Tax notes: Clarification on the retention period of books of accounts

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Monday, August 18, 2014


PURSUANT to Revenue Regulations (RR) No. 17-2013 dated Sept. 27, 2013, all taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records for a period of 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.

This new retention period is materially longer compared to the previous three-year retention period required under Section 203 of the Tax Code, as amended.

The new retention period is further clarified through RR No. 5-2014, issued on July 30, 2014, which specifies that within the first five years of the 10-year period, 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 of the books of accounts, subsidiary books and other accounting records in an electronic storage system which complies with the requirements, as prescribed by the regulation.

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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, 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.

Any taxpayer whose electronic storage system fails to meet the requirements set forth in the regulation shall maintain and preserve the original hardcopy of the books of accounts, subsidiary books and other accounting records.

In view of this, the cost of safe-keeping of relevant documents and records would relatively increase.

(Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on August 19, 2014.

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