Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 5-2014)
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.
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, the taxpayer shall retain hardcopies of the books of accounts, including subsidiary books and other accounting records.
Yes, after the initial five-year period, taxpayers 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.
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.
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.
The independent Certified Public Accountant (CPA) who audited the records and certified the financial statements of the taxpayer is responsible 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.
The system must ensure accurate and complete transfer of images of hardcopies to electronic media, index, store, preserve, retrieve, and reproduce the electronic images. It must have controls ensuring integrity, accuracy, reliability, prevent unauthorized alterations, a quality assurance program, an indexing system, and the ability to reproduce legible and readable hardcopies.
'Legibility' means the observer must be able to identify all letters and numerals positively and quickly to the exclusion of all others; 'readability' means the observer must be able to recognize a group of letters or numerals as words or complete numbers.
The taxpayer must maintain and preserve the original hardcopy of their books of accounts, subsidiary books, and other accounting records.
Yes, the Revenue District Office may initiate tests of the system including evaluation of equipment and procedures. The authorized Revenue Officer must inform the taxpayer of the results within three (3) days after the test. The taxpayer may appeal any adverse findings to the Regional Director within ten (10) days, with resolution within thirty (30) days.
No, these tests do not involve determination of tax liability for a taxable period and therefore are not considered an examination or inspection.