

The term "legibility" means the observer must be able to identify all
letters and numerals positively and quickly to the exclusion of all other letters or
numerals.

The term "readability" means that the observer must be able to recognize
a group of letters or numerals as words or complete numbers. The taxpayer must
ensure that the reproduction process maintains the legibility and readability of
the electronically stored books of accounts, subsidiary books and other
accounting records. IESAac

For each electronic storage system used, the taxpayer must maintain, and
make available to the Bureau of Internal Revenue upon request, complete
descriptions of: (a) the electronic storage system, including all procedures
relating to its use; and (b) the indexing system. For purposes of these Revenue
Regulations, an "indexing system" is a system that permits the identification and
retrieval for viewing or reproducing of relevant books of accounts, subsidiary
books and other accounting records maintained in an electronic storage system.
For example, an indexing system might consist of assigning each electronically
stored document a unique identification number and maintaining a separate
database that contains descriptions of all electronically stored books and records
along with their identification numbers. In addition, any system used to
maintain, organize, or coordinate multiple electronic storage systems is treated
as an indexing system under these Revenue Regulations. The requirement to
maintain an indexing system will be satisfied if the indexing system is
functionally comparable to a reasonable hardcopy filing system. The
requirement to maintain an indexing system does not require that a separate
electronically stored books and records description database be maintained if
comparable results can be achieved without a separate description database.
Reasonable controls must be undertaken to protect the indexing system against
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 the unauthorized creation of, addition to, alteration of, deletion of, or
deterioration of any entries.

The Revenue District Office who has jurisdiction over the taxpayer may
periodically initiate tests of a taxpayer's electronic storage system. These tests
may include an evaluation (by actual use) of a taxpayer's equipment and
software, as well as the procedures used by a taxpayer to prepare, record,
transfer, index, store, preserve, retrieve, and reproduce electronically stored
documents. The Revenue District Office may choose to review the internal
controls, security procedures, and documentation associated with the taxpayer's
electronic storage system. The Revenue Officer duly authorized to conduct the
test must inform the taxpayer within three (3) days from the conclusion of the
test the results thereof, otherwise, he shall be liable administratively for failure
to inform the taxpayer. The taxpayer may appeal to the Regional Director within
ten (10) days from receipt of any adverse findings derived from the tests
conducted. The Regional Director shall resolve the appeal within thirty (30)
days from the submission of the appeal. aTEADI

The aforementioned tests described in the immediately preceding

paragraph do not qualify as an "examination" or "inspection" of the books and
records within the meaning of Section 235 of the Tax Code of 1997
because these tests do not involve a determination of the tax liability of a
taxpayer for a particular taxable period.

A taxpayer's electronic storage system that fails to meet the requirements

of this Section shall maintain and preserve the original hardcopy of their books
of accounts, subsidiary books and other accounting records."

SECTION 3. Repealing Clause. — The provisions of all internal revenue

issuances as well as rulings inconsistent herewith are hereby amended or revoked
accordingly.

SECTION 4. Effectivity. — These Regulations shall take effect fifteen

(15) days after its publication in at least two (2) newspapers of general circulation.
SCHATc

(SGD.) CESAR V. PURISIMA

Secretary
Department of Finance

Recommending Approval:
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 (SGD.) KIM S. JACINTO-HENARES
Commissioner
Bureau of Internal Revenue

Published in the Manila Bulletin and The Philippine Star on August 1, 2014.

September 27, 2013

REVENUE REGULATIONS NO. 17-13

SUBJECT : Preservation of Books of Accounts and Other Accounting

Records

TO : All Internal Revenue Officers and Others Concerned

Pursuant to the provisions of Section 244 , in relation to Sections 5 ,6

, 203 , 235 , and 222 of the National Internal Revenue Code of 1997
(NIRC), as amended, these Regulations are hereby promulgated to clarify the
retention period and to prescribe the guidelines on the preservation of books of
accounts and other accounting records.

SECTION 1. Background. — In general, all books, registers, records,

vouchers, and other supporting papers and documents prescribed by the Bureau of
Internal Revenue (BIR), and other records kept by taxpayers shall be preserved intact,
unaltered, and unmutilated. The same shall be kept at all times in the place of
business of the taxpayer, who shall produce them for examination or deliver them or
any of them for inspection outside of his/its place of business upon demand of any
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 internal revenue officer (Section 21 of Revenue Regulations No. V-1 ).

Section 235 of the NIRC provides:

"SEC. 235. Preservation of Books of Accounts and Other Accounting

Records. — All the books of accounts, including the subsidiary books and other
accounting records of corporations, partnerships, or persons, shall be preserved
by them for a period beginning from the last entry in each book until the last
day prescribed by Section 203 within which the Commissioner is authorized to
make an assessment. . . . CTAIDE

xxx xxx xxx

Any provision of existing general or special law to the contrary

notwithstanding, the books of accounts and other pertinent records of
tax-exempt organizations or grantees of tax incentives shall be subject to
examination by the Bureau of Internal Revenue for purposes of ascertaining
compliance with the conditions under which they have been granted tax
exemptions or tax incentives, and their tax liability, if any." (Underscoring
supplied)

In relation to Section 235 of the NIRC, Section 203 of the same Code provides:

"SEC. 203. Period of Limitation Upon Assessment and Collection. —

Except as provided in Section 222, internal revenue taxes shall be assessed
within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period: Provided, That in a case
where a return is filed beyond the period prescribed by law, the three (3)-year
period shall be counted from the day the return was filed. For purposes of this
Section, a return filed before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day." (Underscoring supplied) ASTcaE

The above provisions imply that the records of the taxpayer must be preserved
for a period of three (3) years from the date of the last entry made thereon. On the
other hand, the following shall be noted:

First, Section 203 also refers to Section 222 of the NIRC which provides for
exceptions to the three (3)-year period of limitation of assessment. Section 222
pertinently provides:

"SEC. 222. Exceptions as to Period of Limitation of Assessment and

Collection of Taxes. —

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 (a) In the case of a false or fraudulent return with intent to evade tax or
of failure to file a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be filed without assessment, at any time within
ten (10) years after the discovery of the falsity, fraud or omission: Provided,
That in a fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action for
the collection thereof.

(b) If before the expiration of the time prescribed in Section 203 for
the assessment of the tax, both the Commissioner and the taxpayer have agreed
in writing to its assessment after such time, the tax may be assessed within the
period agreed upon. The period so agreed upon may be extended by subsequent
written agreement made before the expiration of the period previously agreed
upon. CacEIS

xxx xxx xxx" (Underscoring supplied)

Thus, a taxpayer's accounting records shall be needed beyond the three

(3)-year period of limitation of assessment if he/it is investigated by the BIR for any
falsity, fraud or omission in the returns. In such case, the investigation would be
conducted "within ten (10) years after the discovery of the falsity, fraud or omission."
Further, the taxpayer's accounting records would also be needed beyond the three
(3)-year period of limitation if, before the expiration thereof, both the Commissioner
or his duly authorized representative and the taxpayer have agreed in writing (also
known as the Waiver of the Statute of Limitations) to its assessment and/or collection
after the said period.

Second, if there is a pending tax case, protest or claim for tax credit/refund of
taxes, and the books and records concerned are material to the case, then such books
and records should be kept until the case is finally resolved.

Finally, the books of accounts and other pertinent records of tax-exempt

organizations or grantees of tax incentives are subject to periodic examination by the
BIR for purposes of ascertaining whether they have been complying with the
conditions under which they have been granted tax exemption or tax incentives and
their tax liability, if any.

The reason for requiring the books of accounts to be preserved is to ensure that
all taxes due to the government may be readily and accurately ascertained and
determined any time of the year. As explained above, the right of the BIR to examine
and/or inspect books of accounts and other accounting records of taxpayers may
extend beyond the three (3)-year period of limitation of assessment. ITSaHC

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 On the other hand, from the point of view of taxpayers on the receiving end of
regular or extraordinary audits and assessments, they must ensure that their books of
accounts and other accounting records are available for submission in support of their
defenses and aid in the resolution of the cases.

In view of the foregoing, it is in the best interest of both the government and
the taxpayers that books of accounts and accounting records are retained for a longer
period of ten (10) years.

SECTION 2. Retention Periods. — All taxpayers are required to preserve

their books of accounts, including subsidiary books and other accounting records, for
a period of ten (10) years reckoned from the day following the deadline in filing a
return, or if filed after the deadline, from the date of the filing of the return, for the
taxable year when the last entry was made in the books of accounts.

The term "other accounting records" includes the corresponding invoices,

receipts, vouchers and returns, and other source documents supporting the entries in
the books of accounts. They should also be preserved for a period of ten (10) years
counted from the date of last entry in the books to which they relate.

The term "last entry" refers to a particular business transaction or an item

thereof that is entered or posted last or latest in the books of accounts when the same
was closed.

The foregoing notwithstanding, if the taxpayer has any pending protest or

claim for tax credit/refund of taxes, and the books and records concerned are material
to the case, the taxpayer is required to preserve his/its books of accounts and other
accounting records until the case is finally resolved. aDSIHc

Finally, unless a longer period of retention is required under the NIRC or other
relevant laws, the independent Certified Public Accountant (CPA) who audited the
records and certified the financial statements of the taxpayer, equally as the taxpayer,
has the responsibility to maintain and preserve copies of the audited and certified
financial statements for a period of ten (10) years from the due date of filing the
annual income tax return or the actual date of filing thereof, whichever comes later.

SECTION 3. Examination and Inspection. — All books, registers and

other records, and vouchers and other supporting papers required by the BIR shall be
kept at all times at the place of business of the taxpayer, subject to inspection by any
internal revenue officer, and upon demand, the same must be immediately be
produced and submitted for inspection (Section 20 of Revenue Regulations No. V-1).

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 They may be examined and inspected for purposes of regular audit or extraordinary
audit, requests for exchange of information by a foreign tax authority under Sections
6 and 71 of the NIRC, and in the exercise of the Commissioner's power to obtain
information under Section 5 of the NIRC, among others.

Examination and inspection of books of accounts and other accounting records

shall be done in the taxpayer's office or place of business or in the office of the BIR.

SECTION 4. Penalties. — Any violation of the provisions of these

regulations shall be subject to penalties provided in Sections 266, 275, and other
pertinent provisions of the NIRC; and Section 6 of Republic Act No. 10021 (the
"Exchange of Information on Tax Matters Act of 2009").

SECTION 5. Repealing Clause. — The provisions of all internal revenue

issuances as well as rulings inconsistent herewith are hereby amended or revoked
accordingly.

SECTION 6. Effectivity. — These Regulations shall take effect fifteen

(15) days after its publication in at least two (2) newspapers of general circulation.
HASTCa

(SGD.) CESAR V. PURISIMA

Secretary
Department of Finance

Recommending Approval:

(SGD.) KIM S. JACINTO-HENARES

Commissioner
Bureau of Internal Revenue

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