Preservation of Books of Accounts and Accounting Records in Philippines

By: Tax and Accounting Center Philippines

The Bureau  of Internal Revenue (BIR) issued Revenue Regulations No. 17 – 2013 dated September 27, 2013 (RR No. 17-2013) prescribing the guidelines on the preservation of books of accounts and other accounting records in the Philippines.

Preservation within ten (10) years from last entry

Under RR No. 17-2013, taxpayers are required to preserve their books of accounts as follows:

“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 filing of the return, for the taxable year when the last entry was made on the books of accounts”

In the past, the requirement is to preserve books of accounts and other accounting records in the Philippines for a period of three (3) years is no longer applicable.

Preservation more than ten (10) years

In case the taxpayer has a pending protest or claim for tax credit certificate of tax refund, and the books of accounts and other accounting records are material to the case, then, books of accounts and other accounting records in the Philippines must be preserve until the case is finally resolved. This would mean that such period could go for more than ten (10) years.

Coverage of Books of accounts and Other Accounting Records

Books of accounts refers to the BIR-registered books of accounts in the Philippines – manual books of accounts, loose-leaf books of accounts, and computerized books of accounts both for value added tax (VAT) and non-value added taxpayers (non-VAT). On the other hand, “other accounting records” includes corresponding invoices, receipts, vouchers and returns, and other source documents supporting the entries in the books of accounts.  Books of accounts and other accounting records are required to be preserve within ten (10) years from date of last entry.

When to start counting 10-year period for preservation

The counting of the preservation would start from the last entry on the books of accounts referring 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.

Notably, registration of new sets of manual books of accounts is upon consumption of its pages so that if you have in your books of accounts transactions for five (5) years, then, such books of accounts should be preserved for a total period of fifteen (15) years.

Obligations of CPA’s to preserve AFS for 10 years

An independent certified public accountant (CPA) who audited the books of accounts and other accounting records of 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 annual income tax return or actual date of filing thereof, whichever comes earlier, unless a longer retention period is required under the National Internal Revenue Code of the Philippines (NIRC), as amended, or other relevant laws.

Place of Preservation of Books of Accounts in the Philippines

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. Books of accounts may be inspected by the BIR and examined for purposes of the following:

• Regular audit,
• 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 BIR Commissioner’s power to obtain information under Section 5 of the NIRC,

Examination of books of accounts may be made in the taxpayer’s office or place of business or in the office of the BIR.

Penalties for violation of RR No. 17-2013

Violations of RR No. 17-2013 on the preservation of books of accounts shall be subject to penalties provided in Sections 266, 275, and other pertinent NIRC provisions, and Section 6 of Republic Act No. 10021 (Exchange of Information on Tax Matters Act of 2009).

Effectivity of RR No. 17-2012

RR No. 17-2013 shall take effect within fifteen days from general publication on September 28, 2013 with the Manila Bulletin and Philippine Daily Inquirer.

Summary

In effect, RR No. 17-2013 increased the preservation period from the 3-year period to 10-year period from last entry on the books of accounts in order not to prejudice the government in the conduct of tax examinations in the Philippines in the absence of such books of accounts and other accounting records in the Philippines. It is now the obligation of the taxpayer to see to it that its books of accounts in the Philippines are well preserved. Taxpayers are advised to impose security measures, especially those situated in calamity prone areas – flood, storm, fire, etc.

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.