There are many considerations when it comes to starting a business, such as choosing a location, hiring the right people, and marketing the product. When it comes to the Bureau of Internal Revenue (BIR), registering the books of accounts is an important requirement. A taxpayer can choose manual books, loose-leaf, or computerized books of accounts. Of these three, the most advisable for big operations is the computerized books of accounts generated by duly approved computerized accounting system.
A computerized accounting system (CAS) not only makes the bookkeper’s work faster and more accurate, it also makes end-of-period reports so much easier to generate, allowing users to locate and compile data for any report.
If you are currently using manual books of accounts, you can opt to adopt a loose-leaf or CAS. This article will dwell on the latter.
CAS refers to the integration of different component systems to produce computerized books of accounts and computer-generated accounting records and documents. Note that there are two types of registration for CAS: 1) registration for books of accounts alone, and 2) registration for books of accounts and other commercial documents such as receipts and invoices.
Initial registration of books of accounts to CAS
If a taxpayer is registering for the first time and opting to adopt CAS, the documentary requirements on the initial application will include an accomplished BIR Form 1900 and other supporting documents for company profile, such as a photocopy of BIR Certificate of Registration, photocopy of previously issued permit (if applicable), photocopy of current registration fee payment, location map of the place of business, inventory of previously approved unused invoices and receipts (if applicable), and list of branches that will use CAS (if any). Further details are included in the BIR website at www.bir.gov.ph.
Revenue Memorandum Order (RMO) No. 21-2000 and RMO No. 29-2002 elaborate on the processing and approval of the taxpayer’s application for permit to adopt CAS and/or components thereof. Generally, it starts with the submission of requirements followed by the request for CAS demonstration. Additional requirements maybe raised and will have to be complied with. Note that CAS application goes through a series of reviews and may take months before final approval is complete.
Transfer of registration to CAS
If the taxpayer is currently using manual or loose-leaf books of accounts and decides to transfer to CAS, the following documentary requirements will be needed:
Application Form 1900
Request letter (Indicate what type of receipt/invoices) – if applicable
Certificate of Registration
Sample reports with heading i.e., name of company, address of company, TIN and branch code, kind of book and the period covered
Recently, the BIR centralized the approval of CAS from the Revenue District Offices (RDO) to the National Office. Revenue Special Order (RSO) No. 581-2015 contains the centralization of evaluation of CAS, as well as the creation of the National Accreditation Board (NAB) and the Technical Working Group (TWG) that are authorized to approve the applications for accreditation of CAS.
Prior to this RSO, many CAS registrations were approved that were later found to be insufficient in generating the needed reports during BIR audits. This order has made the approval process longer than usual, raising the clamor for the accreditation of accounting software providers instead. If software providers such as SAP and Oracle are given certificate of accreditation, it would be easier for end-users to get a permit to use.
“Paperless” is the direction most companies are taking, given the advancements and innovations in information technology.But when it comes to BIR reporting, the Philippines remains highly dependent on paper output. Moving forward, the BIR may consider doing IT audit of company software.
We have all seen the waves of change as various accounting software make it easier for companies to manage their accounting books. The BIR is also trying to cope with these developments, recognizing the need to make the statutory books convenient.
In 2006, we saw the draft of a BIR move to accredit accounting software providers to ease the accreditation process for all users of these software. This year, the BIR revived the same draft and submitted it to the Department of Finance for review. We don’t expect this to be approved within the year, but we look forward to this change for the benefit of all users.
While we wait for further developments regarding CAS following many proposed bills to adopt, given the changing technology, the prevailing guidelines will hold.
Revenue Regulations (RR) Nos. 9-2009 and 10-2015 are some of the most relevant references.
RR No. 9-2009 defines the requirements, obligations, and responsibilities imposed on taxpayers for the maintenance, retention, and submission of electronic records. Cited within this regulation is RR No. 1-98 requiring all Large Taxpayers to maintain CAS. Accordingly, all books of accounts shall be in electronic formats.
RR No. 10-2015 mandates the use of non-thermal paper for all CRM/POS and other invoice/receipt-generating machine/software.
The proposed tax reform program (House Bill No. 5636), which was approved on the third and final hearing of the House of Representatives, includes stricter enforcement of the measures on better access to information through three mediums: 1) Access to bank information by mere initiation of criminal charge, 2) linking POS/CRM machines direct to BIR system, and 3) use/issuance of electronic invoices in real time. If the taxpayer opts to adopt the second type of CAS registration, there will be additional pressure to prove that the said system is compliant with this bill.
The most challenging part in any endeavor is the beginning. When it comes to starting a business, remember to choose a good location, hire the right people, and register the books of accounts. Whether you opt for manual, loose-leaf, or computerized books of accounts, it is important to review the governing rules within the industry, choose what is best based on the nature of your business, and implement changes as the needs arise.
The author is a Senior with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.