Maintenance and retention of electronic records

Among the salient fea­tures of the reg­u­la­tions are:

A.            Gen­eral require­ments in keep­ing elec­tronic records. A tax­payer must main­tain all records that are nec­es­sary for the deter­mi­na­tion of his cor­rect tax lia­bil­ity. These records must be made avail­able on request by the Com­mis­sioner of Inter­nal Rev­enue or its autho­rized representatives.

If a tax­payer retains records in both elec­tronic and hard-copy for­mats, the tax­payer shall make avail­able to the BIR such records in elec­tronic for­mat upon request of the BIR. The tax­payer may demon­strate tax com­pli­ance with tra­di­tional hard-copy doc­u­ments or repro­duc­tions, whether or not such tax­payer has retained or has the capa­bil­ity to retain records on elec­tronic or other stor­age media, but he/it shall not be relieved of the respon­si­bil­ity from his/its oblig­a­tion to com­ply with the require­ment to make avail­able records in elec­tronic format.

B.            Adop­tion of CAS for large tax­pay­ers. All large tax­pay­ers clas­si­fied under RR 01–98 are now required to adopt CAS in main­tain­ing their books of accounts and account­ing records.

C.            Main­te­nance and loca­tion of elec­tronic records. The taxpayer’s com­puter hard­ware or soft­ware should accom­mo­date the extrac­tion and con­ver­sion of retained records in accor­dance with exist­ing BIR regulations.

Elec­tronic records must be kept at the taxpayer’s place of busi­ness in the Philip­pines or other places des­ig­nated by the Com­mis­sioner of Inter­nal Rev­enue. Records kept out­side the Philip­pines and accessed elec­tron­i­cally from the Philip­pines are not con­sid­ered to be records in the Philip­pines. How­ever, the BIR may accept a copy of such records if made avail­able in the Philip­pines and sub­mit­ted to the BIR in an elec­tron­i­cally read­able and usable for­mat, and con­tain ade­quate details to sup­port the taxpayer’s tax returns.

D.            Reten­tion of hard-copy records and source doc­u­ments. Tax­pay­ers must retain hard-copy records that are cre­ated or received in the ordi­nary course of busi­ness, unless such hard-copy records are allowed to be retained, using alter­na­tive stor­age media such as micro­film, micro­fiche, etc.

Tax­pay­ers keep­ing elec­tronic records must also retain source doc­u­ments. A source doc­u­ment includes items such as sales invoices, cash reg­is­ter receipts, for­mal writ­ten con­tracts, credit card receipts, deliv­ery slips, deposit slips, work orders, dock­ets, checks, bank state­ments, tax returns, and could also include email, and other gen­eral cor­re­spon­dence where rel­e­vant for tax purposes.

E.            Alter­na­tive Stor­age Media. Tax­pay­ers may, how­ever, con­vert hard-copy doc­u­ments received or pro­duced in the nor­mal course of busi­ness and required to be retained under this reg­u­la­tion to micro­film, micro­fiche or other storage-only imag­ing sys­tems and may dis­card the orig­i­nal hard-copy doc­u­ments, pro­vided the con­di­tions here­un­der enu­mer­ated are met.

How­ever, a prior per­mit from the BIR is required before use of micro­film, micro­fiche and other storage-only imag­ing systems.

It must be noted, how­ever, that these reg­u­la­tions are for BIR pur­poses only and do not extend to other gov­ern­ment agen­cies that may require other legal format/requirements for doc­u­men­ta­tion pur­poses. Thus, Sec­tion 9.1 of these reg­u­la­tions specif­i­cally pro­vides that “the pro­vi­sions of this reg­u­la­tion do not relieve tax­pay­ers of the respon­si­bil­ity to retain hard– copy records that are cre­ated or received in the ordi­nary course of busi­ness, as required by exist­ing law and regulations.”

Specif­i­cally, Repub­lic Act 8792, or the Elec­tronic Com­merce Act of 2000, defines “electronic-data mes­sage” and “elec­tronic doc­u­ment.” As such, infor­ma­tion shall not be denied valid­ity or enforce­abil­ity solely on the ground that it is in the form of an elec­tronic data mes­sage or elec­tronic doc­u­ment, pur­port­ing to give rise to such legal effect. Electronic-data mes­sages or elec­tronic doc­u­ments shall have the legal effect, valid­ity or enforce­abil­ity as any other doc­u­ment or legal writ­ing. Thus, for evi­den­tiary pur­poses, an elec­tronic doc­u­ment shall be the func­tional equiv­a­lent of a writ­ten document.

In any legal pro­ceed­ings, there­fore, noth­ing in the appli­ca­tion of the rules on evi­dence shall deny the admis­si­bil­ity of an electronic-data mes­sage or elec­tronic doc­u­ment in evi­dence (a) on the sole ground that it is in elec­tronic form; or (b) on the ground that it is not in the stan­dard writ­ten form. But, of course, the per­son seek­ing to intro­duce an electronic-data mes­sage or elec­tronic doc­u­ment in any legal pro­ceed­ing has the bur­den of prov­ing its authen­tic­ity by evi­dence capa­ble of sup­port­ing a find­ing that the electronic-data mes­sage or elec­tronic doc­u­ment is what the per­son claims it to be. The authen­tic­ity may be proved by show­ing the integrity of the infor­ma­tion and com­mu­ni­ca­tion sys­tem in which it is recorded or stored or the reli­a­bil­ity, for exam­ple, of the man­ner or method in which it is com­mu­ni­cated, gen­er­ated or stored.

The author is a senior asso­ciate of Du-Baladad and Asso­ciates Law Offices (BDB Law). If you have any com­ments or ques­tions con­cern­ing the arti­cle, you can e-mail the author at deo.saludario@bdblaw.com.