New Rules on Preservation of Books of Accounts Philippines under RR No. 5-2014

By: Tax and Accounting Center Philippines

Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 5-2014 dated 30 July 2014 entitled “Amending Revenue Regulations No. 17-2013 dealing with “Preservation of Books of Accounts and Other Accounting Records”

Under Revenue Regulations No. 17-2013, books of accounts and other accounting records in the Philippines are required to be preserved within ten (10) years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of filing the return, for the taxable when the last entry was made in the books of accounts in the Philippines. Under this regulations, the ten-year period refers to preserving hard copies of the books of accounts and other accounting records.

Under Revenue Regulations No. 5-2014 (RR No. 5-2014), the ten-year period of preservation of books of accounts and other accounting records in the Philippines has been modified and amended as follows:

• 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 filing the return, for the taxable when the last entry was made in the books of accounts in the Philippines, the TAXPAYER SHALL RETAIN HARD COPIES of the books of accounts in the Philippines, 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 in the Philippines, including subsidiary ledgers and other accounting records IN AN ELECTRONIC STORAGE SYSTEM prescribed under RR No. 5-2014.

In short, the 10-year period in RR No. 17-2013 will now be made in two (2) stages – hard copies for the first five 95) years, and electronic copies for the next five (5) years of the 10-year period under an electronic storage system of books of accounts in the Philippines. For the electronic storage system , RR No. 5-2014 provides that it should have the following features:

• Ensure accurate and complete transfer of images of the hard copy of the books of accounts, including subsidiary books and other accounting records to an electronic storage media;
• Index, storage, preserve, retrieve, and reproduce the electronically stored images of the hard copy of  including subsidiary books and other accounting records.

Likewise, the electronic storage of books of accounts in the Philippines must also include the following:

• Reasonable controls to ensure the integrity, accuracy, and reliability of the electronic storage system;
• 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 in the Philippines;
• An inspection and quality assurance program evidenced by regular evaluations of the electronic storage system, including periodic checks of electronically stored books of accounts, subsidiary books and other accounting records in the Philippines;
• A retrieval system that includes an indexing system; and,
• The ability to produce legible and readable hard copies of electronically stored books of accounts, subsidiary books and other accounting records in the Philippines.

For each electronic storage system used, the taxpayer must maintain, and make available to the Bureau of Internal Revenue (BIR), upon request, complete descriptions of:

1. the electronic storage system, including all procedures relating to its use;
2. the indexing system for the identification and retrieval for viewing or reproducing of relevant books of accounts, subsidiary ledgers, and other accounting records maintained in an electronic storage system.

The electronic storage system may periodically be subjected to tests by the Revenue District Office of taxpayer registration that may include evaluation (by actual use) of a taxpayer’s equipment and software, as well as the procedures used by the taxpayer to prepare, record, transfer, index, store, prepare and reproduce electronically stored documents. A taxpayer’s electronic storage that FAILS TO MEET the requirements of Section 2-A of RR No. 17-2013, as amended by RR No. 5-2014 SHALL MAINTAIN AND PRESERVE THE ORIGINAL HARD COPY of their books of account, subsidiary ledgers, and other accounting records.

The provisions of all internal revenue issuances as well as rulings inconsistent with RR No. 17-2013 as amended by RR No. 5-2014 are hereby amended and revoked accordingly.

Summary

In general, books of accounts and other accounting records in the Philippines are required to be preserved within a period of ten (10) years for the taxable year reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of filing the return, for the taxable when the last entry was made in the books of accounts. In such ten (10) year period, taxpayer is required to maintain in hard copies within the first five (5) years, and the remaining five (5) years could be in electronic format based on the electronic filing system that is compliant with the features prescribed by the regulations. This becomes an obligation of the taxpayer and the regulations provides only guidelines on the features of the electronic filing system, and it is upon the taxpayer to conceptualize its own filing system in compliance with such requirements.

Reference:

• Revenue Regulations No. 5-2014

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at info(@)taxacctgcenter.org)

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