Title IX , Chapter I – Keeping of Books of Accounts and Records

Title IX – Compliance requirements

Chapter I – Keeping of Books of Accounts and records

SEC. 232.         Keeping of Books of Accounts. –

(A)       Corporations, Companies, Partnerships or Persons Required to Keep Books Of Accounts. – All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, That corporations, companies, partnerships or persons whose gross annual sales, earnings, receipts or output exceed Three million pesos (P3,000,000), shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements. (As amended by RA No. 10963 (December 19, 2017)).

(B)       Independent Certified Public Accountant Defined. – The term ‘Independent Certified Public Accountant,’ as used in the preceding paragraph, means an accountant who possesses the Independence as defined in the rules and regulations of the Board of Accountancy promulgated pursuant to Presidential Decree No. 692, otherwise known as the Revised Accountancy Law.

SECTION 233.  Subsidiary Books. – All corporations, companies, partnerships or persons keeping the books of accounts mentioned in the preceding Section may, at their option, keep subsidiary books as the needs of their business may require: Provided, That where such subsidiaries are kept, they shall form part of the accounting system of the taxpayer and shall be subject to the same rules and regulations as to their keeping, translation, production and inspection as are applicable to the journal and the ledger.

SECTION 234.  Language in which Books are to be Kept; Translation. – All such corporations, companies, partnerships or persons shall keep the books or records mentioned in Section 232 hereof in a native language, English or Spanish: Provided, however, That if in addition to said books or records the taxpayer keeps other books or records in a language other than a native language, English or Spanish, he shall make a true and complete translation of all the entries in such other books or records into a native language, English or Spanish, and the said translation must be made by the bookkeeper, or such taxpayer, or in his absence, by his manager and must be certified under oath as to its correctness by the  said bookkeeper or manager, and shall from an integral part of the aforesaid books of accounts. The keeping of such books or records in any language other than a native language, English or Spanish, is hereby prohibited.

SECTION 235.  Preservation of Books of 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: Provided, That for income tax purposes, such examination and inspection shall be made only once in a taxable year, except in the following cases:

• (a)        Fraud, irregularity or mistakes, as determined by the Commissioner;
• (b)       The taxpayer requests reinvestigation;
• (c)        Verification of compliance with withholding tax laws and regulations;
• (d)       Verification of capital gains tax liabilities; and
• (e)        In the exercise of the Commissioner’s power under Section 5(B) to obtain information from other persons in which case, another or separate examination and inspection may be made. Examination and inspection of books of accounts and other accounting records shall be done in the taxpayer’s office or place of business or in the office of the Bureau of Internal Revenue. All corporations, partnerships pr persons that retire from business shall, within ten (10) days from the date of retirement or within such period of time as may be allowed by the Commissioner in special cases, submit their books of accounts, including the subsidiary books and other accounting records to the Commissioner or any of his deputies for examination, after which they shall be returned. Corporations and partnerships contemplating dissolution must notify the Commissioner and shall not be dissolved until cleared of any tax liability.

Any provision of existing general or special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to examination by the Bureau of Internal Revenue for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if any.

(Manual encoding credits: Magdaleno Abdon, Sept. 2020)