REPUBLIKA NG PILIPINAS

KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
Quezon City

August 15, 2006

REVENUE REGULATIONS NO. 16-2006

SUBJECT : Submission by Taxpayers of Electronic Books of Accounts and Other

Accounting Records in the Course of a Tax Audit/Investigation

TO : All Internal Revenue Officers and Others Concerned

________________________________________________________________________

Background.
Section 5 (A) of the National Internal Revenue Code (NIRC) of 1997 provides:

“SEC. 5. Power of the Commissioner to Obtain Information, and to

Summon, Examine, and Take Testimony of Persons. – In ascertaining the
correctness of any return, or in making a return when none has been made,
or in determining the liability of any person for any internal revenue tax,
or in collecting any such liability, or in evaluating tax compliance, the
Commissioner is authorized:

(A) To examine any book, paper, record, or other data which may be
relevant or material to such inquiry;

xxx xxx xxx “

This Section authorizes the Bureau of Internal Revenue (BIR) to examine the books and other
accounting records of the taxpayer. The words “any book, paper, record, or other data” herein-
mentioned would comprise both computerized and manual books of accounts and other
accounting records. Thus, the BIR or its duly authorized Revenue Officers (ROs) may examine
taxpayers’ computerized accounting books and records in the course of a tax audit or
investigation pursuant thereto.

Moreover, Section 27 of RA No. 8792, otherwise known as the Electronic Commerce

Act of 2000, mandates all government offices, including the Bureau of Internal Revenue ( BIR),
to perform governmental functions using electronic documents.

With the authority granted and the requirements prescribed under the two aforementioned
laws, these Regulations are issued to lay down the policies, guidelines and procedures on the
submission by taxpayers of books of accounts and other accounting records in electronic form
specifying:

a. The manner and format in which such computerized accounting books/records shall
be created, retained, filed and issued;
 b. When and how such computerized accounting books/records have to be signed or
authenticated;

c. The appropriate control processes and procedures to ensure integrity, security and
confidentiality of computerized accounting books/records;

d. Other attributes required of computerized accounting books/records; and

e. The full or limited use of the documents and papers for compliance with the
requirements of the BIR.

SECTION 1. Scope – Pursuant to the provisions of Section 244 in relation to Section

245 of the National Internal Revenue Code (NIRC) of 1997, these Regulations are hereby
promulgated to prescribe the submission by registered computerized taxpayers of their books of
accounts and other accounting records, in electronic form, during a tax audit or investigation, in
accordance with the provisions of Sections 5 (A), 6 (A), 232 (A), 233, 235 and 237 of the NIRC
of 1997 in relation to Section 27 of Republic Act (RA) No. 8792.

SECTION 2. Definition of Terms

2.1 Computerized Accounting Books/Records – refers to books of accounts and other

accounting records in electronic form, such as electronic documents, transaction files,
customer or vendor master files, and other files/databases maintained and used by a
taxpayer in and under a computerized accounting system.

2.2 Electronic Document – refers to information or the representation of information,

data, figures, symbols or other modes of written expression, described or however
represented, by which a right is established or an obligation extinguished, or by which
a fact may be proved and affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.

2.3 Electronic Signature – refers to any distinctive mark, characteristic and/or sound in
electronic form, representing the identity of a person and attached to or logically
associated with the electronic data message or electronic document or any
methodology or procedures employed or adopted by a person and executed or
adopted by such person with the intention of authenticating or approving an electronic
data message or electronic document.

2.4 Media – refers to the physical forms of recorded information. This includes paper,
film, computer disks, computer tapes, and any other materials on which information
can be recorded.

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2.5 CD-R (Compact Disc-Recordable) – an optical data storage written and read using
lasers that can be read or viewed only but cannot be modified, deleted, or written over
with new data. Recordable CDs are WORM (Write Once, Read Multiple).

2.6 DVD-R (Digital Video Disc- Recordable) – a new generation of optical disc storage
technology which holds more data than the CD-R.

2.7 Database – refers to a stored collection of related electronic data used by

organizations to meet their information processing requirements. It is normally
associated with software to access and manipulate that data.

2.8 Data -a representation of information in a formalized manner suitable for

communication, interpretation, or processing. Data consists of letters, numbers, or
symbols.

2.9 File – a named collection of records stored or processed as an individual entity.

2.10 Records – a collection of related fields containing data items grouped for processing
and considered sub-units of a file.

2.11 Field or data element– a specified area of a record used for storing a particular class
of data. Fields are sub-units of a record.

2.12 Fixed length file – a file in which each record has the same number of characters.

2.13 File formats – a standard of organizing and storing the data in the file such that
specific applications will be able to use the data. Common examples of file formats
include -

a. Dbase File Format – a format typically created from personal computer-based

databases and has a *.dbf file extension.

b. Delimited Format - a format composed of records in which the fields are not in a
fixed position in the record. Instead, each field in the record is separated by a
field separator character, such as a comma.

c. Flat File Format – a format wherein the data is stored in continuous lines of text
similar to a Microsoft Word document that has been saved as “text only.” The
records in flat file can be of fixed or variable length.

2.14 Authentication – a confirmation that the record is accurate, complete and

appropriate to the actions taken. Methods of authenticating electronic records include
authentication of a hard copy document that accompanies the electronic media,
authentication of a label attached to the media, linking a digital signature to the
electronic file/document and design of a unique location-specific procedure for
authentication of electronic records.

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 SECTION 3. Examination of Computerized Books of Accounts and Other Accounting
Records – The books of accounts and other accounting records, documents, schedules, and other
information, submitted by a taxpayer in electronic form, collectively referred herein as
computerized accounting books/records, may be examined by duly authorized Revenue Officers
(ROs) and BIR officials in the course of a tax audit or investigation of the taxpayer, pursuant to
Section 5 (A) of the NIRC of 1997.

At the time of examination, the retained computerized accounting books/records of the taxpayer
must be capable of being retrieved from the computer system and converted to a standard format
that would allow efficient examination and testing of such records using BIR audit tools during a
tax examination, particularly in cases involving large volumes of transactions.

SECTION 4. Submission of Taxpayer Accounting Records in Electronic Form for

BIR Examination – The books of accounts and other accounting records in electronic format
that were submitted and registered with the concerned BIR office within thirty (30) days from
the close of the taxable year pursuant to Revenue Memorandum Order (RMO) No. 29-2002 shall
be provided to the BIR by the taxpayer upon audit/investigation. This does not preclude the BIR
from requesting other transaction files which may contain information or transactions which
occurred during the particular taxable year covered by the examination, which were not
included in the original data submitted.

The required electronic or computerized accounting records should be submitted within the due
date reflected on the document authorizing the audit(i.e. Letter of Authority, Audit Notice, etc).
The number of days within which the computerized accounting records have to be submitted
shall not exceed five (5) days from receipt of the document authorizing the investigation.

If the taxpayer maintains accounting books and records in both electronic and manual (hard-
copy) formats, the Revenue Officers auditing said taxpayers may require the presentation of both
electronic and manual books/records.

During verification process, the taxpayer is required to present the documents supporting the
entries made in the Computerized Accounting System (CAS).

The computerized accounting books/records shall be submitted to the concerned Revenue

Officers. Access to the computerized accounting books/records shall be restricted to the
Revenue Officers assigned to handle the tax examination. After the report of investigation and
the tax docket of the case has been reviewed and approved by the authorized Revenue Official,
the Revenue Officers shall return to the taxpayer their computerized accounting books/records
intact and in their original form. Nonetheless, if there are discrepancies found upon tax audit that
results to tax assessments, the Revenue Officers/Examiners may request for certified true copies,
in hard copy and/or electronic format, of the portion of the accounting books and pertinent
accounting records that would serve as evidence or proof of the audit findings.

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 SECTION 5. Requirements for Submission of Accounting Books/Records in
Electronic Format – The books of accounts and other accounting records, documents, schedules,
files and other data or information that are required to be submitted by a taxpayer to the BIR
under these regulations shall be those, but not limited to electronic books, reports, documents,
files and data that had been produced using the computerized accounting system or components
of a computerized accounting system that have previously been evaluated and approved by the
Computerized Systems Evaluation Team (CSET), a team organized through RMO 29-2002 and
shall be in electronic form, stored in recordable compact discs (CD-R), digital video discs (DVD-
R) or other optical media, depending on the volume of the transactions or size of the business,
and in a format that is readable by the BIR audit tools, as specified in the letter request for
submission of data, e.g. in fixed length flat text, delimited or dBase format.

The CD-Rs, DVD-Rs or other optical media should be properly labeled with the name of
taxpayer, taxable year, content description, serial number, volume number and such other
information required under RMO No. 29-2002 and its amendatory issuances. To ensure that
authorized users can identify, access and retrieve information stored on CDs, DVDs or other
optical media, their external labels should, likewise, indicate the application system/software,
including the version number of the application system/software used to create their contents.
These should also be accompanied by a document describing the file attributes or layout, that is,
the number of records in each data file; the control totals for each numeric field, where
applicable; the record layouts and record lengths; and the documentation of key control
information, including the transaction cutoff date and time.

A duly notarized certification in the form of an affidavit shall be executed by the taxpayer or his
authorized representative, attesting the completeness, accuracy and appropriateness of the
computerized accounting books/records, in accordance with the keeping of books of accounts
and records for internal revenue tax purposes, and should be submitted together with the
accounting books, records, etc., in electronic form. The CDs, DVDs or other optical media
should also be properly authenticated and its label duly signed by the responsible official(s) of
the company who are required to sign the tax returns under the Tax Code, using a permanent
marker. The taxpayer may require the Revenue Officer to acknowledge receipt of the electronic
files and documents.

The notarized certification shall be submitted in hard copy, as currently, legal documents are not
yet prepared electronically in the Philippines. However, whenever this facility becomes
available and acceptable in the country, notarized certification in electronic form may be allowed
and submitted.

For the proper understanding of the taxpayer’s business processes that were used to create and
maintain the computerized accounting books and records, the taxpayer under investigation is
required to provide the concerned Revenue Officers with an overview of the computerized
accounting systems used during the taxable period under audit. It is understood that the
computerized accounting system used or being used by the taxpayer has been previously
approved by the BIR. In relation hereto, any subsequent change or enhancement to such
computerized accounting system shall require approval of the BIR.

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 SECTION 6. Retention of Electronic Documents and Electronic Files – Pursuant to
Section 13 of RA No. 8792, the books of accounts and other accounting records, documents,
files, schedules and other information submitted by a taxpayer to the BIR in electronic form
should be retained in their original form and:

a.) Remain accessible so as to be usable for subsequent reference; and

b.) Retained in the format in which it was generated, sent or received, or in a format
which can be demonstrated to accurately represent the electronic document generated,
sent or received.

The aforementioned books/records shall be retained in accordance with the rules on preservation
of books of accounts and other accounting records provided in Section 235 in relation to Sections
203 and 222 of the NIRC of 1997.

SECTION 7. Legal Recognition of Electronic Document – In relation to Section 7 of

RA No. 8792, electronic documents submitted for purposes of a tax audit or investigation shall
have the legal effect, validity or enforceability as any other document or legal writing subject to
the following conditions:

a. If an electronic document is able to maintain its integrity and reliability

through time and can be authenticated for subsequent reference, in that –

1. The electronic document has remained complete and unaltered, apart

from the addition of any endorsement and any authorized change, or any
change which arises in the normal course of communication, storage and
display; and

2. The electronic document can be relied upon for the purpose for which it
was generated and for all the relevant circumstances.

b. If an electronic document has been presented or retained in its original form,

in that -

1. There exists a reliable assurance on the integrity of the document from

the time when it was first generated in its final form; and

2. That document is capable of being displayed to the person to whom it is

to be presented.

Under existing laws and these regulations, an electronic document shall be the functional
equivalent of a written document for evidentiary purposes.

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 SECTION 8. Compliance Enforcement – In instances where the taxpayer fails to
comply with the provisions of these Regulations, the procedures prescribed in the issuance and
enforcement of Subpoena Duces Tecum shall be followed.

SECTION 9. Penalty Clause – Any violation of the provisions of these Regulations

shall be subject to the penalties provided for under the pertinent provisions of the NIRC.

SECTION 10. Repealing Clause – All existing revenue regulations and other issuances
or portions thereof that are inconsistent herewith are hereby revoked, repealed or amended
accordingly.

SECTION 11. Effectivity Clause – These Regulations shall take effect after fifteen (15)
days following its publication in any newspaper of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary of Finance

Recommending approval:

(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue

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