REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPL KAWANIHAN NG RENTAS INTERNAS coe Diston , dd dot a Quezon City ocr 30 am phbe é ewan | F August 15, 2006 revenur recutations no. /6- M+ ECT: Submission hy Taxpavers of Bleeironte Books of Accounis and Other Accounting Records in the Course of « Tax Audit/Investigaiion All Internal Revenue Officers andl Others Concerned Background, ‘ Sestion 5 (A) of the National Internal Revenue Code (NIRC) of 1997 provides: “SEC. 5. Power of the Commissioner 10 Obiain Informatio Surmmon, 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 Tbility, or in evaluating tax compliance, the Commissioner is autorized: and to (A) To examine any book, paper, record, or other data whieh may be relevant or material ta such ing This Section authorizes the Bureau of Intemal Revenue (BIR) to exzmine the hooks and other iicsounting records of the taxpayer. The words “any Book, paper, record, or ether data” herein= mentioned: would comprise both computerized and manual hocks of accounts and other # secounting records. Thuis, the BIR or its duly suthorized Revenue Officers (ROs) may exemine taxpayers” computerized accounting hooks and records in the course of a tox. audit or investigation pursuant thereto. Moreover, Section 27 af RA No. 8792, otherwise known as the Electronic Commerce Act of 2000, mandates all government offices, including the Bureau of Interns! Revenue ( BIR), lo perfhrm governmental functions using clee:ronie documents, With the authority granted! und the requirements preserihed under the two aforementioned laws, these Regulations are issue to lay down the policies, wuidelines and procedures en the submission by taxpayers of hooks of accounts and cther accounting records in clectronie form/ specilying: a, The manner and format in which such computerized accounting booksrecords shall be created, retained, filed and issued: ‘SANDAANG TAONG SINGKAD})" BIUWIS KAAGAPAY SA PAG-UNLADIE:b. When and how such computerized accounti authenticated; booksireeords have to be signed or + The appropriate control processes and procedures to ensure integrity, Security and confidentiality of computerized accounting booles/recons; 4. Other attributes required of computerized accounting books/reeords: and ~The Zull or limited use of the documents and papers for compliance with the requirements of the BIR, SECTION 1, Scone — Pursuant to the provisions of Section 2444 in relation to Section 245 of ‘the National Internal Revenue Code (NIRC) of 1997, these Regulations are hescby promulgated to/prescribe the submission by registered computerized taxpayers of their books of ccounts and other accounting records, in electronie form, Curing a tax audit or investigation, in secordanes with the provisions of Sections 5 (A), 6 (A), 242 (A), 223, 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 ef accounts and other ‘accounting recorts in electronic form, stich as electronic documents, transaction files, customer or vendor masier files, and other filev(tatahases maintained and used by a taxpayer in and under a computerized accounting sysiem, 2.2:Blectroni¢ 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 extinguishecy, or by which # fact may be proved! and affirmed, which is received, recorded, transmiited, stored, processed, retrieved or produced electronically. 2.3 Bleetronie Signature ~ refers to any distinctive mark, characteristic and/or sound in Clectronic form, representing the identity of a person and attached to or logically essociated with the clectronie data message or electronic document of 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 messege or electronic document, 2.4 Media — refers to the physical forms of recored information. This includes paper film, computer disks, compater tapes, and any other materisls on which information can be recorded, caisson ners: eg DIVES" RG d fd oct 20 20K eae ¥ pant2.5 CD-R (Compact Disc-Recordable) — on optical data storage writen and read using lasers that can be read or viewed only but cannat be modified, deleted, or written over with new data, Recordable CDs are WORM (Write Once, Rend Multigle), 2.6,.DVD-R (Digital Video Dise- Recordable) — a new generation of optical dise storage technology which holds more data than the CD.R 2.7 Database — refers to @ stored collection of related electronic data used by organizations to meet their information processing requirements. It is normally associated with sofiware to access and manipulate that data. 2.8 Data ~ a representation of information in a formalized manner suitable for communication, interpretation, or processing. Data consisis of letters, numbers, oF symbols. 2.9 File — a named collection of records stored or processed as an indivi ual ent 2.10 Records —a collection of related fields containing data items grouped for processing and considered sub-units of @ fle. 2.11 Field or data element a specified area of a record used for storing particular class of data, Fields are sub-units of record. 2.12 Fixed length file ~ a file in which each record has the Same number of characters. 2.15 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 typicelly created from personal computer-based databases and has a *.dbf file extension, b. Delimited Format - a format composed of records in whieh the fields are not ina fixed position in the record. Instead, each field in the recerd is separated by a field separator charseter, such asa comma. ¢. Flat File Format — a format wherein the data is stored in continuous fines 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 varisble length, 2.14 Authentication — a confirmation that the record is accurate, complete and appropriate to the aciions taken. Methods of authenticating electronic records include authentication of a hard copy document that cecompanies the electronic media, authentication of a abel attached to the media, linking a digital signature to the slectronie file/document and design of « unique location-snecifie procedure for authentication of electronic reeorés, waeerais Divan 4 4d Aye cr aL, OCT 20 mi Stananrvde ft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 hy a taxpayer in clectronic form, computerized accounting books/records, may be ex: (ROs) and BIR officials in the course of Section 5 (A) of the NIRC of 1997. collectively referred “herein as ‘amined by duly authorized Revenue Officers # tax audit or investigation of the taxpayer, pursuant to Al the time of examination, the retained computerized accounting booksirecords of ihe taxpayer must be capable of being retrieved from the computer system and converted to a standard format that would ellow efficient examination and testing of such records using BIR audit tools during a tax examination, particularly in cases involving large volumes of transtetions, SECTION 4. Submission of Taxpayer Accounting Records in Electronié Form for BIR Examination — The books of aezounis and other accounting records in electronic fornat that were submitted and registered with the concerned BIR office within thizty (30) days from the close of the taxable year pursuant to Revenue Memorandwm Order (RMO) No, 29-2002 shall he provided to the BIR by the taxpayer upon audivinvestigation. This does not preclude the BIR from requésting other transaction files which may contein 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 compisterized accounting reverds should be submitted within the due date reflected on the document authorizing the audit (2, Letter of Authority, Audit Notice, ete). ‘The number of days within which the computerized accounting recorils have to be submitted shall not exceed five (5) days fiom reecipt of the document authorizing the investigation IF the taxpayer maintains accounting books and records in both electronic ond menual (hard= copy) formats, the Revenne Officers auditing said taxpayers may require the presentation of both electronic and manual baoks/rezords During verification process, the taxpayer is required to present the decuments supporting the entries made in the Computerized Accounting Systein (CAS), ‘The computerized accounting hooks/records shall be submitted to the concerned Revenue Officers, Access to the computerized accounting bookstecords shall be restricted to the Revenue Cificers assigned to handle the tax examination. After the report of investigation and the tax docket of the case has heen reviewed and approved by the authorized Revenue Official, the Revente Officers shall retum to the taxpayer their computerized accounting books/records intact and ia their original forn. Nonetheless, if th are discrepancies found npon text 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 hooks and pertinent secounting records that would serve as evidence or proof of the audit findings,SECTION 5. Requirements for Submission of Aecounting Books/Records in Electronic Format—The books of accounts ard other accounting records, documents, schedules, files and other data or information that arc required 10 be submitted by a taxpayer to the BIR under these regulations shall he those, but rot limited to electronic books, reporis, documents, files and data that hed heen produced using the computerized aceounting sysiem or components of a computerized accounting system that heve previously been evaluated and epproved by the Computerized Systems Evaluation Team (CSET), a team organized through RMO 29-2003 and shall be in electronic form, stored in recordable compact dises (CD-R), digital video dises (OVD- R) or other optical media, depending on the volume of the transactions or size of the business, and in @ format that is readable hy the BIR aucit 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 Iebeled with the name-of taxpayer, taxeble year, conten! 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 extemal labels should, likewise, indicate the application system/sofvrare, including the version number of the application system/software used to ereste their contents, ‘These should also be accompanied by a document describing the file attributes or layout, that is, the number of records in exch data file; the control totals for cach numeric field. where applicable; the record layouts and record lengths; ond the documentation of key control information, including the transaction cutoff dete end time. ‘A duly notarized certifiention in the form of an affidavit shall be executed by the taxpayer o: his authorized representative, attesting the completeness, accuraey and appropriateness of the computerized accounting hooks/records, in accordance with the keeping of books of accounts ‘ is for intemal revenue tax purposes, end should be submitted together with the accounting hooks, recortls, 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 requited 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 docaments. ‘The notarized certification shall be submitted in hard copy yet_prepared electronically in the Philippine available ane acceptable in he count and sulbmitted, as currently, legal documents are not However, whenever this facility beccmes otari7ed certification in electronic form may be allowed For the pruper 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 concemed Revenue Officers with an overview of the computerized accounting systems used caring the taxable period under audit. It is understocd 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 enhaneement to such computerized accounting system shall require approval of the BIR. pros) CF ISTSRTAL even RACORNS Dyviarey: ger 20 ai “emanimSECTION 6, Retention of Electroni¢ Docnments ‘and Electronie Files ~ Pursvant to Section 13 of RA No, 8752, the books of eczounts znd other accounting records, documents, files, schedules and other information submitted by @ 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 },) Retained in the format in which it wes generated, sent or received, or in a format wnich can be demonstrated to accurately represent the electronic document generated, sent or received. ‘The aforementioned bocks/records shall be retained in accordance with the mules on preservation of hooks of accounts and other accounting records provided in Section 235 in relation to Sections 203 and 222 of the NIRC af 1997, SECTION 7. Legal Recognition of Flectronic Documents — In relation to Scetion 7 of RA No, 8792, elecironic documents submitted for purposes of 2 tax aucit or investigation shall have the legal effect, validity or enforceability as any other document or legal writing subject to the following conditions: 8. Wan electronic document is ablé to meintain its integrity and reliability through time and can be authenticated for subsequent reference, in that — 1. The electionic document has remained complete and unaltered, apart . from the addition of any endorsement and any authorized change, of any change which arises in the normal course of communication, storage and ‘i display; and : 2. The electronic document can be relied upon for the purpose for which it was generated and forall the relevant circumstances: , Hen clectronic document has been presented or retained in its original form, in that - 1, ‘There enists a reliable assurance on the integrity of the document fram the time when it was first generated in its final form; and 2, That document is capable of being cisplayed to the person to whom it is to be presented, Under existing Inws and these regulations, an electronic document shall be the fanctional equivalent of a written document for evidentiary purposes. i eons) OF TTESIAL SEVEN ‘RECORDS DIVIBTON AM 0th el femnntySECTION 8. Compliance Enforcement — in instances where the taxpayer fki's to comply with the provisions of these I‘ezulations, the procedures prescribed in the issuance end enforeement of Suipoena Duces ecu shall be followed. SECTION 9. Fenalty Clause ~ Any violstion of the provisions of these Regulatiens shall be subject to the penalties provided for under the pertinent provisions of the NIRC. SECTION 10. Repealing Clause ~All exi or portions thereof that are inconsisten according, ing revenue regulations and other issuances t herewith are hereby revoked, repealed or amended SECTION 11. Rffeetivity Clause - These Regulations shall take effect afer fifteen (15) days following its publication in any newspaper of general circulation, MARGARITO&. TEVES Secretary of Finanee 2433 ‘Recommending approval: sobephanio BUNAG RRCORMS Drvrarny Di Ed bts foner of Internal Reventie