July 30, 2014

REVENUE REGULATIONS NO. 05-14 [α1]

SUBJECT : Amending Revenue Regulations No. 17-2013 Dealing with the "Preservation of Books
of Accounts and Other Accounting Records"

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Section 2 of Revenue Regulations No. 17-2013 [α2] is hereby amended to read as
follows:

"SEC. 2. Retention Periods. — All taxpayers are required to preserve their books of
accounts, including subsidiary books and other accounting records, for a period of ten (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: Provided that, within the first five (5) 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 taxpayer shall retain hardcopies of the books of accounts, including subsidiary
books and other accounting records. Thereafter, the taxpayer may retain only an electronic
copy of the hardcopy (paper) of the books of accounts, subsidiary books and other
accounting records in an electronic storage system which complies with the requirements set
forth under Section 2-A hereof. aHcACT

The term "other accounting records" includes the corresponding invoices, receipts,
vouchers and returns, and other source documents supporting the entries in the book of
accounts.

The term "last entry" refers to a particular business transaction or an item thereof that
is entered or posted last or latest in the books of accounts when the same was closed.

The foregoing notwithstanding, if the taxpayer has any 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/her/its books of accounts and other accounting records
until the case is finally resolved.

Finally, unless a longer period of retention is required under the NIRC 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 electronic copies of the audited and certified financial
statements including the audit working papers for a period of ten (10) years from the due date
of filing the annual income tax return or the actual date of filing thereof, whichever comes
later."
DCaEAS
 SECTION 2. A new Section is hereby inserted after Section 2 of Revenue Regulations No. 17-2013
to read as follows:
"SEC. 2-A. Electronic Storage System. — An electronic storage system to be used by
the taxpayer or independent CPA for preserving books of accounts and other accounting
records shall:

1) Ensure an accurate and complete transfer of the images of the hardcopy of the books
of accounts, including subsidiary books and other accounting records to an
electronic storage media; and

2) Index, store, preserve, retrieve, and reproduce the electronically stored images of the
hardcopy of the books of accounts, subsidiary books and other accounting
records. ACaTIc

The electronic storage system must include:

1) Reasonable controls to ensure the integrity, accuracy, and reliability of the electronic
storage system;

2) Reasonable controls to prevent and detect any unauthorized creation of, addition to,
alteration of, deletion of, or deterioration of electronically stored books of
accounts, subsidiary books and other accounting records;

3) An inspection and quality assurance program evidenced by regular evaluations of the

electronic storage system, including periodic checks of electronically stored
books of accounts, subsidiary books and other accounting records;

4) A retrieval system that includes an indexing system; and

5) The ability to reproduce legible and readable hardcopies of electronically stored

books of accounts, subsidiary books and other accounting records. LLpr

All books of accounts, subsidiary books and other accounting records reproduced by
the electronic storage system must exhibit a high degree of legibility and readability when
displayed on a video display terminal and when reproduced in hardcopy.
The term "legibility" means the observer must be able to identify all letters and
numerals positively and quickly to the exclusion of all other letters or numerals.

The term "readability" means that the observer must be able to recognize a group of
letters or numerals as words or complete numbers. The taxpayer must ensure that the
reproduction process maintains the legibility and readability of the electronically stored books
of accounts, subsidiary books and other accounting records. IESAac

For each electronic storage system used, the taxpayer must maintain, and make
available to the Bureau of Internal Revenue upon request, complete descriptions of: (a) the
electronic storage system, including all procedures relating to its use; and (b) the indexing
system. For purposes of these Revenue Regulations, an "indexing system" is a system that
permits the identification and retrieval for viewing or reproducing of relevant books of
accounts, subsidiary books and other accounting records maintained in an electronic storage
 system. For example, an indexing system might consist of assigning each electronically
stored document a unique identification number and maintaining a separate database that
contains descriptions of all electronically stored books and records along with their
identification numbers. In addition, any system used to maintain, organize, or coordinate
multiple electronic storage systems is treated as an indexing system under these Revenue
Regulations. The requirement to maintain an indexing system will be satisfied if the indexing
system is functionally comparable to a reasonable hardcopy filing system. The requirement to
maintain an indexing system does not require that a separate electronically stored books and
records description database be maintained if comparable results can be achieved without a
separate description database. Reasonable controls must be undertaken to protect the
indexing system against the unauthorized creation of, addition to, alteration of, deletion of, or
deterioration of any entries.

The Revenue District Office who has jurisdiction over the taxpayer may periodically
initiate tests of a taxpayer's electronic storage system. These tests may include an evaluation
(by actual use) of a taxpayer's equipment and software, as well as the procedures used by a
taxpayer to prepare, record, transfer, index, store, preserve, retrieve, and reproduce
electronically stored documents. The Revenue District Office may choose to review the
internal controls, security procedures, and documentation associated with the taxpayer's
electronic storage system. The Revenue Officer duly authorized to conduct the test must
inform the taxpayer within three (3) days from the conclusion of the test the results thereof,
otherwise, he shall be liable administratively for failure to inform the taxpayer. The taxpayer
may appeal to the Regional Director within ten (10) days from receipt of any adverse findings
derived from the tests conducted. The Regional Director shall resolve the appeal within thirty
(30) days from the submission of the appeal. aTEADI

The aforementioned tests described in the immediately preceding paragraph do not

qualify as an "examination" or "inspection" of the books and records within the meaning of
Section 235 [α3] of the Tax Code of 1997 because these tests do not involve a determination
of the tax liability of a taxpayer for a particular taxable period.
A taxpayer's electronic storage system that fails to meet the requirements of this
Section shall maintain and preserve the original hardcopy of their books of accounts,
subsidiary books and other accounting records."

SECTION 3. Repealing Clause. — The provisions of all internal revenue issuances as well as rulings
inconsistent herewith are hereby amended or revoked accordingly.

SECTION 4. Effectivity. — These Regulations shall take effect fifteen (15) days after its publication in
at least two (2) newspapers of general circulation. SCHATc

(SGD.) CESAR V. PURISIMA

Secretary of Finance

Recommending Approval:
 (SGD.) KIM S. JACINTO-HENARES
Commissioner of Internal Revenue

Published in Manila Bulletin and The Philippine Star on August 1, 2014.