REVENUE REGULATIONS NO. 5-2014 issued on July 30, 2014 amends Revenue Regulations No. 17-2013, which deals with the “Preservation of Books of Accounts and Other Accounting Records.” All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records, for a period of 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 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 of this Regulations. 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 National Internal Revenue Code 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 10 years from the due date of filing the annual Income Tax return or the actual date of filing thereof, whichever comes later. An electronic storage system to be used by the taxpayer or independent CPA for preserving books of accounts and other accounting records shall: a. 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 b. Index, store, preserve, retrieve and reproduce the electronically stored images of the hardcopy of the books of accounts, subsidiary books and other accounting records. The electronic storage system must include the following: a. Reasonable controls to ensure the integrity, accuracy and reliability of the electronic storage system; b. 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; c. 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; d. A retrieval system that includes an indexing system; and e. The ability to reproduce legible and readable hardcopies of electronically stored books of accounts, subsidiary books and other accounting records. 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. For each electronic storage system used, the taxpayer must maintain, and make available to the BIR upon request, complete descriptions of: (a) the electronic storage system, including all procedures relating to its use; and (b) the indexing 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. The Revenue District Office (RDO) 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 RDO 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 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 10 days from receipt of any adverse findings derived from the tests conducted. The Regional Director shall resolve the appeal within 30 days from the submission of the appeal. A taxpayer’s electronic storage system that fails to meet the said requirements shall maintain and preserve the original hardcopy of their books of accounts, subsidiary books and other accounting records.