For how long should a company retain its accounting books and records? Where should the records be kept? Do they have to be in hard copy or can they be stored online?
The Bureau of Internal Revenue, or BIR, has rules and guidelines about the preservation of accounting records. Businesses in the Philippines must be aware of them!
In this article, we explain the key pieces of legislation relating to the storage of accounting books and records. We also outline the relevant penalties that a company might incur for non-compliance.
- 1 BIR Regulations
- 2 What type of accounting records need to be preserved?
- 3 For how long does a company have to store its accounting books and records?
- 4 What about companies that do their accounting and bookkeeping through online cloud accounting solutions?
- 5 Where must accounting records stored?
- 6 Penalties for violations
- 7 Let us help you maintain and preserve your books
The two key Regulations regarding the preservation of accounting books and records by businesses in the Philippines are:
This Regulation sets out the primary guidelines for the retention of accounting books and records in the Philippines. It was issued in order to align with various sections of the National Internal Revenue Code of 1997. This Regulation was later amended in 2014.
- Revenue Regulations No. 5 – 2014 – Amending Revenue Regulations No.17-2013 dealing with the “Preservation of Books of Accounts and Other Accounting Records”.
These Regulations were introduced primarily to facilitate the modern approach taken by companies to process their accounting and finance services and store their accounting records electronically via online accounting solutions (e.g. Xero, Quickbooks Online) and cloud technology.
What type of accounting records need to be preserved?
As a basic rule, all accounting-related records relevant to each transaction performed by filipino businesses must be preserved. The BIR requires that records be maintained “intact, unaltered and unmutilated.”
Revenue Regulation 17-2013 specifically provides that the following documents must be retained by businesses:
a. Books of Accounts – these are the books where business transactions are recorded and maintained. General ledgers and general journals are primary records within the books of accounts. Check out our article on books of accounts in the Philippines for more information
b. Subsidiary books – these are books of accounts where similar transactions are recorded in chronological order. Examples of these are cash receipts journal, cash disbursement journal, sales journal and purchases journal
c. Other accounting records – “other accounting records” include invoices, receipts, vouchers, returns and other source documents that support entries into the books of accounts
d. Registers – these are accounting records that illustrate the transactions for each account together with the running balance
e. Vouchers – this is an accounting document used to prepare payments to creditors
For how long does a company have to store its accounting books and records?
Why did the BIR select a period of 10 years?
- Under Section 203 of the National Internal Revenue Code, the government can examine the records of a taxpayer for 3 years after the tax return (or a subsequent amended tax return) has been filed. The 3-year period can be extended in certain circumstances.
- However, for cases of false or fraudulent returns with an intent to evade tax or for failures to file a return, the BIR has the power to assess tax documents for a period of 10 years after the discovery of the falsity, fraud or omission.
For this reason, it makes sense for the BIR to set a retention period of 10 years as it covers both of the above situations.
What about companies that do their accounting and bookkeeping through online cloud accounting solutions?
Companies that use cloud accounting solutions or computerised accounting platforms can store their records electronically. However, there are certain rules they must follow.
Importantly, for the first 5 years, companies must also preserve hard copies. This is based on the amendment to RR 17-2013 made by Revenue Regulation 5-2014 which provides the following:
- For the first 5 years, the preservation of accounting records must be in hard copy. While holding electronic copies also is not prohibited, there must be corresponding hard copies during this period.
- For the 6th to 10th year, accounting records may be preserved in electronic form only. Hard copies are no longer required.
RR 05-2014 outlines additional requirements about the format in which electronic records must be stored. For electronically stored records, the following must be observed by companies:
- Any electronic images of hard copy accounting records must be clear, accurate and complete
- The electronic storage system must be able to index, store, preserve, retrieve and reproduce the electronic records.
RR 5-2014 also provides requirements around the safeguarding and maintenance of electronic records. The electronic storage system must:
a. Have effective and efficient controls to maintain integrity, accuracy and reliability
b. Prevent unauthorized access, alteration, deletion or deterioration of electronically stored data
c. Have personnel who will regularly inspect and monitor the storage system
d. Have a retrieval system that includes an indexing system
e. Have the ability to reproduce legible and readable hardcopies of the electronically stored documents
If your electronic storage does not adhere to these requirements, the company will be obliged to keep hard copies for the whole duration of the 10-year retention period or implement a more advanced storage system.
Remember, being able to store records electronically is just one of the benefits of using a cloud accounting system in the Philippines. Cloud accounting can save your business and time in several ways. Here are 8 more reasons why companies in the Philippines should embrace cloud accounting technology for their accounting, tax and finance services.
Where must accounting records stored?
All necessary accounting documents and records must be kept at all times in the place of business of the taxpayer during the retention period.
Examination and Inspection
Companies should be aware that a taxpayer must deliver books and records for examination or inspection upon the demand of any internal revenue officer.
The BIR requires this so they can inspect records in order to check compliance with tax legislation, tax exemptions and examine potential tax liabilities.
The BIR can request any accounting records during regular audits, extraordinary audits, by the power of BIR Commissioner under the NIRC.
Can the BIR take a company’s records and books away from a company’s premises? Yes. The BIR can take documents and conduct their inspection at the BIR offices.
Penalties for violations
Here are some potential penalties that can arise if a company fails to follow the BIR rules relating to the retention of accounting records:
- Section 266 of NIRC:
For failure to reproduce records required by the BIR, a penalty of not less than P5,000 but not more than P10,000, and possible imprisonment of not less than 1 year but not more than 2 years.
- Section 275 of the NIRC:
For a violation of any provision of the NIRC, a fine of not more than P1,000 or imprisonment of not more than 6 months, or both.
- Republic Act No. 10021 (Exchange of Information on Tax Matters Act of 2009):
Willful refusal to supply required documents shall be punished by a fine of not less than P50,000 but not more than P100,000, or imprisonment of not less than 2 years but not more than 5 years, or both.
Let us help you maintain and preserve your books
A company must consider a wide range of matters to achieve tax compliance in the Philippines. While the preservation of accounting records is just one element, it is an important one. Without records, it can be difficult for a company to demonstrate compliance and adherence to tax regulations.
So it is in the interests of a company to comply!
The CloudCfo team is always on top of their clients’ tax compliance requirements. We provide our clients with the latest updates and issuances from the BIR, SEC, DOLE and other government bodies. CloudCfo aims to help its clients grow their businesses while ensuring compliance at the same time.
We are a trusted and professional provider offering the highest level of accounting, bookkeeping, tax and compliance services to companies in the Philippines. Visit us at cloudcfo.ph or contact us at email@example.com for more information on how we can support your business here in the Philippines.
DISCLAIMER: This article is strictly for general information purposes only. Nothing in this article constitutes or intends to constitute financial, accounting, regulatory or legal advice and must not be used as a substitute for professional advice. It is still necessary to consult your relevant professional adviser regarding any specific matter referenced above.
For the first 5 years, the preservation of accounting records must be in hard copy. While holding electronic copies also is not prohibited, there must be corresponding hard copies during this period. For the 6th to 10th year, accounting records may be preserved in electronic form only.How long do you have to keep accounting records in the Philippines? ›
7653 and/or the applicable provisions of the Revised Penal Code. Records shall be retained for a period of at least five (5) years, unless they are otherwise required by law or other regulations, or as directed by the Bangko Sentral to be retained for a longer period.How long should employee records be kept in the Philippines? ›
All employment records required to be kept by employers must be preserved for at least three years from the date of the last entry in the records.How long should accounting documents be kept? ›
Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.What records must be kept for 10 years? ›
For example, documents such as bills of sale, permits, licenses, contracts, deeds and titles, mortgages, and stock and bond records should be kept permanently. However, canceled leases and notes receivable can be kept for 10 years after cancellation.
Exposure records must be maintained for 30 years. Medical records must be maintained for the duration of employment plus 30 years.How long are financial firms required to keep records? ›
The length of time your broker must keep records depends on the type of record. For example, brokers must retain blotters (records containing details of all purchases and sales of securities) for at least six years. But they must keep copies of trade confirmations for only three years.What is the records management law in the Philippines? ›
What is Republic Act 9470? Republic Act 9470, otherwise known as the "National Archives of the Philippines Act of 2007", is an Act to strengthen the system of management and administration of archival records, establishing for the purpose the National Archives of the Philippines, and for other purposes.Why keep employee records 7 years? ›
Often, employers will use a 7-year rule for purging terminated employee files as this typically covers state and federal statutes of limitations; although shorter retention periods may suffice for some records such as I-9 forms and longer periods may apply to other records such as OSHA exposure records.How many years should auditors in the Philippines maintain their workpapers and documents? ›
The auditor must retain audit documentation for seven years from the date the auditor grants permission to use the auditor's report in connection with the issuance of the company's financial statements ( report release date ), unless a longer period of time is required by law.
How far back can the IRS go to audit my return? Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years.Do banks destroy records after 7 years? ›
Bank Secrecy Act: Documents must be retained for 5 years under the BSA/AML requirements. Each type of document has specific instructions with this act: All CTRs and SARs must be retained 5 years after filing. Records of every cashier and other official check of $3,000 or more must be stored for 5 years after issuance.Do I need to keep bank statements for 7 years? ›
Knowing that, a good rule of thumb is to save any document that verifies information on your tax return—including Forms W-2 and 1099, bank and brokerage statements, tuition payments and charitable donation receipts—for three to seven years.What are five 5 kinds of records that must be kept? ›
- Cash register tapes.
- Deposit information (cash and credit sales)
- Receipt books.
- Forms 1099-MISC.
Most bank statements should be kept accessible in hard copy or electronic form for one year, after which they can be shredded. Anything tax-related such as proof of charitable donations should be kept for at least three years.What are 3 types of records that might be kept? ›
- Minutes. ...
- Notice of meetings. ...
- Certificate of Incorporation. ...
- Financial records. ...
- Annual report. ...
- Employment records. ...
- Safety records. ...
- Insurance records.
Permanent RecordsPermanent records are records that must be kept indefinitely.How long does the IRS require a business to keep records? ›
The records should substantiate both your income and expenses. If you have employees, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.What to keep after closing business? ›
- Federal, state, and local tax returns and supporting documentation. ...
- Employment tax records and supporting documentation. ...
- Employment records. ...
- Asset records. ...
- Insurance files. ...
- Business documents. ...
- Financial records.
Accounting and Tax Records
For that reason, you should keep most income tax records for seven years.
- Implement a document management system. ...
- Check for record retention mandates. ...
- Choose accounting and payroll software that generate records. ...
- Match records to transactions during bank reconciliations. ...
- Back up and secure your records.
Firms are required to store legible, true, accurate and complete copies of their books and records and to protect the integrity of the books and records from the time the books and records are created or received throughout the applicable retention period.What are the four 4 characteristics of records? ›
Based on this study the essential characteristics of records were identified as context, form, organization, structure and version/copy.Is recording without consent illegal in Philippines? ›
Can You Record Conversations in The Philippines? The Philippines is a two-party consent state which means you must obtain the consent of all the parties to a conversation before recording.What documents are in the National Archives of the Philippines? ›
- Extra Judicial Settlement of Estate of Pascual David. ...
- Deed of Sale. ...
- World War II Documents in relation to Guerilla Movements in Northern Luzon. ...
- Certification of Notarization : Deed of Absolute Sale. ...
- Birth Certificate. ...
- Marriage Certificate. ...
- Marriage Certificate. ...
- Marriage Certificate.
Labor Code 1174 requires California employers to preserve and keep all employee payroll records for at least three years and to keep a record of the names and addresses of all current employees. Employers also must allow the Division of Labor Standards Enforcement free access and inspection of these records.What documents should not be in a personnel file? ›
- Pre-employment records (with the exception of the application and resume)
- Monthly attendance transaction documents.
- Whistleblower complaints, notes generated from informal discrimination complaint investigations, Ombuds, or Campus Climate.
Employers should keep all job-related documentation such as hiring records, performance reviews, disciplinary actions and job descriptions in an employee's general personnel file. Consider whether the document would be relevant to a supervisor who may review this file when making employment decisions.How many years of audited financials do you need to go public? ›
In addition, if a company has acquired or is in the process of acquiring a material business, it may need to include in its offering documents up to three years of audited financial statements (and related auditors' consents) of the acquired, or soon-to-be-acquired, entity.Is audit mandatory in Philippines? ›
If you own a business in the Philippines, you must submit audited financial statements regularly. This enables the Philippine government to see how a company manages its finances and to know if the business abides by the rules and requirements.
Most lawyers, accountants and bookkeeping services recommend keeping original documents for at least seven years. As a rule of thumb, seven years is sufficient time for defending tax audits, lawsuits and potential claims.Who gets audited by IRS the most? ›
Who gets audited by the IRS the most? In terms of income levels, the IRS in recent years has audited taxpayers with incomes below $25,000 and above $500,000 at higher-than-average rates, according to government data.Can the IRS collect after 10 years? ›
Internal Revenue Code section 6502 provides that the length of the period for collection after assessment of a tax liability is 10 years. The collection statute expiration ends the government's right to pursue collection of a liability. The period for collection expires 90 days after the date specified in the waiver.What are red flags for the IRS? ›
Some red flags for an audit are round numbers, missing income, excessive deductions or credits, unreported income and refundable tax credits. The best defense is proper documentation and receipts, tax experts say.Do banks keep records for 20 years? ›
For any deposit over $100, banks must keep records for at least five years. Banks may retain these records for longer periods if they choose to do so.Can I get bank records from 20 years ago? ›
It may take some time, but your banking institution should have retained the records of your transactions. Go to your bank and put in a request for your old statements. Give them the from and to dates and they will let you know when they can mail the records to you.What happens to bank account after 10 years? ›
Your money can be recovered. As per RBI guidelines, a savings or current account becomes 'inoperative' without transactions for two years. If inoperative for 10 years, the account's balance and interest are transferred to the Depositors' Education and Awareness Fund, which was launched by the RBI in 2014.Should I shred 20 year old bank statements? ›
Old Bank Statements
Even if they're old bank statements, they should be shredded. Your name, address, phone number and bank account information are in those statements, along with your habits, purchases and banking history. Even if the account is closed, shred it anyway.
1. IRS Audits. As we mentioned above, the IRS can audit your tax returns for a certain period. If the IRS conducts an audit and you don't have documentation to back up your tax claims, it can be extremely difficult to prove that the agency made a mistake.How long does bank of America keep records? ›
We keep copies of your statements for 7 years. If you are an Online Banking customer, you can sign into Online Banking, and select Statements & Documents under the Accounts tab, then go to the Request statements tab and select Order a paper statement copy.
You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Additional evidence is required for travel, entertainment, gifts, and auto expenses.Does the IRS accept bank statements as receipts? ›
They require any form of acceptable proof such as receipts, bank statements, credit card statements, cancelled checks, bills or invoices from suppliers and service providers. Without the appropriate documentation, the IRS won't allow your deductions. Remember, it's better to be safe than sorry.How long should you keep credit card receipts? ›
The IRS recommends that you hold onto receipts for at least three years.Do I need to keep old 401k statements? ›
You should keep retirement plan records until the trust or IRA has paid all benefits and enough time has passed that the plan won't be audited. Retirement plans are designed to be long-term programs for participants to accumulate and receive benefits at retirement.Do I need to keep old home insurance policies? ›
In general, if you don't have any open claims, you don't need to keep old, expired insurance policies. However, if you have any open claims or have been involved in an incident that may result in a claim, keep all paperwork related to the incident and your policy until the claim is resolved.What are the two common tools of record keeping? ›
There are two main ways in which business records can be kept: manual record keeping and computerized (or automated) record keeping.What are the two main types of accounting records? ›
Accounting records generally come in two forms: single entry and double entry.What are the two methods of maintaining records? ›
Manual recordkeeping involves maintaining records by hand, using pen and paper, while digital recordkeeping involves using electronic tools such as spreadsheets, databases, or accounting software to keep records.How long do you have to keep tax records for a CPA? ›
At a minimum, the books and records should be maintained until the expiration of the statute of limitations, including extensions, for each tax year. The statute of limitations is generally three years from the date a taxpayer files his or her return.Are Philippine companies required to report financial statements annually? ›
Under the Bureau of Internal Revenue (BIR), corporations, partnerships, or individuals earning gross sales of more than P3,000,000 per year must submit an Audited Financial Statement to the BIR each year.
For any deposit over $100, banks must keep records for at least five years. Banks may retain these records for longer periods if they choose to do so.Does the IRS destroy tax records after 7 years? ›
Office of Primary Responsibility: Retire to the Federal Records Center when five (5) years old. Destroy when ten (10) years old. All other offices/Copies: Destroy when three (3) years old.What is the IRS 6 year rule? ›
If you omitted more than 25% of your gross income from a tax return, the time the IRS can assess additional tax increases from three to six years from the date your tax return was filed. If you file a false or fraudulent return with the intent to evade tax, the IRS has an unlimited amount of time to assess tax.What accounting standards are followed in Philippines? ›
The Philippines has adopted the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as PFRSs. Unaccompanied IFRSs may be downloaded from the IASB website free of charge.How much is annual report Philippines? ›
Foreigners who will report to the BI offices are required to register with the BI's online registration system via http://e-services.immigration.gov.ph. They are also required to present their original ACR I-Card and valid passport as well as pay the PHP300 annual report fee and the PHP10 legal research fee.What is financial reporting standard in the Philippines? ›
The Philippine Financial Reporting Standards (PFRS)/Philippine Accounting Standards (PAS) are the new set of Generally Accepted Accounting Principles (GAAP) issued by the Accounting Standards Council (ASC) to govern the preparation of financial statements.How many years can an auditor audit the same company in the Philippines? ›
This external auditor has to be rotated every 5 years. In the case of an auditing firm, the signing partner also has to be rotated for public companies and secondary licensees every five years.Can I get a bank statement from 10 years ago? ›
If you need bank statements that are older than 7 years, you will need to contact the bank directly. Each bank has their own process for requesting old statements, so you will need to call or visit the bank's website to find out more information. In some cases, the bank may charge a fee for retrieving old statements.How far back does bank of America keep records? ›
We keep copies of your statements for 7 years. If you are an Online Banking customer, you can sign into Online Banking, and select Statements & Documents under the Accounts tab, then go to the Request statements tab and select Order a paper statement copy.How long should you keep monthly statements and bills? ›
Keep for a year or less – unless you are deducting an expense on your tax return: Monthly utility/cable/phone bills: Discard these once you know everything is correct. Credit card statements: Just like your monthly bills, you can discard these once you know everything is correct.