Dear PAO,

As business owner/taxpayer, how long should accounting books, records and other pertinent documents be kept/ preserved for tax purposes? Thank you.

Dear Jolie,

Please be informed of Section 235 of the National Internal Revenue Code, to wit:

“Sec. 235. Preservation of Books and Accounts and Other Accounting Records. - All the books of accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, shall be preserved by them for a period beginning from the last entry in each book until the last day prescribed by Section 203 within which the Commissioner is authorized to make an assessment. The said books and records shall be subject to examination and inspection by internal revenue officers: x x x”

Apropos, Revenue Regulations (RR) 17-2013, as amended by RR 5-2014, which tackles the preservation of books of accounts and other accounting records, reads as follows:

“Section 2. Retention Periods. – All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records, for a period of ten (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 (paper) 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 hereof. x x x

“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.

x x x” (Emphasis and underscoring supplied)

As can be clearly gleaned from the foregoing, all taxpayers — as a general rule — are required to keep/preserve all accounting books, records, invoices, receipts and other supporting papers and documents 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.

Note that although the regulation requires a 10-year retention period of records, hard copies are only required to be retained during the first five years. After such period, retaining an electronic copy of the records would suffice. As an exception to the above, if there is a pending protest of claim for tax credit or refund, the concerned taxpayer is required to retain the records for as long as the case is still pending, even if it goes beyond the 10-year retention period. Under the regulations, what is required to be kept are books of accounts, including subsidiary books and other accounting records. The term “other accounting records” includes the corresponding invoices, receipts, vouchers and returns, and other source documents supporting the entries in the book of accounts. (Id.) We hope that we were able to answer your queries.

This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.