Preservation of books of accounts and other accounting records

01 October 2013

The Commissioner of Internal Revenue (“CIR”) has issued Revenue Regulations (“RR”) No. 17-2013 dated 27 September 2013 clarifying the retention period and preservation of the books of accounts and accounting records of a taxpayer and prescribing the guidelines therefor.

The salient portions of the RR are as follows:

1. The taxpayers’ books of accounts and accounting records shall generally be preserved during the 3-year period within which a taxpayer can be assessed by the tax authority. The 3-year period is counted from the last day prescribed by law for the filing of the return provided that if a return is filed beyond the period prescribed by law, it shall be counted from the day the return was filed. However, the 3-year period to assess is extended to:

  • 10 years - in the case of a false or fraudulent return with intent to evade tax or of failure to file a return in which case 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.
  • Agreed upon date in the Waiver of the Statute of Limitations - in case the CIR and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon.

2. In relation to Item 1 above, the books of accounts and accounting records of the taxpayer need to be preserved until the resolution of the case 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.

3. In view of the foregoing, the CIR is requiring all taxpayers to preserve their books of accounts including subsidiary books and other accounting records, for a period of 10 years. The 10-year period is 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.

4. 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 10 years counted from the last entry in the books to which they relate.

5. 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 10 years from the due date of filing the annual income tax return or the actual date 'of filing thereof, whichever comes later.