Retention period of books of accounts and accounting records

The BIR has issued the following clarifications on the retention period of books of accounts and other accounting records under Section 235, in relation to Section 203 of the Tax Code.

Retention period

Pursuant to Section 235 and 203 of the Tax Code, 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.

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, which should likewise be maintained for a period from the date of last entry in the books to which they relate. The term “last entry” means the particular business transaction or an item that is entered or posted last or latest in the books of accounts when the same was closed.

In case a taxpayer has a 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/its books of accounts and other accounting records until the case is finally resolved.

Responsibility of independent Certified Public Accountant

Unless a longer retention period is required under the Tax Code or other relevant laws, 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.

Examination of books of accounts

All books, registers and other records, and vouchers and other supporting papers shall be kept at all times at the place of business of the taxpayer, and must be immediately produced and submitted for inspection upon demand by any internal revenue officer. They may also be examined and inspected for purposes of regular audit or extraordinary audit, or requests for exchange of information by a foreign tax authority. The examination and inspection of books of accounts and other accounting records shall be done in the taxpayer’s office or place of business or in the office of the BIR.

(Revenue Regulations No. 17-2013, September 27, 2013)

Tax Brief – October 2013

Punongbayan and Araullo