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Amatterofrecord
ByWilfredoU.Villanueva
FirstPublishedinBusinessWorld(10/21/2013)
Recordsmanagementprogramsaregenerallynotanorganizationspriorityastheseusuallydonot
generateincome.Policiesandpracticesonhowrecordsarekeptandhandledalsovaryamong
companies.Inalargeenterprise,documentsareusuallystoredseparatelyaccordingtodivisionorsection,
e.g.,Finance,CorporatePlanning,Legal,Marketing,andSales.Insomemultinationalcompanies,there
isanestablishedcentralizedrecordsmanagementgroupthatnotonlyoverseestheindexing,storageand
retrievaloffiles,butsafeguardsvitalinformationabouttheorganization.
Awellorganizedrecordsmanagementsystemcontributestoacompanysoverallefficiencyand
productivity,andsupportsbettermanagementdecisions.WiththerecentissuancebytheBureauof
InternalRevenue(BIR)ofRevenueRegulations(RR)No.172013extendingtheperiodforpreserving
booksofaccountsandotheraccountingrecords,taxpayersnowhaveallthemorereasontocomeupwith
aneffectiverecordsmanagementsystemthatnotonlyenhancesserviceandprofitbutalsominimizes
litigationandreputationalrisks.
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RRNo.172013nowrequirestaxpayerstopreservealltheirbooksofaccountsandaccountingrecords
foraperiodof10years.Previously,taxpayerswereonlymandatedtodosountilthelapseofthe3year
periodwithinwhichtheBIRcanmakeanassessmentor,ifthereisapendingtaxauditinvestigation,
untilsuchexaminationhasbeendulyterminatedoruponexpirationofthewaiverofthestatuteof
limitationsthatthetaxpayerissuedinfavoroftheBIR.Booksofaccountsincludesubsidiarybooksand
otheraccountingrecordssuchasinvoices,receipts,vouchers,andreturns,andothersourcedocuments
supportingtheentriesinthebooksofaccounts.
AccordingtotheBIR,thelongerpreservationperiodwillallowthebureauaccesstothetaxpayers
accountingrecordsshoulditbeinvestigatedonthebasisoffalsity,fraudoromissioninitstaxreturns.
UnderSection222oftheTaxCode,incaseofafalseorfraudulentreturnwithintenttoevadetaxor
failuretofileareturn,thetaxmaybeassessedorproceedingincourtforcollectionofsuchtaxmaybe
filedwithoutassessment,atanytimewithin10yearsafterthediscoveryofthefalsity,fraudor
omission.ThisimpliesthattheremayhavebeeninstanceswhentheBIRcouldnotpursueafraud
investigationbecausesupportingdocumentshadalreadybeendisposedof.
Asidefrompursuingextraordinaryauditsandassessments,theextendedretentionperiodalsogivesthe
BIRmoreleewayinverifyingthebooksofaccountsandotherpertinentrecordsoftaxexempt
organizationsandgranteesoftaxincentives.
Notably,theindependentCertifiedPublicAccountant(CPA)whoauditedtherecordsandcertifiedthe
financialstatementsofthetaxpayerisequallyresponsibletopreservecopiesoftheauditedandcertified
financialstatementsfor10yearsfromtheduedateoffilingtheannualincometaxreturn,unlessalonger
retentionperiodisrequiredundertheTaxCodeorotherrelevantlaws.
Whiletherecordkeepingrequirementshavelongexistedinourtaxbooks,thisisthefirsttimethatithas
extendedtheretentionperiodto10years,perhapsconsistentwithitsobjectivetostrengthenits
enforcementdrive.
Thenewrequirementisevenmorestringentcomparedwithprevailingstatutes.Section52.11ofthe
SecuritiesRegulationsCode,forinstance,requiressecuritiesbrokerstomaintaincertainbooksand
recordsoftheirtransactionsandcustomersforaperiodofnotlessthan6years,thefirst2yearsinaplace
easilyaccessibleforexaminationbytheSecuritiesandExchangeCommission.TheAntiMoney
LaunderingLawrequiresthatrecordsofcoveredtransactionsbemaintainedandsafelystoredfor5years
fromthedateoftheaccountsortransaction.
Meanwhile,theInternationalOrganizationforStandardization(ISO)doesnotmandateaminimum
periodforrecordsretention,butallowscompaniestocomeupwiththeirownstandardsorpolicies.They
mustalsoensurethatsuchstandardsaremaintainedwithintheorganization.
AsfarasBIRisconcerned,booksofaccountsaretobekeptintact,unalteredandunmutilatedto
ensurethatalltaxesduetothegovernmentmaybereadilyandaccuratelyascertainedanddeterminedany
timeoftheyear.However,whatdoesthisnewrequirementmeanfortaxpayers?
First,thiswillmeanadditionalcost.WhileRRNo.909allowstaxpayerstomaintainelectronicrecords,
therearestrictrequirements,includingsecuringBIRapproval,beforeerecordscanbehonoredduringa
taxauditorinvestigation.WithouttheBIRapprovalfortheconversionofharddocumentstomicrofilm
orotherstorageonlyimagingsystems,taxexaminerscanonlyrelyonhardcopiesoforiginaldocuments.
Withmanualdocumentsasacceptableformofevidence,itisthereforenecessaryfortaxpayersto
designateanareawithinitspremisestostoreitsvoluminousoriginalrecords.Ifspaceisanissue,thenan
offsitewarehousemayhavetobeleasedtostorethesedocuments.Additionalmeasuresmayalsoneedto
beundertaken,suchasfireproofing,pestcontrolandsecurity.
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Second,asidefromstorage,considerablemanpowerinvestmentmayneedtobemadefortheupkeepof
therecords.Ideally,thepointpersonmustbecapablenotonlyofanalyzingandputtinginorderthe
currentmanualrecordkeepingsystem,butalsoknowledgeableinusingnewtechnologytoupgradethe
organizationssystem.
Third,thereisaneedtoestablishanimprovedsystemofaccountability.Maintainingcorporaterecords
shouldbeseenasnotjusttheresponsibilityoftherecordsgroupordivision,butofthewholeenterprise.
Recordsmustbekeptorderlydespitetheseparationofemployeeswhohavethesedocumentsincustody.
Ifthisisfosteredwithintheorganization,thenbettercompliancecanbeexpected.
Indeed,keepingacompanysrecordsforsuchalongtimeisnoeasytask.Wehave,infact,seen
companieswhohavestartedtorelaxor,attheveryleast,usetechnologyfortheirrecordkeepingpolicies
andpracticespreciselybecauseofissuesonproperstorage.Soonemightaskwhetherthisnew
requirementoftheBIRisanecessaryburden.Theprimaryreasonforextendingtheretentionperiodto
10yearsseemstobeinconnectionwiththeongoingcampaignoftheBIRtoweedouttaxcheats.Thisis,
ofcourse,acommendableeffort,butthen,assomequartersarenowsaying,itseemstoimplythatall
taxpayersaresuspectedofunlawfullydeprivingthegovernmentofmuchneededtaxrevenue.Theyask:
whydoeseveryoneneedtobesubjectedtothisburden?
Acompanysfilesembodyitsinstitutionalmemory,anassetthat,thoughirreplaceable,isoften
overlooked.Managementdecisionsaremadebasedonthenumeroustransactionsacompanymakes
daily.Thus,inanycase,whilethenewretentionrulesmayprovetobetedious,timeconsuming,and
expensivetotaxpayers,thismayalsobeseenasanopportunityfororganizationstoinvestinareliable
recordsmanagementsystemandprofessionalscrucialtosafeguardingthisinstitutionalmemory.
WilfredoU.VillanuevaistheDeputyHeadoftheTaxDivisionofSGV&Co.
Thisarticleisforgeneralinformationonlyandisnotasubstituteforprofessionaladvicewherethefactsandcircumstanceswarrant.Theviewsandopinion
expressedabovearethoseoftheauthoranddonotnecessarilyrepresenttheviewsofSGV&Co.

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