A record or document has been generally defined as any concrete or symbolic indication, preserved or recorded, for reconstructing or for proving a phenomenon, whether physical or mental. Anyone would definitely look into the original documents if it wants the best evidence to prove a fact or a circumstance. Recently, the Bureau of Internal Revenue (BIR) has issued Revenue Regulations (“Rev. Regs.â€) No. 17-2013, which effectively requires the preservation of the books and other accounting records for at least 10 years.
Section 235 of the Tax Code provides that “All the books of accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, shall be preserved by them for a period beginning from the last entry in each book until the last day prescribed in Section 203 within which the Commissioner is authorized to make an assessment.†In this connection, Section 203 of the Tax Code provide that internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return. The exception to the three-year period can be found in Section 222 of the Tax Code that in case of false or fraudulent return, with the intent to evade tax or of failure to file a return, 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.
Prior to this issuance, Section 235 of the Tax Code is interpreted to mean that the books of accounts and other accounting records must be kept for a period of three (3) years pursuant to Section 203. However, this Rev. Regs. now requires all taxpayers to preserve their books of accounts and other accounting records for a period of ten (10) years. Allegedly, the reason is to ensure that all taxes due to the government may be readily and accurately ascertained and determined. Apparently, the 10-year period in Rev. Regs. 17-2013 is based on the exception provided in Section 222 of the Tax Code.
This Rev. Regs. now raises a long term concern on the part of the taxpayers on how to manage the preservation of their books of accounts and other accounting records. We believe it might be practical if the BIR would allow and provide guidelines in keeping records electronically. In addition, since Rev. Regs. 17-2013 was issued only last 27 September 2013, taxpayers may have already disposed of its books of accounts and other accounting records, say from taxable year 2009 and earlier taxable period. The BIR might want to clarify which taxable year this Rev. Regs. apply. Absent any clarificatory issuance, the Rev. Regs. should be applied prospectively.
Jamie Andrea Mae Y. Arlos is a Supervisor from the Tax Group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com.
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