1 REVENUE REGULATIONS NO. 16-2006 issued on October 20, 2006 prescribes 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 the National Internal Revenue Code (NIRC) of 1997 in relation to Republic Act (RA) No. 8792. The books of accounts and other accounting records, documents, schedules, and other information submitted by a taxpayer in electronic form, collectively referred to as computerized accounting books/records may be examined by duly authorized Revenue Officers (ROs) and Bureau of Internal Revenue (BIR) officials in the course of a tax audit or investigation of the taxpayer. 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. The books of accounts and other accounting records in electronic format that were submitted and registered with the concerned BIR office within 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 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 ROs 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 ROs. Access to the computerized accounting books/records shall be restricted to the ROs 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 ROs shall return to the taxpayer their computerized accounting books/records intact and in their original form. Nonetheless, if there are discrepancies found during tax audit that results to tax assessments, the ROs/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. The taxpayer under investigation is required to provide the concerned ROs 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. Any subsequent change or enhancement to such computerized accounting system shall require approval of the BIR. 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 2 a computerized accounting system that have previously been evaluated and approved by the Bureau’s Computerized Systems Evaluation Team (CSET), 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. 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 ROs to acknowledge receipt of the electronic files and documents. A duly notarized certification in the form of an affidavit shall be executed by the taxpayer or his authorized representative, attesting to 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 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. 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: a. Be retained in their original form; b. Remain accessible so as to be usable for subsequent reference; and c. Be 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. 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 – i. 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 ii. The electronic document can be relied upon for the purpose for which it was generated and for all the relevant circumstances. 3 b. If an electronic document has been presented or retained in its original form, in that – i. There exists a reliable assurance on the integrity of the document from the time when it was first generated in its final form; and ii. 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. In instances where the taxpayer fails to comply with the provisions of these Regulations, the procedures prescribed in the Regulations and enforcement of Subpoena Duces Tecum shall be followed.