RR V-1 The Bookkeeping Regulations, as amended – PTABCP Business Solutions & Coaching

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Republic of the Philippines

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Manila

March 17, 1947

REVENUE REGULATIONS NO. V-1

THE BOOKKEEPING REGULATIONS

(As Amended)

TO: All Internal Revenue Officers and Others Concerned

CHAPTER I Scope and Definition of Terms

SECTION 1. Scope. — Pursuant to the authority granted in section 338, in relation to section 4 (j) of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations relative to the keeping of books of accounts, records, registers, and the issuance of invoices, receipts, tickets, and other supporting papers and documents by persons subject to internal revenue taxes, and the manner of recording business transactions are hereby promulgated and shall be known as Revenue Regulations No. V-1 or "The Bookkeeping Regulations."

SECTION 2. Definition of Terms. — As used in these regulations, the following words and phrases shall be taken to mean as follows:

"Persons" include natural persons and partnerships, associations companies or corporations, no matter how created or organized.

"Books of accounts" shall include the journal and the ledger and their subsidiaries, or their equivalents.

"Journal" is a book of original entry in which the happenings or transactions affecting the business of a taxpayer are recorded consecutively day by day as they occur:

"Ledger" is a book of final entry to which are posted the classified accounts or items of all transactions entered in the journal or its equivalent.

"Simplified set of Bookkeeping Records" consists of the record of duly sales and cash receipts, the record of daily purchases, expenses and cash disbursements, record of the summary of transactions, and the yearly statements of net worth and operations, which may be in combined form or in separate booklets. Said records should be specially designed for each class or kind of trade or business and prepared by a certified public accountant, should conform substantially with the forms illustrated in Revenue Regulations No. V-13, should be regularly bound, and may be printed, mimeographed or typewritten[1].

An "independent certified public accountant" is one who is in fact independent. In other words, an accountant will not be considered independent with respect to any person in whose business the accountant has any financial interest, direct or indirect, or in which he is, or was during the period of the report, connected as a promoter, underwriter, voting trustee, director, officer, or employee. A certified public accountant whose work is subject to the supervision and control of the taxpayer, or who is employed to keep the books of accounts or to supervise the keeping of the said, accounts, cannot audit the latter's books of accounts. He must, therefore, be employed exclusively to audit the books of accounts of the taxpayer and not for any other purpose, nor bear to him any business or professional relationship which may in any way affect the independence of his professional actuations. A firm of certified public accountants, one of the members of which is actually keeping or supervising the keeping of the books of accounts of a certain taxpayer, cannot audit or examine the said books of account of the latter[2].

CHAPTER II Books of Accounts and Audit by Independent Certified Public Accountants

"All corporations, companies, partnerships, or persons required by law to pay internal revenue taxes shall keep a journal and a ledger, or their equivalents: Provided, however, That those whose gross quarterly sales, earnings, receipts, or output do not exceed five thousand pesos shall keep and use a simplified 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. And provided, further, That in the case of corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos, shall have their Books of Accounts audited and examined yearly by Independent Certified Public Accountants and their income tax returns accompanied with certified balance sheets, profits and loss statements, schedules, listing income-producing properties and the corresponding incomes therefrom and other relevant statements." [3]

SECTION 3. Persons Required to Keep Books of Accounts: — Persons required by law to pay internal revenue taxes whose gross quarterly sales, earnings, receipt, or output, whether subject to percentage tax or not, exceed five thousand pesos (P5,000), are required to keep books of accounts in accordance with the standard accounting system. The said books of accounts shall consist of journal and a ledger, or their equivalents, and shall contain all information necessary for the accurate determination of the internal revenue taxes due on their businesses.[4]

SECTION 4. Journals, Ledgers, and Their Equivalents: — The journal may consist of only one book, the general journal. Its equivalents may consist of several books such as sales book, purchase book, cash book and such other books as the taxpayer may find convenient for his business. Such books are also books of original entries where all the daily transactions, whether cash or otherwise, are recorded in their chronological order. A journal, in order to comply with the provisions of these regulations, must contain all the transactions affecting the business. Every entry in the general journal shall carry a brief but complete explanation of the nature of the business transaction and be supported by proper vouchers. The general journal shall be in bound form. Where subsidiary journals are used, the same may be either bound or in loose-leaf form provided that the entries in loose-leaf sheet shall be summarized at the end of every month in the general journal which shall then be posted to the ledger.

The ledger, like the journal, may consist of one book, the general ledger. Its equivalents, may consist of several ledgers such as customers' ledger, creditors' ledger, stock ledger, and such other books as the taxpayer may find convenient for his business. All entries in the journal must be posted to the ledger not later than seven days from the date of the transaction and shall be classified in the ledger so as to show the assets, liabilities, capital, and the operating accounts from which a balance sheet, and a profit and less statement covering the operation of the business can be prepared. No entry shall be made in the ledger or its equivalents unless said entry originates from the journal or its equivalents. The general ledger shall be in bound form. Where subsidiary ledgers are used, the same may be either in book form or in loose-leaf form, provided that the entries in the loose-leaf subsidiary ledger are reflected in the general ledger by a controlling account.

In meritorious cases and upon written authority of the Commissioner of Internal Revenue the use of the general journal and the general ledger in loose-leaf form may be allowed[5].

SECTION 5. Persons Required to Keep Simplified Set of Bookkeeping Records: — Persons required by law to pay internal revenue taxes on business whose gross quarterly sales, earnings, receipts or output do not exceed five thousand pesos (P5,000) shall keep and use the simplified set of bookkeeping records recommended by the Commissioner of Internal Revenue and approved by the Secretary of Finance as defined in section 1 of these regulations, unless they elect to keep the regular books of accounts [6].

Simplified sets of bookkeeping records previously authorized under Revenue Regulations No. V-13 which are not specifically assigned and designated for use of a definite class of trade or business and for which specific sets of bookkeeping records have been prepared in accordance with and authorized under Revenue Regulations No. V-43 shall no longer be used. All persons commencing business after the publication of these regulations shall use the simplified sets provided for in these regulations [7]. However, persons already engaged in business at the time of the publication of these regulations may continue using their simplified sets of bookkeeping records authorized under Revenue Regulations No. V-13 until December 31, 1962. Thereafter, beginning January 1, 1963, only such forms of simplified sets of bookkeeping records approved and authorized for use in particular line of business or trade under Revenue Regulations No. V-43 are allowed to be used [8].

A trade or business for which no specific form has as yet been approved pursuant to Revenue Regulations No. V-43 may use a simplified set of bookkeeping records approved under Revenue Regulations No. V-13 until such time when a specific set therefor has been approved under the latter regulations [9].

The simplified sets of bookkeeping records enumerated in Annex "A" hereof are the only ones so far approved by the Secretary of Finance in accordance with Revenue Regulations No. V-43 [10].

SECTION 6. Transactions to be Recorded in the Simplified Set of Bookkeeping Records. — The amount of sales of goods, wares, or merchandise or the value of services rendered for the day, whether in cash or on credit, shall be entered in the record of daily sales and cash receipts not later than five o'clock in the afternoon of the day following the date of transaction. The manner of entering the transactions for the day in the record of daily sales and cash receipts are explained in Appendix I (Form No. 1). If there is no sale or receipt during the day, that fact shall be noted in the said record within the same period [11].

All purchases and expenditures whether in cash or on credit and other sundry disbursements shall be recorded likewise every day in the record of daily purchases, expenses and cash disbursements not later than five o'clock in the afternoon of the day following the date the particular transaction was effected. The manner of entering the transactions for the day in the said record of daily purchases, expenses and cash disbursements are explained in Appendix II (Form No. 2) [12].

Within twenty-four hours after the close of each calendar month, the money columns of the record of daily sales and cash receipts and record of purchases, expenses and cash disbursements shall be totaled and posted or transferred to the corresponding columns in the record of the summary of transaction as shown in Appendix III (Form No. 3). After the end of the accounting year, the money columns of the summary of transactions shall be totaled and the computations indicated therein properly accomplished [13].

The yearly statements of net worth and operations shall be prepared within one hundred and five days after the end of the accounting year by using the totals for the year in the summary of transactions and the inventory sheet required by section 13 of Revenue Regulations No. V-1. The said yearly statements shall be attached to the income tax return to be filed by the taxpayer [14].

SECTION 7. Records of Receipts and Disbursement: — All persons subject to any internal revenue tax on their occupation, pursuit or calling of whatever nature, or on their income, such as professionals, farmers, property owners, etc., shall, unless they provide themselves with the journal and the ledger or their equivalents, keep a record of their receipts and disbursements. All entries therein shall be made not later than five o'clock in the afternoon of the day following the date the transaction was effected. However, a person whose only source of income is his salary shall be exempt from keeping the records prescribed in these regulations [15].

SECTION 8. Entries to be Kept up to Date in Ink or Indelible Pencil. — All entries in the books of accounts and other records must be kept up to date in ink or indelible pencil in a neat and legible manner, and the figures entered in all columns shall be totalled within twenty-four hours from and after the close of each calendar month and the totals posted at the foot of the respective columns. All transactions, the time of posting or entry of which is not specifically provided for in these regulations, shall be recorded within seven days from the date of transactions were effected.

SECTION 8-A. Audit to be Performed by Independent Certified Public Accountant: — (1) Corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos, shall have their books of accounts audited and examined yearly by independent certified public accountants. The audit to be performed by an independent certified public accountant shall embrace an examination of the accounting for assets, liabilities and capital together with a review of the income and expense accounts of the taxpayers in accordance with generally accepted auditing standards and procedures.

(2) ACCOUNTANT'S CERTIFICATE. — The accountant's certificates shall be dated, signed and manually, and shall identify without detailed enumeration the financial statements covered by the certificate and shall be submitted and filed with the taxpayer's income tax return. However, if the audit and examination has been performed by a firm of certified public accountants, the certificate shall indicate the firm's name, signed either by the certified public accountant of the firm who actually performed the audit and examination or by the responsible officer thereof.

The certificate shall include statements and or answers on the following:

(a) Kinds and amount of taxes payable by the taxpayer during the year.

(b) Degree of relationship by consanguinity or affinity of the accountant to the taxpayer, to its President, Manager or principal stockholder.

(d) How much of such taxes or assessments still remains unpaid?

(e) Has the audit been made in accordance with generally accepted auditing standards and procedures? If not, in accordance with what accounting standards and procedures was the audit made? What was the reason or reasons for the omission of any of the audit procedures or the non-compliance with accepted auditing standards[16]?

SECTION 8-B. Schedule of Income-Producing Properties and the Corresponding Incomes Therefrom and Other Relevant Statements to Accompany Income Tax Return: — Corporations, companies, partnership or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos shall have their income tax returns accompanied with schedules listing income-producing properties and the corresponding incomes therefrom and other relevant statements. Said schedules shall conform substantially with the form prescribed in Annex "A" hereof [17].

PROFIT AND LOSS STATEMENT TO ACCOMPANY INCOME TAX RETURN FORM THEREOF: — Corporations, companies, partnership and persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos shall accompany their income tax returns with comparative profit and loss statements. Said statement shall conform substantially with the form prescribed in Annex "B" hereof [18].

CHAPTER III Other Books and Records

"All corporations, companies, partnerships, or persons keeping the books of accounts mentioned in the preceding section may at their option keep such 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.[19]"

SECTION 9. Subsidiary Books. — Persons required to keep the books and records mentioned in section 334 of the National Internal Revenue Code may, at their option, keep such subsidiary books as the needs of their business may require and such other books as may be required by these regulations. Such books shall be subject to the same rules and regulations as are applicable to the journal and ledger prescribed in Chapter II hereof[20].

SECTION 10. Records to be Kept by Proprietors or Operators of Rope Factories, Sugar Centrals, and Disiccated Coconut Factories: — Aside from the books and other records required in Chapter II of these regulations, proprietors or operators of rope factories, sugar centrals, desiccated coconut factories and other factories subject to the percentage tax on the gross value of their output or gross sales of their products shall keep true and correct records of their purchases of raw materials, the finished products and by products. The records of purchases of raw materials shall indicate the kind and quantity of raw materials received, the unit price, and the total value of the said raw materials, the date of receipt, the number of receipt issued therefor, and the name, address and residence certificate of the persons from whom the raw materials were purchased. The record of finished products and by-products shall state the date of production, and the kind and quantity of the finished products and by-products, and the record of removals shall show the date of removal, the number of the invoice issued therefor, the kind and quantity of the finished products or by-products, the unit price and the total selling price or market value thereof, and the name, address and residence certificate of the purchaser or the person to whom delivery is made.

The proprietor or operator of a factory or mill may adopt such system of keeping his records as may be convenient for his business, provided that the system adopted truly reflects all his transactions and his books contain all the desired information. All his purchases shall be covered by the corresponding receipts, except when the person from whom the same are made has issued invoices therefor in which case, the proprietor or operator may keep the said invoices in lieu of issuing receipts therefor, provided, that said invoices show the information herein required. Every removal of the finished products or by-products shall be covered by an invoice showing the date of removal, the kind and quantity of the finished product or by-product removed, the unit price and the total selling price or market value thereof, and the name, address and residence certificate of the purchaser or the person to whom delivery is made.

Proprietors or owners of rice mills and corn mills shall keep the records and issue the receipts and invoices prescribed in Revenue Regulations No. 1 (Rice and Corn Mills Regulations. 1 [21]).

SECTION 11. Record of Jobs Received by Contractors. — Road, building, waterworks, and other construction work contractors, and other persons subject to tax under section 191 of the National Internal Revenue Code shall, in addition to the books and other records required in Chapter II of these regulations, keep a register book for job orders received in which they shall enter immediately upon making a contract the date, name and address of the customer, a description of the articles to be constructed or the services desired, the consideration therefor, and the amount of deposit or partial payment, if any; and upon completion and delivery of the subject matter of the contract, the date of completion or delivery and the amount paid therefor.

Keepers of hotels and lodging houses may, in lieu of the records of jobs received, keep a guest register book in which shall be entered immediately upon accepting a guest the date and time of his arrival, the name and address of the guest, and the number of the room to be occupied; and, upon checking out, the date and time of his departure; and the amount paid by him. The entries shall be numbered consecutively for purposes of reference. The books prescribed herein shall conform substantially with Form "C" of the Appendix.

In case any of the taxpayer enumerated in section 191 of the National Internal Revenue Code finds the use of the register book for jobs received impracticable for his business he may devise such system of keeping his books and other records as may be appropriate for his particular business and submit said books and records for approval to the Commissioner of Internal Revenue, if his place of business is in Manila, or to the provincial revenue agent, if in the province. No such books and records may be used until they are duly approved in accordance with section 19 of these regulations. [22]

SECTION 12. Records to be Kept by Brokers. — Aside from the books and other records required in Chapter II of these regulations, stockbrokers, dealers in securities, real estate brokers, real estate dealers, commercial, customs and immigration brokers shall use serially numbered contract forms, which shall be issued in chronological order, for each agreement had with their customers, showing the date and other facts concerning the services rendered or to be rendered and the signature of the parties thereto. The contracts shall be recorded everyday in a register book showing the date and number of the contract, the name of the customer, the services desired, the subject matter and the value thereof (in case of properties), the compensation agreed upon and the duration of the contract; and upon termination of the contract, a remark as to the date and number of the receipt issued for the compensation received. The contracts shall be filed in the office of the broker in numerical order together with copies of all papers concerning the transactions.

In case of commercial brokers representing foreign companies, copies of the orders such as cablegrams, telegrams, radiograms, etc. shall be filed with the corresponding file copies of the contracts. These pertinent papers need not be filed with the file copies of the contracts where a filing system is employed such that said papers are readily available by reference appearing on the file copies of the contracts.[23]

SECTION 13. Records of Inventories: — Persons required by law to pay internal revenue taxes on business shall keep, in addition to the other books and records prescribed in these regulations, a book of inventories, in which they shall record in detail the quantity, description, unit and total cost of every item of their stocks-in-trade, materials, supplies and other goods found in the premises of their establishments at the time they start business and at the close of the calendar year or accounting period. The inventory at the beginning shall be made and submitted to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the deputy provincial or city treasurer, if in a municipality or city, within ten days after securing the privilege tax-receipts or starting the business, and the subsequent inventories not later than thirty days after the close of the calendar year or accounting period. This period may, in meritorious cases, be extended by the Commissioner of Internal Revenue.

Deputy provincial and city treasurers shall, upon receipt of such inventories, immediately send the same to the corresponding provincial revenue agent who shall keep and preserve them for purposes of reference.

CHAPTER IV Invoices or Receipts

"All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at two pesos or more, prepare and issue sales or commercial invoices or receipts serially numbered in duplicate, showing among other things, their names, or styles, if any, and business addresses; PROVIDED, That in case of sales, receipts or transfers in the amount of fifty pesos or more, the invoices or receipts shall further show the name, or style, if any, and business address of the purchaser, customer or client. The original of each sales invoice or receipts shall be issued to the purchaser, customer, or client who, if engaged in any taxable business, shall be kept and preserve the same in his place of business for a period of five years from the date of the invoice or receipt, the duplicate to be kept and preserved by the persons subject to tax, also in his place of business for a like period: PROVIDED, That persons subject to tax, whose gross sales, earnings, or receipts during the last preceding year exceed twenty thousand pesos shall, for each sale or transaction, issue an invoice or receipt irrespective of the value of the articles sold or service rendered.

"The Commissioner of Internal Revenue may, in meritorious cases, exempt any person subject to an internal revenue tax, from compliance with the provisions of this section. In any event, public market vendors selling exclusively domestic meat, fruits, vegetables, game, poultry, fish and other domestic food products are hereby exempted from the provisions of this section.[24]"

SECTION 14. Vouchers for Transaction: — Persons paying internal revenue taxes who are required to keep the books of accounts mentioned in section 334 of the National Internal Revenue Code shall have a voucher for each entry in their books. The voucher may be an invoice, receipt, check or other document, which shall show the details of each transaction.

"Persons subject to tax shall issue a sales or commercial invoice for each sale or transfer of merchandise or for services rendered valued at P2 or more. In case the transaction is valued at less than P2, the taxpayer need not issue any invoice, but unless it is issued, the transaction must be recorded immediately after it is effected in a record of petty sales or transactions the entries in which shall be summarized at the end of the day and the total transferred to the journal or internal revenue sales book or book of receipts. If the gross sales or receipts of a person during the preceding year exceed P20,000, every sale or transaction effected by him shall be covered by an invoice, irrespective of the amount of the sale or transaction.

"The record of petty sales or receipts may be dispensed with if a cash register machine with roll sheets is used to record all petty transactions. The entries in the roll sheets shall be summarized at the end of the day and the total transferred to the journal or to the internal revenue sales or receipts book. The said roll sheets shall be identified by the signature or initials of the taxpayer or his bookkeeper or manager and shall show the dates of the transaction therein recorded.

"Every purchase or expenditure by a taxpayer subject to these regulations shall also be supported by an invoice or a receipt issued by the vendor or the person rendering the service. In case an invoice or a receipt is not issued, the taxpayer concerned shall require the vendor to sign a purchase or expense voucher showing the date, the quantity and description of the articles purchased or the services rendered, THE RATE OF TAX TO WHICH THE ARTICLES WERE SUBJECTED, IF SUBJECTED TO THE ADVANCE SALES TAX IN THE CASE OF IMPORTATION OR TO THE SALES TAX IN THE CASE OF LOCALLY MANUFACTURED OR PRODUCED ARTICLES, the consideration paid therefor, and the name and address of the vendor or PERSON RENDERING THE SERVICE together with the number, date and place of issue of his residence certificate.

"The COMMISSIONER of Internal Revenue may, in meritorious cases, exempt a person from compliance with these regulations.[25]

SECTION 15. Form and Manner of Issuance of Invoices and Receipts. — An invoice or a receipt, in order to comply with the requirement of these regulations, must be serially numbered and made at least in duplicate. They shall be bound in the form of booklets or pads of 50 or 100 each, and shall show, among other things, the name and address and the business style, if any, of the person issuing the same, and shall contain such columns as may be necessary and appropriate for the business of the taxpayer concerned. The invoices or receipts may have as many duplicate copies as may be necessary for the purposes of the taxpayer, but the duplicate copies shall bear the same serial number as the original.

"Where the transaction is required to be covered by an invoice or receipt, the same shall be issued at the time the transaction is effected and the original thereof delivered to the purchaser or to the person from whom payment is received. In the case of sales invoices, THE INVOICE MUST show the date of the transaction, the quantity and description of the merchandise, the unit cost, THE RATE OF SALES TAX TO WHICH THE PRODUCTS OR ARTICLES ARE SUBJECT OR WERE SUBJECTED IF ISSUED BY PRODUCERS, MANUFACTURERS, IMPORTERS, OR WHOLESALERS, and the total price. IN CASE OF SALES, REGARDLESS OF AMOUNT, BY PRODUCERS, MANUFACTURERS, IMPORTERS, OR WHOLESALERS TO RETAILERS OR ANY BUSINESS ESTABLISHMENT, THE INVOICE MUST FURTHER SHOW THE NAME, OR STYLE, IF ANY, THE BUSINESS ADDRESS AND THE NUMBER, DATE, AND KIND OF PRIVILEGE TAX OF THE PURCHASER. RETAIL DEALERS IN LOCALLY PURCHASED ARTICLES, UNLESS REQUESTED BY THE PURCHASERS, NEED NOT INDICATE IN THE SALES INVOICES THE RATE OF TAX TO WHICH THE ARTICLES SOLD HAD BEEN SUBJECTED. In case of a sale or transfer in the amount of P50 or more, the invoice shall also show the name, or style, if any, the business address of the purchaser, and the number, date, and place of issue of his residence certificate. In the case of other invoices, THE INVOICE MUST show the date, the description of the articles or the nature of the service, the consideration paid therefor, and the name, address, and residence certificate of the person furnishing the articles or rendering the service. The residence certificate need not appear in the invoice when the other party to the transaction is a corporation or a registered partnership or association." [26]

SECTION 16. Freight Stub Receipts and Passage Tickets Required of Common Carriers. — Common carriers, transportation contractors, and other persons subject to tax under section 192 of the National Internal Revenue Code shall use freight stub receipts and passage tickets in duplicate to be printed in accordance with such form as the Public Service Commission may, from time to time prescribe. In issuing the freight stub receipt, the carrier or his agent shall enter in both the original and the duplicate the name and address of the carrier, the date of issue, the name and address of the consignee, a description of the goods shipped with a statement of their weight or quantity, the place of delivery to the carrier and the destination of the goods, the route to be followed, the date of shipment, and the amount of freightage. Every receipt issued must be signed by the carrier or his authorized agent. Passage tickets shall also be in duplicate and must show the points of embarkation and destination and the amount of charges. The original must be delivered to the passenger or the shipper, and the duplicate retained by the carrier for record purposes and preserve for a period of five years from the date of issue. However, passage tickets may not be issued in duplicate if common carriers employ the services of inspectors or car auditors, etc. to check and supervise the issuance of the passage tickets by their conductors and if they keep in their office daily record of the number of tickets issued to every conductor as well as the number of tickets returned by each conductor after each trip or day's work. [27]

SECTION 17. Admission Tickets and Other Records to be Issued or Kept by Persons Subject to Amusement Tax. — In the case of amusement or business places where fees or cover charges are required to be paid for admission, the proprietor, lessee or operator shall provide himself with tickets which shall evidence payment of fees or cover charges. The tickets shall be serially numbered and shall indicate the name of the place of amusement or business and the fees or cover charges. The serial number of each ticket and the admission fee or cover charge shall be printed on the ticket twice that when the ticket is divided into two upon being presented for admission both the serial number and the price shall appear on both parts.

Before the proprietor, lessee or operator of the place of amusement or business orders tickets for printing he shall first send to the Commissioner of Internal Revenue, if the business is located in Manila, or to the provincial revenue agent or deputy provincial or city treasurer, if in the province, a written notice stating the name and address of the printer with whom he intends to place the order, the classes of tickets, the inclusive serial numbers, the admission fee or cover charge, and the total number of each class of tickets. The proprietor, lessee, or operator shall keep for record purposes the invoice or receipt issued by the printer covering the order.

Before being used, the tickets shall first be presented to the Commissioner of Internal Revenue, if the place of amusement or business is located in Manila, or to the provincial revenue agent or deputy provincial or city treasurer, if in the province, for approval and registration. The said officers shall keep a register of tickets in the form of a ledger, such that each place of amusement or business shall have a separate account or record for the purpose of entering therein all the tickets presented for approval and registration, indicating the date of registration, the classes of tickets, and the admission prices, the inclusive serial numbers, and the number of tickets of each class. The proprietor, lessee or operator of the place of amusement or business shall likewise keep a true and correct record of his stock of tickets, indicating the total number of registered and unregistered tickets, and of the registered tickets, how much has been sold from day to day.

All such proprietors, lessees, or operators shall prepare monthly statements of the daily box receipts from admission fees or cover charges, showing the total number of each particular class of tickets sold, the unit price of each class and the total amount collected, duly signed by the proprietor, lessee, or operator, or by manager. The said statements shall be submitted to the Commissioner of Internal Revenue, if the place of amusement or business is in Manila, or to the deputy provincial or city treasurer, if in the province, not later than the 10th day of each month as regards the gross receipts for the preceding month. Duplicate copies of the said statements shall be kept by the proprietor or operator at the box office as part of his accounting system and the same shall be preserved in the same manner as the books of accounts and other records.

Other persons subject to tax under section 260 of the National Revenue Code shall keep true and correct records of their gross receipts. In case any of the records and registers hereinbefore mentioned are not appropriate for their business, they shall devise a system for recording their receipts appropriate or their business and submit the same, before they are used, to the Commissioner of Internal Revenue, if the place of business or amusement is in Manila, or to the provincial revenue agent or city or deputy provincial treasurer, if in the province, for registration and approval.

CHAPTER V General Administrative Provisions

"All such corporations, companies, partnership, or persons shall keep the books or records mentioned in section 334 hereof in a native language, English or Spanish: Provided, however, That if in addition to said books or records the taxpayers 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, 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 form an integral part of the books of accounts aforesaid. The keeping of such books or records in any language other than a native language, English or Spanish, is hereby prohibited.[28]"

"All the books of accounts, including the subsidiary books, and other accounting records of such corporations, companies, partnership, or persons shall be preserved by them for a period of at least five years from the date of the last entry in each book and shall be subject to examination an inspection at any time by internal-revenue officers: Provided, That all corporations, companies, partnerships, or persons who retire from business shall within ten days from the date of such retirement or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases, submit their books of accounts, including the subsidiary books, and other accounting records, to the Commissioner of Internal Revenue or any of his deputies for examination, after which they shall be returned.[29]"

SECTION 18. Language to be Used in Keeping Books of Accounts and Supporting Papers; Translation of Entries in Other Books and Records. — The books and records prescribed in section 334 of the National Internal Revenue Code shall be kept in a native language. English, or Spanish. The vouchers and other supporting papers and documents, being part of the accounting system shall, likewise be kept in a native language, English, or Spanish. However, persons who keep other books in addition to the books and records prescribed in this section 334 of the Tax Code in a language other than a native language English or Spanish, shall, within ten days from the date of the transaction, make a true and complete translation thereof into a native language, English, or Spanish, the said translation to form an integral part of such books, registers and records.[30]

Translation shall be made in a neat and legible manner in ink or indelible pencil, either on the same page of the books, registers or records, opposite or below such entry or on a separate page opposite the page to be translated. The taxpayers, or his bookkeeper or manager shall certify to the correctness of the translation of the entries in the books, register, or record by executing, within ten days after each book has been filled or its use completed, a certificate to be sworn to before a notary public or an internal-revenue officer authorized to administer oaths. The certificate shall be placed immediately following the translation of the last entry on the last page of each book and shall be substantially in the following form:

"CERTIFICATE OF CORRECTNESS”

I hereby certify that the foregoing translation is a true and complete translation of all entries contained in this ________________ covering the period from ________________ to ______________, 19____

___________________________

(Owner, Bookkeeper, or Manager)

"Subscribed and sworn to before me at _________________________ Philippine, on this ______________________ day of ___________________ 196______________ Affiant exhibited to me his Residence Tax Certificate No. ________________, issued at _______________________________ on ________________, 19____

__________________________________

(Internal Revenue Agent or Notary Public)

SECTION 19. Prior Approval and Registration of Books of Accounts, Registers, Records, Invoices and Receipts. — Persons required to keep books of accounts, internal revenue books, records of receipts and disbursement, additional registers and other records, invoices and receipts for recording their transactions as prescribed in these regulations, shall before using any of the aforesaid books, records, registers, invoices and receipts first present them to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval and registration. A register book for every book, register, or record which has been approved shall be kept showing such information as the date of approval; the name and address of the taxpayer, his citizenship; the number of the alien registration certificate or landing certificate, if an alien; the kind of business and the schedule, paragraph and number of privilege tax receipt issued for the business, if any; and the kind, volume, number of pages, or sheets of the book, register or record. Every book, register or record so approve and registered shall be serially numbered for each taxpayer.

A draft copy of invoices and receipts proposed to be used by the persons required to keep books of accounts and records prescribed by these regulations shall first be presented to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval. All approved draft copies of invoices and receipts shall be recorded in a register showing such data as the date of approval; the name, address, and the kind of business of the taxpayer; the schedule, paragraph, and number of his privilege tax receipt. No change shall be made in the form or type of invoices or receipts used by the said persons and no new or different invoice or receipt shall be used by said person without prior approval as required herein. Every invoice or receipt must be serially numbered.

Before ordering invoices or receipts for printing, a taxpayer shall send to the Commissioner of Internal Revenue if his place of business is in Manila, or to the provincial revenue officer or city deputy provincial treasurer, if in the province, a written notice of the name and address of the printer with whom he intends to place the order, and the total number of booklets and the inclusive serial number of the invoices or receipts ordered.

Before any book, register, or record is presented for registration there shall be place on the front cover by the owner thereof an identification as to the kind of book, register, or record, the name and business address of the owner, citizenship, the number of the alien registration certificate or landing certificate, if an alien, the kind of business engaged, and the schedule, paragraph, and number of the privilege tax receipt issued for the business, serially numbered in a permanent and legible manner. If a book, register or record is approved, the following authentication shall be made by the approving officer on the reverse side of the front cover thereof:

"This ________________, Volume No. ____________ with _________ pages or sheets, is approved on this _____________ day of _______________ 19___, for purposes of Revenue Regulations No. __________________

_________________

Signature

____________________

(Designation of Officer)

If the book, register, or record presented for approval is a continuation of previous books, registers, or records, besides the foregoing authentication, the following notation shall be added to the authentication:

"Volume No. ________________ of this ______________________ was approved on the __________________ day of ____________________ 19_____

____________________

Signature

_____________________

(Designation of Office)

In the case of invoices and receipts, the approval shall be indicated by an appropriate stamp placed on the front cover, on the back of the middle page and on the back page of the last invoice or receipt of the booklet or pad approved, together with the signature of the officer authorized to approve the same.[31]

SECTION 20. Inspection of Books, Registers and Records. — All books, registers and other records, and vouchers and other supporting papers required by these regulations shall be kept at all times at the place of business of the taxpayer, subject to inspection of any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection. When required by inspecting officers, the owner, bookkeeper, or manager shall give the necessary explanations regarding the items in the entries contained in the said books, registers and records. In the case of a branch store, or where the controlling books are kept in a place other than the business establishment, there shall be kept in the store or business establishment such books and records as would clearly reflect all the transactions effected therein. When the books, register, record and other papers are needed by an internal revenue officer for examination outside of the taxpayer's place of business, the said officer shall issue a receipt therefor on the required internal revenue form. After making the inspection or examination of the said books, registers, records and other papers, the Internal Revenue Officer shall inform the taxpayer that he will receive a confirmation of the investigation within thirty (30) days upon termination of the investigation from the revenue office who authorized the investigation in accordance with the following form:

ANNEX "C"

LETTER OF CONFIRMATION NO. . . .

(Name of Taxpayer)

(Address)

Sir/Madam/Gentlemen:

With reference to our letter of Authority No. _____________________ addressed to you ______________________________________, please be informed that the results of the investigation conducted by Revenue Examiner _________________ of your tax liability/liabilities for the year(s) period _________________ the findings are:

Discrepancies P ______________

Deficiency Tax(es) Due ________________

The above findings are subject to review and final approval by the proper officer of this Bureau.

Very truly yours,

__________________

(Head of Office)

To be signed by CME, CMA, PRO, Asst. PRO (For province of Rizal only), chief of Regional Investigating Branches, or Chief of National Office Divisions, as the case may be.

IMPORTANT: This letter of confirmation should be pasted on the inside cover of the ledger for the year(s) investigated.

"In this confirmation letter, the taxpayer shall be informed that the corresponding report of investigation of his tax liability has been submitted and that the recommendation of the investigating Internal Revenue Officer is under consideration by the Revenue Office concerned. The taxpayer upon receipt of the confirmation letter shall paste the said letter on the inside cover of the ledger for the year or years investigated. The confirmation letter shall be prepared in triplicate and numbered consecutively. The original shall be sent to the taxpayer, the duplicate shall be attached to the report of the investigating Internal Revenue Officer and the triplicate shall be retained as the file copy.[32]"

SECTION 21. Preservation of Books of Accounts and Other Records. — All the books, registers, records, vouchers, and other supporting papers and documents prescribed in these regulations, and other records kept by taxpayers at their option, shall be preserved intact, unaltered, and unmutilated for at least five years from the date of the last entry in each book or from the date of the last transaction, and the same shall be kept at all times in the place of business of the taxpayer, who shall produce them for examination or deliver the same or any of them for inspection outside of his place of business upon demand of any internal-revenue officer.[33]

SECTION 22. Submission of Books and Records Upon Retirement. — All taxpayers required by these regulations to keep books of accounts or other records who retire from business or cease to pursue their calling shall, within ten (10) days from the date of such retirement, or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases upon application therefor in writing, submit their books of accounts and other records pertaining to their business, including the translation thereof, to the city treasurer or the deputy provincial treasurer (now Collection Agents) for examination. The city treasurer or the deputy provincial treasurer shall keep all such books and records in a secure place and notify the corresponding provincial revenue agent of the receipt hereof within forty-eight hours after the receipt of such books and other records. An examination of such books of accounts and records shall be conducted immediately by an internal-revenue officer to ascertain if all the taxes due from the taxpayer have been paid.[34]

SECTION 23. Return of Books and Records. — The books of accounts and other records mentioned in the preceding section shall not be returned until after the taxes, charges and penalties found to be due, if any, shall have been paid unless authority to do so shall have been first secured from the Commissioner of Internal Revenue. Furthermore, in case a violation of provision of the internal revenue laws or regulations has been committed by a taxpayer and said books of accounts and records are served the purpose for which they were taken or submitted Commissioner of Internal Revenue shall notify the taxpayer or representative to get the books and other records. If the books and other records are not taken by the taxpayer or by his representative the same shall be destroyed by the Commissioner of Internal Revenue within six months from the date of such notice. Books held by internal-revenue officers for examination in the provinces shall be destroyed by the provincial revenue agents only upon previous authority of the Commissioner of Internal Revenue.

CHAPTER VI General Penal Provisions

“A person who violates any provisions of this Code or any regulation of the Department of Finance made in conformity with the same, for which delinquency no specific penalty is provided law, shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months, or both.[35]”

“Any person who knowingly shall make a false entry or enter false or fictitious name in the books or records mentioned in Sections 334 and 335 of this Code or who shall abet or aid, if any, manner in the making or writing thereof, shall be fined in the sum of not less than five hundred pesos or more than five thousand pesos or imprisoned for a term of not less than six months and one day nor more than five years, or both.”

“Any person who fails to keep the books or records mentioned in Section 334 in a native language, English, or Spanish, or to make a true and complete translation as required in Section 336 of this Code, or whose books or records kept in a native language, English, or Spanish, are found to be at material variance with books or records kept by him in another language, shall be fined in a sum of not less than two thousand pesos nor more than ten thousand pesos or imprisoned for a term of not less than two years or both.[36]”

SECTION 24. Penalty for Making False Entries or Writing False or Fictitious Names in Books or Records. — Any person who knowingly makes any false entry or writes any false or fictitious name in his books of accounts or other records, or who abets or aids in the making or writing thereof, is punishable under section 355 of the National Internal Revenue Code by a fine of not less than P500 nor more than P5,000 or by imprisonment of not less than six months and one day nor more than five years, or both.

In order to obviate the possibility of entering false or fictitious name in their books, taxpayers should require persons to whom they have transactions which should be entered in their books exhibit their residence certificates, if subject thereto, and take note of their number and the date and place of issue.

A person who fails to keep the books or records mentioned in section 334 of the National Internal Revenue Code in a native language, English, or Spanish, or to make a true and complete translation of books kept in other languages into a native language, English, or Spanish, or whose books or records kept in a native language, English or Spanish are at material variance with books or records kept by him in another language, is liable to a fine of not less than P2,000 nor more than P10,000, or imprisonment for not less than two nor more than six years, or both.[37]

SECTION 25. Penalty for Violation of Other Provisions of These Regulations. — Any person who shall violate any provision of these regulations for which violation the National Internal Revenue Code or any other law does not provide any specific penalty shall be penalized, under section 352 of the aforesaid Code, by a fine of not more than P300 or by imprisonment of not more than six months, or both.[38]

SECTION 26. Repealing Provisions. — Regulations Nos. 34, 48, 58, 84, 91, 101, 105 and 108 of the Department of Finance and other regulations inconsistent herewith are hereby repealed.

SECTION 27. Date of Effectivity. — These regulations shall take effect upon their promulgation in the OFFICIAL GAZETTE.[39]

"A" — Explanatory note for the RECORD OF DAILY SALES AND CASH RECEIPTS

(Form No. 1, Appendix I)

All transactions concerning SALES and SERVICES RENDERED and MONIES RECEIVED, including those received as investment and other income, shall be entered in this Record. The amount of every transaction shall be entered under two money columns, first under a column on the left side of "Explanation," second under a column on the right side. The total of the columns on the left side must equal the total of the columns on the right side.

DATE — correspondents to the date of the transaction.

EXPLANATION — refers to a brief statement of the nature of the transaction, such as total cash sales, credit sale with the name of the customer, other income, payment for previous credit sale with the name of the customer and any other explanation which may be necessary.

INVESTMENT IN CASH shall be entered first under "Cash Received" and second under "Other Credits."

CASH SALES for the day shall be entered in total only, first under "Cash Received" and second under "Sales," classified according to privilege tax receipt.

CREDIT SALES shall be entered individually, by invoice if sales invoices are issued therefor, first under "Due from Customers" and second under "Sales," classified according to privilege tax receipt.

SERVICE RENDERED and OTHER INCOME — by total for the day — shall be entered first under "Cash Received" and second under "Other Credits."

PAYMENT FOR PREVIOUS CREDIT SALES shall be entered individually first under "Cash Received" and second under "Received for Credit Sales."

The columns designed on this form may be increased into such number as the needs of each particular business may require.

"B" — Explanatory note for the RECORD OF DAILY PURCHASES, EXPENSES AND CASH DISBURSEMENTS

(Form No. 2, Appendix II)

All transactions concerning PURCHASES, EXPENSES, and MONIES disbursed, including those for payments for previous purchases on credit and as withdrawals of investment, shall be entered in this Record. The amount of every transaction shall be entered under two money columns also, first under a column on the left side of "Explanation," second under a column on the right side. The total of the columns on the left side must likewise equal the total of the columns on the right side.

DATE — corresponds to the date of the transaction.

EXPLANATION — refers to a brief statement of the nature of the transaction, such as total purchases without invoices, purchases on credit with the name of the creditor, payment for previous purchases on credit with the name of the creditor, nature of the expenses incurred, withdrawal of investment and any other explanation which may be necessary.

WITHDRAWAL OF CASH INVESTMENT shall be entered first under "Cash Disbursed," second under "Other Debits."

CASH PURCHASES without invoices or receipts for the day shall be entered by the total first under "Cash Disbursed," second under "Purchases," classified according to privilege tax receipt.

PURCHASES ON CREDIT shall be entered individually first under "Payable to Creditors," second under "Purchases," classified according to privilege tax receipt.

EXPENSES shall be classified and entered by the classification indicated under "Explanation" first under "Cash Disbursed," second under "Expenses."

PAYMENTS FOR PREVIOUS PURCHASES ON CREDIT shall be entered first under "Cash Disbursed," second under "Payment to Creditors."

OTHER DISBURSEMENT shall be entered first under "Cash Disbursed," second under "Other Debits."

The columns designed on this form may be increased into such number as the needs of each particular business may require.

Form No. 4 Appendix IV

SUMMARY OF TRANSACTIONS

Accomplish this Record by using the data shown on Form No. 3, Appendix III and Statement of Net Worth for the past year.

CASH ON HAND

Cash on hand at beginning of the year (z) Pxxxx

Add: (1) Cash received during the year Pxxxx

Total cash on hand at beginning of the year

and received during the year Pxxxx

Less (6) Cash disbursed during the year xxxx

(a) Cash on hand at end of the year Pxxxx

DUE FROM CUSTOMERS

Unpaid sales at beginning of the year (z) Pxxxx

Add:(2) Sales on credit during the year xxxx

Total receivables from customers Pxxxx

Less: (3) Payments received from

customers during the year xxxx

(b) Due from Customers at end of the year Pxxxx

PAYABLE TO CUSTOMERS

Unpaid accounts at beginning of the year (z) Pxxxx

Add: (7) Obligation incurred during the year xxxx

Total payables to creditors Pxxxx

Less: (9) Payments made

to creditors during the year Pxxxx

OTHER ASSETS

Total (11) other debits during the year Pxxxx

Less: Withdrawals of investment

during the year xxxx

Other assets acquired during the year Pxxxx

Add: Other assets at beginning of the year (z) xxxx

(d) Other assets at end of the year Pxxxx

OTHER LIABILITIES

Total (5) Other credit during the year Pxxxx

Less: Investments made during the year xxxx

(f) Other income during the year xxxx

Other liabilities incurred during the year Pxxxx

Add: Other liabilities at beginning of the year xxxx

(e) Other liabilities during the year xxxx

OTHER INCOMES

Total (5) Other Credits during the year Pxxxx

Less: Investments made during the year xxxx

Other liabilities incurred during the year xxxx

(f) Other incomes during the year Pxxxx

SALES

Sales (3-a) under first privilege tax receipt Pxxxx

Sales (3-b) under second privilege tax receipt xxxx

Sales (3-c) under third privilege tax receipt xxxx

(g) Total Sales during the year Pxxxx

PURCHASES

Purchases (8-a) under first privilege tax receipt Pxxxx

Purchases (8-b) under second privilege tax receipt xxxx

Purchases (8-c) under third privilege tax receipt xxxx

(h) Total Purchases during the year Pxxxx

EXPENSES

Distribute (j-1) Salaries, wages, etc. Pxxxx

(j-2) Rents and taxes xxxx

(j-3) Sundries xxxx

(j) Total Expenses during the year Pxxxx

(z) Statement of Net Worth for past year. Pxxxx

Form No. 5 Appendix V

YEARLY STATEMENTS

STATEMENT OF NET WORTH

as of ____________

(a) Cash on hand Pxxxx

(b) Due from Customers (Unpaid Sales) xxxx

(x) Merchandise at end of the year xxxx

(d) Other Assets Pxxxx

Less: Estimated Depreciation xxxx

TOTAL ASSETS xxxx

Less: (c) Payable to Creditors (Unpaid Obligations) Pxxxx

(e) Other liabilities xxxx

TOTAL LIABILITIES xxxx

NET WORTH AS OF Pxxxx

STATEMENT OF OPERATIONS

For the year ending ________

(g) Total Sales Pxxxx

(x) Inventory at end of the year xxxx

Total Pxxxx

(h) Total Purchases Pxxxx

(y) Inventory at the beginning of the year xxxx

Total Pxxxx

GROSS INCOME FROM OPERATIONS Pxxxx

Less: Deductions

(j-1) Salaries, wages, etc. Pxxxx

(j-2) Rents and taxes xxxx

(j-3) Sundries xxxx

(j) Total expenses Pxxxx

Add: Estimated Depreciation xxxx

TOTAL DEDUCTIONS xxxx

NET INCOME FROM OPERATIONS Pxxxx

Add: (f) Other Income xxxx

NET INCOME FOR THE YEAR Pxxxx

NOTE:

(x) See inventory sheet for the present year.

(y) See inventory sheet for the past year.

The depreciation expenses is not taken up in the bookkeeping records. It is estimated and shown only in these statements. REVENUE REGULATIONS No. V-13.

ANNEX "B"

COMPARATIVE PROFIT & LOSS STATEMENT

Ending December31, 19A) (Ending December 31, 19 B

Gross sales P100,000 P150,000

Less returned sales and allowances 1,000 1,200

————— ————

Net Sales P99,000 P148,800

Less cost of goods sold:

Inventory — finished goods, begin. P10,000 P15,000

Add cost of goods manufactured 50,000 80,000

———— ————

Total P60,000 P95,000

Deduct inventory

—finished goods, and 10,000 50,000 20,000 75,000

——— ———

Gross profit on sales P49,000 P73,000

Deduct selling expenses:

Advertising P3,000 P5,000

Salesman's salaries 10,000 15,000

Salesman's traveling expenses 2,000 3,000

Insurance 1,000 1,000

Taxes 500 700

Misc. selling expense 1,000 17,500 2,000 24,700

——— ——— ——— ———

Net profit on sales P31,500 P49,100

Deduct general and

administrative expenses:

Office salaries P2,000 P2,000

Officers' salaries 3,000 3,000

Stationery & printing 200 300

Office supplies 300 500

Telephone & telegraph 200 200

Misc. general expense 100 200

Bad debts 1,000 2,000

Depreciation — of. Equip 200 7,000 200 8,400

——— ——— ——— ———

Net profit on operations P24,500 P40,700

Deduct net financial expenses:

Bond interest P1,000

Interest on notes payable& bank loans 300 500

Discount on sales 500 700

——— ———

Total P1,800 P2,200

Less:

Int. on notes receivable (200) (400)

Discount on purchases (600) (800)

——— ——— ——— ———

Net income P23,500 P39,700

` ====== ======

"ANNEX A"

15-Minute Simplified Bookkeeping Records (Sari-sari)
Drugstore Simplified Bookkeeping Records
Farmer's Simplified Accounts & Tax Record
Professional's Simplified Accounts & Tax Records
General Simplified Accounts & Tax Record (Retail and Wholesale)
U. Operator's Simplified Accounts & Tax Record
Gasoline Service Station Simplified Accounts & Tax Record
Rice-Corn Mill Simplified Accounts & Tax Record including Mill Office Record
Restaurant-Hotel Simplified Accounts & Tax Record
Dressmaker-Milliner-Embroiderer's & Tailor's Simplified Accounts & Tax Record
Beauty Parlor & Barber Shop's Simplified Accounts & Tax Records
Manufacturer's Simplified Accounts & Tax Record
Poultry-Livestock Accounts & Tax Record
Fishermen's-Fishpond's Accounts & Tax Record
Broker's and Dealer's Simplified Accounts and Tax Record

[1] As amended by Sec. 2, Reg. No. V-13 and Sec. 1, Rev. Reg. No. V-43.

[2] As amended by Sec. 1, Rev. Reg. No. V-20.

[3] Sec. 334, National Internal Revenue Code, as amended by Sec. 2, Rep. Act No. 438 and Sec. 1, Rep. Act No. 658.)

2(1). RULE NO. 60, RULES AND REGULATIONS OF THE BOARD OF ACCOUNTANCY, DUTIES OF CERTIFIED PUBLIC ACCOUNTANT: — The Board, pursuant to Section 4 of Act 3105, as amended, hereby recommends that Section 60 be amended to read as follows:

"No Certified Public Accountant shall certify to the financial statement of any enterprise which, during the period covered by the report, is owned or controlled by him or his spouse, or in which he or his spouse is a partner, stockholder, promoter, voting trustee, transfer agent and registrar, officer, director or salaried employee. The same prohibition applies to a firm engaged in the practice of accountancy in the Philippines if any of the partners or associates thereof be any of the above in the enterprise."

"Neither shall a Certified Public Accountant or a firm engaged in the practice of accountancy in the Philippines certify to the financial statements of any enterprise which, during the period covered by the report, is owned or controlled by his, or the partner's or associate's, relatives within the third civil degree, by affinity or consanguinity, as computed under the rules of civil law; or, in which any of said relatives is a partner, officer, treasurer, director, manager or voting trustee; or, in which said relatives own or are committed to own an aggregate of 5% or more of the subscribed capital stock, or even if their shareholding is less than 5% of the subscribed capital stock but such interest is substantial in relation to their personal fortune.

"The relatives of a Certified Public Accountant or of the partner or associate in the case of a firm of accountants, within the third civil degree, by affinity or consanguinity, as computed under the rules of civil law, are as follows:

Parents
Grandparents
Great grandparents
Uncles or aunts and their spouses
Brothers or sisters and their spouses
Nephews or nieces and their spouses
Children and their spouses
Grandchildren and their spouses
Great grandchildren and their spouses
Parents-in-law
Grandparents-in-law
Uncle or aunt-in-law and their spouses
Brothers or sisters-in-law and their spouses
Nephews and nieces-in-law and their spouses

"The Board finally recommends that Section 60, as amended, take effect one year after its approval by the Office of the President. (Amendment to Rule 60 of the Rules and Regulations of the Board of Accountancy, dated Dec. 27, 1962) (NOTE: The said amendments were indorsed by the Bureau of Internal Revenue in its indorsement to the Department of Finance dated March 31, 1964).

2(2) INDEPENDENCE OF CERTIFIED PUBLIC ACCOUNTANTS: — A certified public accountant may not be retained by a Company as its external auditor and at the same time appoint him as stock and transfer agent even if he will not be paid for the latter work. (B.I.R. Ruling No. 251, s. 1961).

2(3) CERTIFIED PUBLIC ACCOUNTANT: — As used in section 334 of the Tax Code, the term "certified public accountant" presupposes one who is qualified to engage in the active practice of accountancy. (B.I.R. Ruling No. 406, s. 1960)

2(4) PART-TIME EMPLOYMENT OF CHILDREN OF CERTIFIED PUBLIC ACCOUNTANT: — A certified public accountant, whose children are employed as part-time bookkeepers of certain taxpayers, does not lose his independence as such accountant, it not appearing that he has any financial interest direct or indirect in the business of the said taxpayers. However, in case said accountant is related by consanguinity to the taxpayer, to its president, manager or principal stockholder, he must state such fact in his certificate. (B.I.R. Ruling, May 29, 1963; File No. 106.02)

2(5) KEEPING OF BOOKS OF ACCOUNTS — REASONS FOR REQUIREMENT: — Taxpayer is a foreign corporation organized under the laws of Japan and engaged in maritime transportation with vessels touching Philippine ports. It has been paying, through its local agent, the American Steamship Agencies, the common carrier's fixed and percentage taxes; however, it does not, either personally or through its agent, keep books of accounts and other accounting records and so there is nothing upon which may be based the determination of its taxable gross receipts.

The issue is whether taxpayer, being a non-resident foreign corporation, is exempt from the obligation of keeping books and other accounting records in the Philippines.

The vessels of taxpayer come to the Philippines and carry passengers and freight therefrom. As it is subject to common carrier's tax which it is actually paying, the taxpayer should keep the required records, pursuant to Section 334 of the Tax Code, as implemented by Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations. Moreover, to hold otherwise would be to leave to the mercy of the taxpayer the amount of taxes it should pay. As correctly stated by the Court of Tax Appeals in the case of "Maria B. Castro vs. Collector (CTA Case No. 141, Dec. 291, 1956):

"The reason for the requirement to keep books of accounts is stated in the law (Sec. 334, Tax Code) itself, that is, in order that all taxes due the government may readily and accurately be ascertained and determined any time of the year." (B.I.R. Ruling No. 108, s. 1962, dated Oct. 3, 1962)

Mere generalization regarding the existence of falsified invoices, without positive indications of truthfulness, is not sufficient to overthrow the book entries especially when it is made to appear that it is done to suit the personal convenience of petitioner. (Ibid.)

[4] 3(1). VENDORS INSIDE PUBLIC MARKET REQUIRED TO KEEP BOOKS OF ACCOUNTS: — The fact that Filipinos selling meat in public market places are exempt from the fixed and sales taxes does not relieve them from the duty of keeping books of accounts. (B.I.R. Ruling No. 266, s. 1960).

3(2). VENDORS INSIDE PUBLIC MARKET, LIABLE TO KEEP BOOKS. — Public market vendors selling meat, poultry, fish, fruits, vegetables and other food products though exempt from the business tax are, nevertheless, required to keep books of accounts, because they are, in proper cases, subject to income and additional residence taxes. (B.I.R. Ruling No. 120, s. 1960)

3(3). GROSS INCOME IN RELATION TO THE USE OF BOOKS OF ACCOUNTS: — Where the gross sales, receipts, or gross value of output of a taxpayer exceeds P5,000 during any quarter of the year, he cannot avail himself of the use of the simplified set of bookkeeping records even if during the other quarters his gross sales, receipts, or gross value of output are only P5,000.00 or less. (B.I.R. Ruling No. 42, Jan. 21, 1953)

3(4). BOOKS OF ACCOUNTS TO BE KEPT BY BRANCH ESTABLISHMENTS: — An owner of a store who maintains a branch establishment need not keep two sets of books of accounts if the branch store merely buys goods or merchandise for the principal store and no sale is effected in the former, provided that memoranda of transactions therein are kept and duly taken up in the books of accounts of the principal store; otherwise, the branch establishment should be provided with separate books of accounts (B.I.R. Ruling dated Sept. 12, 1955, File No. 106.02)

Purchases of the branch store made in the name of the principal store should be treated by keeping a memorandum thereof and taken up in the books of accounts of the principal store. (Ibid.)

3(5). ACCRUAL AND CASH BASIS IN KEEPING BOOKS OF ACCOUNTS: — A taxpayer cannot be permitted to keep his books of accounts on both the accrual and cash basis. (B.I.R. Ruling dated Sept. 23, 1953)

[5] 4(1) PROCEDURE IN THE ISSUANCE OF PERMITS TO USE LOOSE-LEAF BOOKS OF ACCOUNTS, RECORDS, INVOICES AND RECEIPTS. —

TO: — All Regional Directors, Chief Revenue Officers, Collection Agents and Others Concerned:

In order to insure effective control and supervision in the issuance of permits to use loose-leaf books of accounts, records, invoices and receipts, the following procedure is hereby promulgated for the guidance of all concerned:

All requests for permit to use loose leaf books of accounts, records, invoices and receipts should be filed either in the office of the Chief Revenue Officer or the Regional Director. The said request should be referred to the fieldmen of the inspection district who has jurisdiction over the taxpayer, for appropriate investigation.

The investigation should be conducted in accordance with the following:
1. The necessity of the use of the loose leaf forms requested should be determined and the reason or reasons for recommending the approval or disapproval of the request should be clearly stated in the report;

The report should, likewise, include a statement of the privilege or fixed taxes paid by the taxpayer by citing the official receipt number, date of payment, amount paid and the corresponding paragraph and schedule, including a statement whether the business of the taxpayer has been duly registered with the Bureau of Internal Revenue. The examiner should investigate whether all the privilege and fixed taxes due on the activities engaged in by the taxpayer have been duly paid;

The taxpayer should be informed by the investigating examiner that a condition precedent to the issuance of a permit to use loose-leaf invoices and receipts is that the taxpayer upon receipt of the permit should immediately register with the Collection Agent or the Chief Revenue Officer, a register which should be a bound book. The bound book should show in detail and in column the serial numbers of the invoices or receipts printed for use by the business on the left side of the book. Every additional printing should be recorded on the same side of the bound book. On the right hand side, the serial numbers of the invoices and receipts used during the week, together with the total amount involved should be entered weekly.

Upon receipt by the Chief Revenue Officer of the report of the investigating examiner, he must check with his IBM list of delinquent accounts to determine whether the taxpayer owes anything to the Bureau. If the taxpayer is delinquent in the payment of his tax liabilities, such fact should be communicated to the taxpayer with the request that the delinquent taxes should be paid, otherwise his request to use loose leaf forms will not be given due course. If there is no delinquency, on the part of the taxpayer, the report should be forwarded to the Regional Office.

Upon receipt by the Regional Office, the reports should be processed to determine further through the Collection Branch whether the taxpayer has no delinquent tax liabilities; through the Investigation Branch to determine whether the taxpayer has derogatory information regarding tax evasion; and through the Income and Business Tax Branch to determine whether the taxpayer has any pending report for processing which will involved a big amount of deficiency tax. In case of positive information in any of the above-mentioned branches, the Regional Director should inform the taxpayer of such fact, informing him that his request cannot be given due course.

All requests for permit to use loose leaf invoices, receipts, books and other records forwarded from Regional Offices should be processed in the Business Tax Division of the National Office. The Business Tax Division, before processing, should forward the papers to the Delinquent Accounts Division for notation by the latter division of any delinquency of the taxpayer as shown by its record. If the taxpayer has any delinquency, the Business Tax Division should inform the taxpayer that his permit cannot be given due course unless he settles his obligations with the bureau.

In the preparation of the permit to use loose leaf invoices which should be prepared for the signature of the Deputy Commissioner, the taxpayer should be required to bind the loose leaf forms within fifteen (15) days after the end of his taxable year and the condition to register a bound book for recording of the serial numbers of invoices printed and serial number of invoices used within the week and the amount involved. The letter should likewise contain a statement that if the taxpayer is discovered to have violated any of the provisions of the bookkeeping regulations, his permit to use loose-leaf forms will be immediately cancelled.

The permit should be duly numbered and a permit register should be kept in the Business Tax Division showing the number of the permit, name of the taxpayer, address, nature of loose-leaf form to be used and such other information as may be necessary for the keeping of the register.

All permits to be issued under this Circular are to be considered on a permanent basis unless otherwise revoked. Permits issued previous to this Revenue Memorandum Circular which were issued on an annual basis should be renewed at the end of the term of the permit and must undergo the same process as that required in this Circular.

This Revenue Memorandum Circular revokes all Circulars or Orders previously issued which are inconsistent herewith.

This Circular shall become effective upon approval.

(Revenue Memorandum

Circular No. 48-64.

dated Oct. 21, 1964)

4(2). REVOCATION OF AUTHORITY TO USE LOOSE-LEAF INVOICES: — Repetition of the failure by a taxpayer to submit within the prescribed period a sworn certificate to use loose-leaf books of accounts or invoices, will constrain this Office to revoke the authority granted to the taxpayer to use said loose-leaf books of accounts. (B.I.R. Rulings Nos. 446, s. 1959; 351, s. 1960; and 142, s. 1961).

4(3). PERSONS OPERATING "HOME INDUSTRIES": — Persons operating "home industries" are required to keep and use books of accounts, namely, the journal and the ledger or their equivalents where all their business transactions should be duly recorded. (B.I.R. Ruling No. 220, s. 1960).

4(4). CERTIFICATE REGARDING THE USE OF LOOSE-LEAF BOOKS OF ACCOUNTS: — As in the case of loose-leaf invoices, the requirements imposed upon persons or corporations authorized to use loose-leaf books of accounts to submit within a certain period a sworn statement certifying to the number of pages used during a given period is neither a provision of the Tax Code nor a regulation of the Department of Finance issued in conformity therewith. Accordingly, failure to submit such statement on time does not constitute a violation of any internal revenue law or regulations and, therefore no compromise penalty can be imposed for said failure.

However, as in the case also of loose-leaf invoices, repetition of such failure will constrain the Bureau of Internal Revenue to revoke the authority granted to use loose-leaf books of accounts. (B.I.R. Ruling No. 351, s. 1960)

4(5). BINDING OF JOURNAL AND LEDGER: — As the Bookkeeping Regulations merely requires that the journal and ledger be in bound form without specifying the manner or the device to be used in binding, any device may be used as long as said books of accounts are in book form. Accordingly, binding of the books by the use of post binders and roundhead fasteners is sufficient compliance of the Regulations. (B.I.R. Rulings No. 138, Feb. 20, 1959).

4(6). CASH RECEIPTS BOOK IN LOOSE-LEAF FORM: — A cash receipt book is a part of a journal and, therefore, the use thereof in loose-leaf form is subject to the requirements on the use of loose-leaf books of accounts. Accordingly, the certificate attesting to the number of sheets used in a loose-leaf cash receipts book should be under oath. (B.I.R. Ruling No. 225, s. 1959).

4(7). NO TRANSACTIONS MADE IN THE MAIN ESTABLISHMENT: — Where no sales are effected in the main establishment, no books of accounts and other accounting records needs be kept and used by said establishment. On the other hand, where sales are made in both the main and branch establishments, all should keep and use books of accounts and accounting records. (B.I.R. Ruling No. 145, s. 1959).

4(8). UNAUTHORIZED USE OF THE JOURNAL AND LEDGER IN LOOSE-LEAF FORM: — The unauthorized use of loose-leaf general journal and ledger is a violation of section 4 of the Bookkeeping Regulations, punishable under section 352 of the Tax Code. (B.I.R. Ruling No. 264, s. 1959).

4(9). AUTHORITY TO USE LOOSE-LEAF LEDGER: — The authority granted to the main establishment to use loose-leaf ledgers does not include the branch establishments. The latter cannot use loose-leaf ledgers without specific authority therefor. (B.I.R. Ruling No. 607, Oct. 2, 1958)

4(10). USE OF JOURNAL AND LEDGER BY BRANCH STORES: — Each branch office or store must keep a journal and a ledger, or their equivalent, or a simplified set of bookkeeping records, depending upon whether or not their respective gross sales exceed P5,000.00 a quarter. (B.I.R. File No. 105.02, Dec. 23, 1957).

4(11). CERTIFICATE AS TO THE USE OF LOOSE-LEAF BOOKS OF ACCOUNTS: — The certificate of the taxpayer as to the number of sheets of his loose-leaf books of accounts used by him for the previous year must be under oath. (B.I.R. Ruling dated May, 1957).

[6] As amended by Sec. 3, Rev. Reg. No. V-13

[7] Revenue Regulations No. V-43

[8] Added by Sec. 1, Rev. Reg. No. 5-62

[9] Added by Sec. 1, Rev. Reg. No. 5-62

[10] Added by Sec. 1, Rev. Reg. No. 5-62

5(1). USE OF BOOKS OF ACCOUNTS ON A PARTICULAR KIND OF BUSINESS: — Under Revenue Regulations No. V-43, only simplified sets especially designed for a particular kind of business and approved by the Secretary of Finance can be used. If no simplified sets has as yet been approved for a particular business, that business may use simplified sets approved under the provisions of Revenue Regulations No. V-43. A particular business cannot therefore, use a simplified set specifically designed for another business by merely changing the title thereof to that corresponding to said business. (B.I.R. Ruling dated Feb. 12, 1964).

5(2). OPERATORS OF BOWLING ALLEYS TO KEEP BOOKS OF ACCOUNTS: — Operators of bowling alleys should keep a journal and a ledger, or their equivalents. However, if their gross quarterly receipts do not exceed P5,000.00 they may use a simplified set of bookkeeping records only. (B.I.R. Ruling dated Dec. 13, 1961).

5(3). CRITERIA IN DETERMINING THE USE OF BOOKS OF ACCOUNTS. — The criterion in determining what books of accounts a taxpayer should keep is the amount of his gross quarterly sales, receipts, earnings, or output, and not those derived during a given year. If his sales, receipts, earnings, or output do not exceed P5,000 he may use only the simplified set of bookkeeping records but unless he chooses the use of the latter books, he must keep a journal and a ledger, or their equivalents. If the taxpayer realizes more than P5,000.00 during any quarter of year, he is duty bound to use the journal and ledger, or their equivalents, even if his total sales for the year do not exceed P20,000.00. (B.I.R. Ruling No. V-20, s. 1960).

5(4). AMENDMENT OF REVENUE REGULATIONS; EFFECT OF: — The Secretary of Finance may not, by amending the regulations promulgated by him, immediately declare as unlawful and illegal simplified sets of bookkeeping records previously approved by him under regulations also promulgated by him in accordance with law but superseded later on. While he may always amend his revenue regulations governing the preparations and submission of simplified sets of bookkeeping records with the end in view of public good, he should also take into consideration the investments made by persons whose acts have been approved by him under previous revenue regulations. It should be noted that the approval of said sets does not contain any specific date of validity. While it may be contended that since they do not have any specific date of validity they may be declared illegal at any time, such act would work an injustice to those who invested their time and money, relying on the regulations duly promulgated and on the subsequent approval of their sets made by the Secretary of Finance. And to follow the theory advanced by the petitioner to the extreme, we may also say that even now the Secretary can issue revenue regulations No. V-43 and requiring additional information not contained in the forms, submitted by the petitioner or deleting others he deems unnecessary and thereby place the petitioner in the same situation as those whose simplified sets have been approved under Revenue Regulations No. V-13.

Moreover, it does not appear that the forms prepared by the petitioner and approved by the respondent Secretary of Finance cover all kinds of conceivable business or trade. Neither was it shown that there are at present simplified sets of bookkeeping records approved by the respondent Secretary of Finance cover all kinds of conceivable business or trade. Neither was it shown that there are at present simplified sets of bookkeeping records approved by the respondent Secretary pursuant to Revenue Regulations No. V-43, applicable to all kinds of conceivable business or trade. That being the case, to prohibit the use of simplified sets approved by the Secretary under Revenue Regulations No. V-13 would create a situation where the merchants or traders whose business, trade or calling is not covered by sets approved under Revenue Regulations No. V-43, would not have any form to use and would not be able to comply with the requirements of section 334, as amended, of the Revenue Code.

There is no question that the sets submitted by the petitioner are superior to those approved under Revenue Regulations No. V-13. However, those who have acquired a right under Revenue Regulations No. V-13 by virtue of the approval of the sets submitted by them, which sets are now being used by merchants engaged in different trades for which the petitioner prepared specific sets, should be given sufficient time to recover their investments and to make a reasonable profit out of said investments. This should be left to the sound discretion of the Secretary of Finance.

With respect to those sets approved under Revenue Regulations No. V-13 and for which no form has been approved under Revenue Regulations No. V-43, the same may continue to be used indefinitely. (Felipe B. Ollada vs. The Secretary of Finance, et al., Civil Case No. 3473 (CFI, Manila, Feb. 23, 1959; G.R. No. L-15397, Oct. 31, 1960.)

5(5). INCOME RECEIVED BY PILOT ASSOCIATION, HOW RECORDED IN BOOKS: — Where members or pilots of a pilot association share equally in the net income of the latter derived from its business as such, the respective income received by the former should be treated in their respective books of accounts as "share or participation in the profits or income" of the pilot association and not as "salary." (B.I.R. Ruling No. 366, s. 1960)

5(6). BOOKS OF ACCOUNTS TO BE KEPT BY MANUFACTURER OF GARMENTS: — A manufacturer of garments whose expected gross sales in a quarter will not exceed P5,000.00 may keep and use only a simplified set of bookkeeping records.

As in the case of other books of accounts, said bookkeeping records must be presented for registration and approval prior to their use. (B.I.R. Ruling No. 214, s. 1960).

5(7). PERSONS EXEMPT FROM THE PAYMENT OF FIXED AND PERCENTAGE TAXES, REQUIRED TO KEEP BOOKS OF ACCOUNTS: — As persons subject to internal revenue taxes are required to keep and use books of accounts, one exempt from the fixed and percentage taxes is nevertheless, under obligation to do so, because he remains subject to the income and additional residence taxes. (B.I.R. Ruling No. 427, s. 1960).

5(8). FISHPOND OWNERS OR OPERATORS MUST KEEP BOOKS OF ACCOUNTS: — Fishpond owners or operators must keep a journal and a ledger or their equivalents. However, should their gross quarterly receipts do not exceed (P5,000.00, they may keep and use only a simplified set of bookkeeping records. (B.I.R. Ruling No. 339, s. 1959).

5(9). BOOKS OF ACCOUNTS TO BE KEPT BY RETAIL MERCHANTS: — The books of accounts which retail merchants should keep and use are the journal and the ledger. However, if their gross quarterly sales, receipts, or earnings do not exceed P5,000 they may keep and use the simplified set of bookkeeping records duly authorized by the Secretary of Finance. (B.I.R. Ruling No. 87, s. 1959).

5(10). POULTRY RAISERS TO KEEP BOOKS OF ACCOUNTS: — While a person engaged in the business of poultry raising is exempt from business taxes, nevertheless, he is under obligation to keep and use books of accounts, he being subject to the income and additional residence taxes. (B.I.R. Ruling No. 70, s. 1959).

5(11). BOOKS OF ACCOUNTS TO BE KEPT BY LANDOWNERS: — Owners of agricultural lands, being subject to the income and additional residence taxes, should keep and use a simplified set of bookkeeping records, if their gross quarterly sales, earnings, or receipts do not exceed P5,000.00; otherwise, they should keep and use a journal and a ledger, pursuant to section 334 of the Tax Code, as amended. In accordance with section 337 of the same Code, said books of accounts should be preserved for a period of at least five (5) years from the date of last entry in each book. Failure to keep said books of accounts and to preserve the same within the prescribed period is punishable under section 352 of the same Code, as implemented by General Circular No. V-237 dated March 2, 1957. (B.I.R. Ruling dated May 22, 1957, File No. 106.02).

5(12). AGENTS AND SUB-AGENTS OF THE PHILIPPINE CHARITY SWEEPSTAKES OFFICE. — Agents of the Philippine Charity Sweepstakes Office, as well as their sub-agents, whose gross quarterly sales, earnings or receipts do not exceed P5,000.00 shall keep and use a simplified set of bookkeeping records duly approved by the Secretary of Finance wherein all transactions are shown and from which all taxes due the Government may readily and accurately be ascertained and determined anytime of the year. Said records must, before being used, first be presented to the deputy provincial treasurer (now Collection Agent) of the locality where the agent resides or is doing business for registration and approved. (B.I.R. Ruling dated March 5, 1957, File No. 105.02).

5(13). USE OF SIMPLIFIED SETS OF BOOKKEEPING RECORDS NOT MANDATORY: — While Section 334 of the Tax Code as implemented by Revenue Regulation No. V-1 (Bookkeeping Regulations), and its amendatory regulations, requires a taxpayer whose gross quarterly sales receipts, earnings or output do not exceed P5,000.00 to use a simplified set of bookkeeping records, nevertheless, such requirement is not mandatory. The taxpayer may at his option, use instead of journal and a ledger, or their equivalents.

5(14). MEDICAL PRACTITIONERS AND INSURANCE AGENTS — TO KEEP BOOKS OF ACCOUNTS: — Medical practitioners and insurance agents, being persons subject to internal revenue taxes, are required by section 334 of the Tax Code to keep and use either a journal and a ledger, or their equivalents, or a simplified set of bookkeeping records duly authorized by the Secretary of Finance, depending on whether or not their gross quarterly earnings or receipts exceed P5,000.00 (B.I.R. Ruling dated Jan. 3, 1956).

5(15). VENDORS INSIDE PUBLIC MARKET: — Market vendors should keep and use either the journal and the ledger, or their equivalents, or the simplified set of bookkeeping records, depending upon whether or not their gross quarterly receipts exceed P5,000.00 in accordance with section 334 of the Tax Code. (B.I.R. Ruling dated Aug. 6, 1956, File No. 105.02).

5(16). VENDORS INSIDE PUBLIC MARKET SELLING EXCLUSIVELY DOMESTIC PRODUCTS: — Public market vendors engaged exclusively in the sale at retail of domestic meat should use and keep either the journal and ledger or their equivalents, or the simplified bookkeeping records prescribed by section 334 of the Tax Code, because, while they are exempt from the business tax they remain, nevertheless, subject to the income and additional residence taxes. (B.I.R. Ruling dated July 10, 1956, File No. 106.02).

5(17). RECORDS TO BE KEPT BY RETAIL TOBACCO DEALERS: — Retail leaf tobacco dealers may use in lieu of purchase books, a simplified set of bookkeeping records provided the following are shown in every purchase made by them:

1) The date of purchase;

2) The quarterly purchase;

3) The name of the wholesale leaf tobacco dealers from whom the purchase were made;

4) The schedule, paragraph and assessment number of the wholesale leaf tobacco dealers; and

5) The signature of the wholesale leaf tobacco dealer.

(B.I.R. Ruling dated Oct. 2, 1956).

5(18). BAKERY SHOP OWNERS OR PROPRIETORS REQUIRED TO KEEP BOOKS OF ACCOUNTS: — An operator or proprietor of a bakery shop is required to keep a journal and ledger or their equivalents as required under section 334 of the Tax Code, except when the gross quarterly sales, earnings, receipts, or output do not exceed P5,000.00, in which case the owner or operator may keep only the simplified bookkeeping records. (B.I.R. Ruling dated Oct. 8, 1954, File No. 105.02).

5(19). AUTHORITY TO USE SIMPLIFIED SETS OF BOOKKEEPING RECORDS APPROVED UNDER SECTION 2 OF REVENUE REGULATIONS NO. V-1, as amended: — In accordance with the introduced amendments, beginning January 1, 1964, only Simplified Sets of Bookkeeping Records especially designed for each class or kind of trade or business and prepared by a certified public accountant, are to be registered and approved. All others not prepared in accordance with the above-mentioned amendments shall no longer be used, approved or registered. (Revenue Memorandum Circular No. 1-64, dated January 7, 1964)

5(20). AUTHORITY OF THE SECRETARY OF FINANCE RE-USE OF SIMPLIFIED SETS OF BOOKKEEPING RECORDS: —

"While this Department takes cognizance of the difficulties confronting small business taxpayers as herein pointed out, nevertheless it is not necessary to resort to the outright suspension of the effectivity of the provisions of Revenue Regulations No. 5-62 to meet such contingency. It is believed that in places where simplified sets of bookkeeping records specified in Annex "A" of Revenue Regulations No. 5-62 are available and at prices not exceeding P1.00 each, the provisions of the aforesaid Regulations No. 5-62 could be enforced. However, in places where the simplified sets of bookkeeping records referred to herein are not available, or available but the cost thereof exceeds P1.00 per copy, the problem could be met by allowing small merchants to continue using simplified sets of bookkeeping records previously authorized by this Department in accordance with Revenue Regulations No. V-13.

"In view of the foregoing, the request of that Bureau to have the effectivity of Revenue Regulations No. 5-62 suspended cannot be approved. However, authority is hereby given that Bureau to allow businesses concerned to continue using simplified sets of bookkeeping records previously approved by this Department under Revenue Regulations No. V-13, in places where simplified sets of bookkeeping records mentioned in Annex "A" of said Regulations are not available or altho available the selling price thereof exceeds P1.00 per copy, but such permit to continue using unspecified class of bookkeeping records should not extend beyond December 31, 1963. In accordance with the aforequoted authorization, taxpayers whose gross quarterly sales, earnings, receipts, or output do not exceed P5,000 and whose businesses are located in places where simplified sets of bookkeeping records mentioned in Annex "A" of Revenue Regulations No. 5-62 are not available, or altho available the selling price thereof exceeds P1.00 per copy, may be permitted to continue using simplified sets of bookkeeping records previously approved in accordance with Section 2 of Revenue Regulations No. V-1 (as amended by Rev. Regs. No. V-13), up to Dec. 31, 1963 only. (B.I.R. Revenue Memorandum Circular No. 5-63, dated Feb. 22, 1963)

[11] As amended by Sec. 4, Rev. Reg. No. V-13

[12] As amended by Sec. 4, Rev. Reg. No. V-13

[13] As amended by Sec. 4, Rev. Reg. No. V-13

[14] As amended by Sec. 4, Rev. Reg. No. V-13; See Republic Act No. 2343

OTHER REQUIREMENTS FOR PERSONS REQUIRED TO KEEP AND USE THE SIMPLIFIED SET OF BOOKKEEPING RECORDS: — Persons required to keep and use the simplified set of bookkeeping records shall comply with all the requirements regarding the preparation, issuance, use, keeping, the presentation, and preservation of invoices, receipts, vouchers, as prescribed in Chapter IV and observe the general administrative provisions provided for in Chapter V, of Revenue Regulations No. V-1. (Sec. 5, Rev. Reg. V-13).

MEANING OF INTERNAL REVENUE PURCHASES AND SALES BOOKS: — Whenever the words "internal revenue purchases and sales books, appear in the other provisions of these regulations the same shall read as "simplified set of bookkeeping records." (Sec. 6, Rev. Reg. No. V-13).

PRINTING OF SIMPLIFIED SET OF BOOKKEEPING RECORDS: — The printing of any simplified set of bookkeeping records by any private party for sale to the public may be recommended by the Commissioner of Internal Revenue to the Secretary of Finance provided said records conform substantially with the form prescribed herein as minimum requirements. (Sec. 7, Rev. Reg. No. V-13.)

6(1). PURCHASES BY MEANS OF "CHITS" ARE CONSIDERED SALES ON CREDIT: — Purchases effected by means of "chits" are considered sales on credit contemplated by Section 6 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations, as amended, implementing Section 334 of the Tax Code. Since all these sales are properly invoiced and the use of "chits" in lieu of cash does not constitute violation of any internal revenue law or regulations, the same need not be approved by this Office. (B.I.R. Ruling No. 83, s. 1963).

6(2). FAILURE TO AFFIXED SIGNATURE IN THE STATEMENT OF NET WORTH AND OPERATIONS: — Failure of a taxpayer to affixed his signature in the Statement of Net Worth and Operations attached to his income tax returns invalidates the same, pursuant to Revenue Memorandum Circular No. 1-63, dated January 28, 1963. Such failure amounts to as if no statement of net worth and operations has been attached to the income tax returns and, therefore, constitutes a violation of section 6 of Revenue Regulations No. V-1 otherwise known as the Bookkeeping Regulations, as amended by Revenue Regulations No. V-13, punishable under Section 352 of the National Internal Revenue Code. (B.I.R. Ruling No. 102, s. 1963.)

6(3). DAILY SALES AND DISBURSEMENT RECORD: — The record of daily sales and disbursement is part of a simplified set or bookkeeping records. Accordingly, as in the case of the simplified sets, said record should be approved and registered prior to its use. (B.I.R. Ruling No. 65, s. 1961).

6(4). TREATMENT OF COSTS OF RAW MATERIALS IN BOOKS OF ACCOUNTS. — The cost of raw materials incurred in the manufacture of ice such as salt, water, ammonia, fuel and lubricating oil although not deductible from the gross selling price of such manufactured ice, must be entered in the manufacturer's simplified accounts and tax records. (B.I.R. Ruling No. 132, s. 1960).

6(5). ONE SET OF BOOKS SUFFICIENT — SEGREGATION OF TRANSACTION: — A company engaged in the production of coffee and chocolate need not keep and use more than one set of books of accounts. The use of a set of books consisting of the journal and the general and subsidiary ledgers is a sufficient compliance with the bookkeeping regulations.

As the production of coffee and chocolate constitutes a single business, the record of transactions in each product need not be segregated. (B.I.R. Ruling No. 218, s. 1960).

6(6). SUBMISSION OF STATEMENT OF NET WORTH AND OPERATIONS: — A taxpayer whose income does not exceed P5,000.00 a quarter need not file with his income tax return a balance sheet and profit and loss statement. However, he should file a statement of net worth and operations, pursuant to Section 6 of the Bookkeeping Regulations, as amended. (B.I.R. Ruling No. 449, s. 1960).

6(7). FAILURE TO SUBMIT STATEMENT OF NET WORTH AND OPERATIONS: — A person under obligation to file with his income tax returns the statement of networth and operations who fails to do so commits as many violations as there are such failures on his part. (B.I.R. Ruling No. 179, s. 1959).

Professionals whose only source of income is their salary need not file the statement of networth and operations, but those engaged in the active practice of their professions or in any taxable business should file said statement. (Ibid.)

6(8). RECORDS TO BE KEPT BY SUB-LESSOR OF BUILDING: — A sub-lessor of a building whose gross quarterly receipts do not exceed P5,000.00 must keep a simplified set of bookkeeping records. He is also under obligation to submit with his income tax return a statement of his networth and operations. (B.I.R. Ruling No. 35, s. 1959).

6(9). INCOME RECEIVED CONSIST OF SALARY, DIVIDENDS AND INTEREST: — A person whose income during a given year consists exclusively of salaries, dividends, and capital gains need not accompany his income tax return with the yearly statement of networth and operations required of those whose gross quarterly sales, earnings, receipts, or output does not exceed P25,000 under section 6 of Revenue Regulations No. V-1, as amended. Neither does such person need to attach to his income tax return the certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding incomes therefrom, and other relevant statements required of persons whose gross quarterly sales, earnings, receipts, or output exceed P25,000.00 under Section 334 of the Tax Code. (B.I.R. Ruling dated Feb. 19, 1958).

6(10). WHEN TO FILE STATEMENT OF NETWORTH AND OPERATIONS: — Taxpayers whose gross quarterly receipts exceeds P5,000.00 but do not exceed P25,000.00 are under obligation to submit with their income tax return the yearly statement of networth and operations. (B.I.R. Ruling No. 650, s. 1958).

6(11). TREATMENT OF IMPORTED AND LOCALLY PURCHASED ARTICLES IN THE BOOKS OF ACCOUNTS: — Sales of imported and locally purchased articles can be combined in one entry in the books of accounts of a taxpayer, provided the correct taxes are paid on time and that in case of investigation the taxpayer can furnish the desired data concerning the business transaction for purposes of assessing the taxes due and considering that the imported articles are duly tax-paid before release from customs custody. (B.I.R. Ruling dated Jan. 15, 1953).

[15] 7(1). FARMERS TO KEEP BOOKS OF ACCOUNTS: — A Farmer comes within the purview of the term, "persons required by law to pay internal revenue taxes," found in section 334 of the Tax Code, and therefore, he is required to keep books of accounts and other accounting records in accordance with said law, as implemented by Revenue Regulations No. V-1 otherwise known as the Bookkeeping Regulations. (B.I.R. Ruling No. 141, s. 1962).

7(2). BARBERSHOP OPERATORS TO KEEP BOOKS OF ACCOUNTS: — As persons subject to internal revenue taxes are required to keep and use books of accounts, owners and operators of barbershops should comply with the requirement notwithstanding the fact that they are not subject to any business tax, because they are subject to the income and additional residence taxes. (B.I.R. Ruling No. 53, s. 1961).

7(3). SECTION 7 OF REVENUE REGULATIONS NO. V-1 REPEALED BY IMPLICATION: — Section 7 of Revenue Regulations had been impliedly repealed by section 334 of the Tax Code, as last amended by Republic Act No. 658, because under the latter the only principal books of accounts that can now be used by taxpayers are the journal and ledgers, or their equivalents, and the simplified set of bookkeeping records. (B.I.R. Ruling Dated March 30, 1957, File No. 106.02).

7(4). SALARY RECEIVED AS THE ONLY SOURCE OF INCOME: — A taxpayer whose only source of income is his salary need not keep and use any book of accounts, it being material whether or not, for purposes of the income tax, he has selected the standard optional deduction provided for in section 30(k) of the Tax Code. (B.I.R. Ruling dated Dec. 2, 1957).

7(5). FARMERS REQUIRED TO KEEP BOOKS OF ACCOUNTS: — Pursuant to Section 334 of the Tax Code, farmers must keep a journal and a ledger or their equivalents. However, if their gross quarterly earnings or receipts do not exceed P5,000, they may use only a simplified set of bookkeeping records duly authorized by the Secretary of Finance. Before using said books or records, they must first be presented for approval and registration with the Regional Director, or the Chief Revenue Officer, of Collection Agent, as the case may be, in accordance with Sec. 19 of the Bookkeeping Regulations. (B.I.R. Ruling No. 50, s. 1965)

[16] Added by Sec. 3, Rev. Reg. No. V-20; See Republic Act No. 658

8-A(1). ACCOUNTANT'S CERTIFICATE: — If the kinds and amounts of taxes payable and whether or not they have been fully paid are stated in the accountant's certificate, the requirements of the regulations have been complied with. A statement on the official receipt number and date of payment is not necessary. (B.I.R. Ruling No. 44, s. 1963).

8-A(2). CERTIFIED BALANCE SHEETS, PROFIT AND LOSS STATEMENT: — The moment one's gross sales, earnings, receipts or output in any quarter of the years exceeds P25,000.00, his books of accounts should be audited and examined by an independent certified public accountant and his income-tax return accompanied with certified balance sheets, profit and loss statements, and the other statements required by section 334 of the Tax Code. (B.I.R. Ruling No. 184, s. 1961).

8-A(3). MANNER OF SIGNING BOOKS AND RECORDS BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT: — From the provisions of Section 8-A of Revenue Regulations No. V-1, as amended by Revenue Regulations No. V-20, it is quite clear that the cases where the audit and examination have been performed by a firm of certified public accountants, the certificate should be signed as follows (taking for granted that the name of the firm is "Cruz, Santos & Co." and "Juan Antonio," is the certified public accountant thereof who actually performed the audit and examine or a responsible officer of the firm):

"Cruz, Santos & Co.

Certified Public Accountant

By:

Juan Antonio"

To sign the certificate merely with "Cruz, Santos & Co.", either alone or immediately above the typewritten name of the firm, would not be a sufficient compliance with the regulations. (B.I.R. Ruling No. 53, s. 1960).

8-A(4). REGISTER BOOK FOR WHOLESALE DEALERS OF ARTICLES SUBJECT TO SPECIFIC TAX: — Under Revenue Regulations No. V-66, which amended Revenue Regulations No. V-62 wholesale dealers of liquors, fermented liquors, wines, and tobacco products are required to keep and use the official register books (BIR Form No. 31.77) wherein only transactions in said article should be entered. However, where the dealer at the same time deals in other articles, he may enter in the same ledger wherein transactions in general merchandise are summarized the summary of the transactions recorded in said official register book, provide that the latter summary is identified from the other entries. (B.I.R Ruling No. 499, s. 1959).

8-A(5). BOOKS OF ACCOUNTS OF PAWNSHOPS, WHEN AUDITED: — Loans given by pawnshops are not embraced within the meaning of "sales, earnings, receipts, or output" and, therefore, pawnshop brokers need not have their books of accounts audited and examined by an independent certified public accountant even if the total amount of the loans given during any quarter exceeded P25,000.00.

However, should the amount of interest realized from the loans, plus the amount of the sales of unredeemed jewelries minus the amount for which they were pawned, and all other income, earnings, or receipts derived from the operation of the pawnshop exceed P25,000.00 during any given quarter, said books must be audited and examined by an independent certified public accountant. (B.I.R. Ruling No. 112, s. 1958).

[17] Added by Sec. 1, Rev. Reg. No. V-58

[18] Added by Sec. 2, Rev. Reg. V-58

[19] Sec. 335, Commonwealth Act No. 466

8-B(1). USE OF DOUBLE ENTRY BOOKKEEPING SYSTEM: — The use of the double entry bookkeeping system is permissible in any business transaction and, therefore, said system may be used by retailers and wholesalers. (B.I.R. Ruling No. 215, s. 1958).

The use of books of accounts other than those mentioned in Section 334 of the Tax Code cannot be allowed. (Ibid.)

8-B(2). CERTIFIED PUBLIC ACCOUNTANT EMPLOYED IN A BANK ADMINISTERING PROPERTIES OF A DECEASED: — A certified public accountant employed in a bank which, among others, handles the administration of estate of deceased persons, cannot duly certify to the statement of estate of deceased persons, cannot duly certify to the statement of itemized assets, itemized deductions and amount of taxes due which should accompany the estate returns showing a gross value of P50,000.00 or more, or to be filed by the bank in behalf of the decendant's estate in its capacity as administrator or executor, because his employment in the bank might affect his professional actuations as a certified public accountant. (B.I.R. Ruling, dated July 3, 1957.)

8-B(3). TOTAL SALES SUBJECT TO YEARLY AUDIT: — Where the sales, earnings, receipts or output of a corporation, company, partnership, or person exceed P25,000.00 in any one quarter, the books of accounts of such corporation, company, partnership or person shall be subject to the yearly audit to be performed by an independent certified public accountant, even if the total sales, earnings, receipts or output during the entire year do not reach P100,000.00 (B.I.R. Ruling dated April 10, 1950, File No. 106.02).

8-B(4). BOOKS OF ACCOUNTS OF RELIGIOUS CORPORATIONS TO BE AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT: — A religious corporation whose gross income from another religious and educational corporation exceeds P100,000 a year, shall have its books of accounts audited and certified by an independent certified public accountant, pursuant to Section 334 of the Tax Code. (B.I.R. Ruling dated Feb. 12, 1953).

[20] 9(1). USE OF SUBSIDIARY BOOKS: — Pursuant to section 335 of the Tax Code, where subsidiary books are kept, they shall form part of the accounting system of the taxpayer and be subject to the same rules and regulations as to their keeping, translation, production and inspection as are applicable to the journal and ledger. Accordingly, the requirement of registration and approval prior to the use of the journal and ledger is applicable to the subsidiary books. (B.I.R. Ruling dated Sept. 17, 1956, File No. 106.02).

9(3). CHARGE SALES BOOK AND CHARGE PURCHASE BOOK: — As charge sales book and charge purchase book correspond to customers ledger and creditors ledger respectively, the entries in which are controlled by the general ledger in the corresponding controlling accounts, they are subsidiary books of accounts, and their use is optional only. Consequently, they may be used without the necessity of prior approval by and registration in the Bureau of Internal Revenue. (B.I.R. Ruling dated Feb. 23, 1953, File No. 106.02).

9(4). "POISON" BOOK, "ABORTIVE" BOOK AND "PRESCRIPTION" BOOK, CONSIDERED SUBSIDIARY BOOKS: — The so-called "poison book," "abortive book," and "prescription book" are considered subsidiary books within the purview of section 335 of the Tax Code and should, therefore, be presented for approval and registration prior to their use. (B.I.R. Ruling dated Sept. 22, 1953, File No. 106.02).

9(5). DELIVERY RECEIPTS PART OF ACCOUNTING RECORDS: —

The so-called delivery order receipts used by a firm in accompanying the delivery of manufactured lead on sales made by it in its Manila office are, like the regular invoice and receipts, a part of the accounting records and, therefore, subject to registration and approval by this office before the actual use of the same, pursuant to Section 14 of the Revenue Regulations No. V-1, (B.I.R. Ruling No. 45, s. 1965).

[21] Repealed by implication by Republic Act No. 3704. Operators or owners of rice or corn mills are now subject to an annual graduated fixed tax based upon the total capacity per machine used and not on the percentage tax imposed by section 189 of the National Internal Revenue Code.

10(1). REPUBLIC ACT NO. 3704: — Under Section 1 of Republic Act No. 3704 which amends section 182 of the Tax Code, operators or owners of rice or corn mills are now subject to an annual graduated fixed tax based on the rates provided therein beginning July 1, 1963. However, inasmuch as this is an annual tax, they may pay only one half (1/2) of the prescribed rates corresponding to the second semester of 1963, payment of which should be made on or before July 22, of this year (1963).

Under Section 2 of the aforesaid law which amends Section 189 of the Tax Code, operators or owners of rice or corn mills are no longer liable to the 2% miller's tax starting June 22, 1963. However, they are subject to the payment of said tax on transactions covering the period from June 1 to June 21, 1963, payment of which should be made not later than July 22, 1963. (B.I.R. Gen. Circular No. 17-63, dated July 9, 1963).

10(2). RICE AND CORN MILLS REQUIRED TO KEEP BOOKS OF ACCOUNTS PRESCRIBED BY REV. REGS. NO. V-1: — Operators or owners of rice and/or corn mills are no longer required to keep and use the books and records prescribed by Regulations No. 7, the Rice and Corn Mills Regulations, because under the amendment effected by Republic Act No. 3704, rice and/or corn mills are no longer subject to the 2% tax prescribed by Section 189 of the Tax Code. In lieu of the books and records prescribed by Regulations No. 7, they are now required to keep and use the books and records prescribed by Regulations No. V-1, otherwise known as the Bookkeeping Regulations, as amended. (B.I.R. Ruling No. 84, s. 1964).

Under the provisions of Section 1 of Republic Act No. 3704, which took effect on June 22, 1963, amending Sections 182 and 189 of the Tax Code, the basis of the graduated fixed annual tax payable by operators, proprietors or owners of rice and/or corn mills is the milling capacity per machine operated by the proprietor. (B.I.R. Ruling No. 1, s. 1964).

[22] 11(1). REGISTER BOOK FOR JOB ORDERS: — One engaged in a machine shop business should, in addition to the regular books of accounts and other accounting records, keep a register book for job orders received in which he shall enter immediately upon making a contract the date, name and address of the customer, a description of the articles to be constructed or the services desired, the consideration therefor, and the amount of deposit or partial payment, if any; and upon completion and delivery of the subject matter of the contract, the date of completion or delivery and the amount paid herefor. However, should he find the use of said register book impracticable for his business, he may devise such system of keeping his books and other records as may be appropriate for his business and present them for approval in accordance with section 19 of the Bookkeeping Regulations. (B.I.R. Ruling No. 620, s. 1959).

[23] 12(1). COMMERCIAL BROKERS REQUIRED TO KEEP BOOKS OF ACCOUNTS: — A commercial broker is subject to 6% tax on the gross compensation received by him as such, pursuant to Section 195 of the Tax Code. Being subject to the internal revenue tax he is required to keep books of accounts in accordance with Section 334 of the Tax Code, as implemented by Revenue Regulations No. V-1. (B.I.R. Ruling dated Nov. 2, 1962).

[24] Sec. 204 of Commonwealth Act No. 466, as amended by Com. Act No. 526; sec. 9, Republic Act No. 48; sec. 18 of Republic Act No. 1612; and by Republic Act No. 1856

13(1). SARI-SARI STORE OWNERS TO SUBMIT INVENTORY OF THEIR STOCKS IN TRADE: — Sari-sari store owners being subject to internal revenue tax on business are required to submit an inventory of their stocks in trades pursuant to Section 13 of the Bookkeeping Regulations. (B.I.R. Ruling No. 407, s. 1961).

13(2). INVENTORIES NEED NOT BE NOTARIZED: — There is no requirement in the Bookkeeping Regulations that the record of inventories be notarized before the submission thereof at the start of business operations or within thirty (30) days after the close of the calendar year or accounting period. It is enough that said records be signed by the owner or manager of the business. (B.I.R. Ruling No. 271, s. 1959).

13(3). PAWNSHOP OPERATORS NEED NOT SUBMIT INVENTORY OF JEWELRIES: — The requirement under Section 13 of Revenue Regulations No. V-1, does not apply to pawnshop in so far as the submission of an inventory of the jewelries pawned to them at the end of the taxable year is concerned.

Therefore, they need not submit any annual inventory of the jewelry and other articles pledged to them as security for loans. (B.I.R. Ruling dated Oct. 9, 1957, File No. 105.02).

13(4). INVENTORY OF A BRANCH AND MAIN STORE: — Purchases of the branch store made in the name of the principal store should be treated by keeping a memorandum thereof and taken up in the books of accounts of the principal store. On the assumption that the function of branch store is limited to the making of purchases for the principal store, a single inventory for them would be sufficient. (B.I.R. Ruling dated Sept. 12, 1955).

IV(1). USE OF ONE SET OF SALES INVOICES BY ESTABLISHMENTS LOCATED IN DIFFERENT PLACES: — A factory located in the suburbs with an office in Manila for display and sales of its products can use one set of sales invoices both for sales made at the factory and those made at the Manila office, provided that the respective addresses of the factory and Manila office appear in said invoices. (B.I.R. Ruling No. 49, s. 1963).

IV(2). PUBLIC MARKET VENDORS, WHEN REQUIRED TO ISSUE SALES OR COMMERCIAL INVOICES: — In order to enjoy the privilege under Section 204 of the Tax Code, as amended by Republic Act No. 1856, a public market vendor must sell exclusively domestic meat, fruits, vegetables, game, poultry, fish and other domestic food products. The moment he sells product or articles in addition to those mentioned, he loses the benefit of the exemption and, therefore, should issue sales or commercial invoices or receipts. (B.I.R. Ruling No. 7, s. 1961).

IV(3). SALES ON CREDIT: — Under Section 204 of the Tax Code, a sales invoice should be issued for every sale or transfer of merchandise, even for a sale on credit. (B.I.R. Ruling No. 244, s. 1961).

IV(4). REQUIREMENTS IN THE EXEMPTION FROM ISSUING INVOICES OR RECEIPTS: — In meritorious cases, the Commissioner of Internal Revenue may exempt a taxpayer from the issuance of sales invoices or receipts, provided that every sales made by him is covered by purchase vouchers issued and signed by the buyers, showing the date, the quantity and description of the articles purchased, the consideration paid therefor and his name and address together with the number, date and place of issue of his residence tax certificates. (B.I.R. Ruling No. 304, s. 1959).

IV(5). RECEIPTS ISSUED IN PAYMENT OF AN OBLIGATION: — Receipts issued for payments made by customers of their outstanding obligations need not show the customer's addresses, provided that the same had already been indicated in the sales invoices and or delivery receipts previously issued which accompanied the delivery of the articles for which said payments are being made. (B.I.R. Ruling dated Aug. 23, 1956, File No. 106.02).

[25] Amended by Rev. Reg. No. 4-65, dated Jan. 22, 1965

14(1). RECEIPTS ISSUED BY PAWNSHOPS ON FEES RECEIVED: — Pawnshops should issue receipts for amounts received by them as interests and service fees, pursuant to the 3rd paragraph of Section 14 of Revenue Regulations No. V-1. (B.I.R. Ruling dated Aug. 16, 1962).

14(2). MEAT VENDORS INSIDE PUBLIC MARKETS: — Persons selling domestic meat exclusively in public markets are exempt from the requirement of issuing sales or commercial invoices or receipts. (B.I.R. Ruling No. 87, s. 1961).

14(3). SALES ON CREDIT: — Under section 204 of the Tax Code, a sales invoice should be used for every sale or transfer of merchandise, including sales on credit. (B.I.R. Ruling No. 244, s. 1960).

14(4). PUBLIC MARKET VENDORS: — Public market vendors selling shoes, ready-made clothes, china wares and others, but not raw or cooked food, should issue sales invoices or receipts notwithstanding the fact that they are not subject to any percentage tax, pursuant to section 204 of the Tax Code, in relation to section 14 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations. (B.I.R. Ruling No. 120, s. 1960).

14(5). CONFIRMATION RECEIPT: — Where an insurance company still in the process of incorporation entered into an agreement with another corporation whereby the latter, as its underwriter, shall collect subscription to the shares of stock of the former, and in order to protect the interest of the paying investors, the underwriter issues confirmation receipts advising the investors that their respective money were used in payment of their subscriptions of the shares, said receipts should first be presented for approval and registration prior to their use thereof, pursuant to section 19 of the Bookkeeping Regulations, as amended. (B.I.R. Ruling No. 94, s. 1960).

14(6). ISSUANCE OF SALES INVOICES OR RECEIPTS: — All persons subject to internal revenue tax are required to issue sales invoices or receipts where the merchandise sold or services rendered is valued at P2.00 or more. Where the value of the goods sold or services rendered is less than P2.00, a receipt or invoice need not be issued but unless a receipt is issued the sale must be entered in a record of petty sales which shall be summarized at the end of the day and the total transferred to the journal or internal revenue sales book or book of receipts. The record of petty sales or receipts may be dispensed with if a cash register machine with roll sheets is used to record all petty transactions. The entries in the roll shall be summarized at the end of the day and the total transferred to the journal or to the internal revenue sales or receipt book. The said roll sheets shall be identified by the signature or initials of the taxpayer or his bookkeeper or manager and shall show the dates of the transactions recorded therein. (B.I.R. Ruling No. 272, s. 1960).

14(7). "GIFT CERTIFICATE" OR GIFT COUPON": — "Gift certificate" or "gift coupon" need not be registered and approved by this Office provided that sales invoices or receipts properly registered and approved are issued for the articles delivered to the person and who presents the certificate or coupon. (B.I.R. Ruling No. 52, s. 1960).

14(8). VOUCHERS CANNOT TAKE THE PLACE OF JOURNAL: — A business firm cannot do away with the journal and use instead vouchers as the basis for posting the entries to the general ledger, a voucher not being a book of original entry. (B.I.R. Ruling No. 576, s. 1959).

14(9). EXTENSION OF PERIOD TO MAKE ENTRIES IN BOOKS OF ACCOUNTS: — The Commissioner of Internal Revenue cannot extend the period within which transactions should be entered in the corresponding books of accounts. (B.I.R. Ruling No. 241, s. 1959).

14(10). SALES NOT EXCEEDING P2.00: — It appearing that most of the sales of the candy stand ranges from P0.10 to P0.20 and that the bulk of the sales of confectioneries, taken singly, do not exceed P2.00, an invoice or receipt need not be issued for each sale not exceeding P2.00. However, unless an invoice or receipt is issued, the sales must be immediately recorded in a petty sales book the entries in which shall be summarized at the end of each day and the total thereof stated in the journal or simplified set of bookkeeping records, as the case may be, not later than 5:00 o'clock in the afternoon of the day following the date of the sale. (B.I.R. Ruling No. 220, s. 1959).

14(11). PROCEDURE IN CASE OF LOSS: — In case of loss of a taxpayer's sales invoices, or some of them, he should report the matter to the Bureau of Internal Revenue. For that purpose, he need not execute an affidavit attesting to such loss. (B.I.R. Ruling No. 567, s. 1959).

14(12). TICKETS USE AS A MEDIUM OF EXCHANGE: — The fact that in a canteen (located inside a company compound) tickets, instead of cash, are used as the medium of exchange does not exempt the owner or operator thereof from issuing invoice, or receipts for sale made by him in excess of P2.00. However, while said invoice or receipts should be registered prior to their use, the tickets need not be registered. (B.I.R. Ruling No. 618, s. 1958).

14(13). WHERE ARTICLE SOLD IS VALUED AT P2.00 OR MORE: — As sales or commercial invoice should be issued for every service rendered by a dressmake valued at P2.00 or more, no receipts need be issued if it less than P2.00. But unless it is issued, the transaction must be recorded in a record of petty sales or transactions, the entries in which shall be summarized at the end of the day and the total transferred to the journal or record of daily sales and cash receipts, as the case may be. (B.I.R. Ruling dated March 13, 1957, File No. 105.02)

14(14). COLLECTOR'S PROVISIONAL RECEIPT. — The so-called collector's provisional receipt and salesman provisional delivery receipt used by a corporation in connection with the sale of its products are, like the regular invoice and receipt, a part of its accounting system and, therefore, subject to the requirements of Revenue Regulation No. V-1, as amended. Accordingly, said receipts should, prior to their case, be presented for approval and registration. (B.I.R. Ruling dated Sept. 27, 1957).

14(15). SALE OF ARTICLES MORE THAN P2.00. — Pursuant to section 204 of the Tax Code, as amended, all persons subject to internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at P2.00 or more, prepare and issue sales or commercial invoices or receipts serially numbered in duplicate showing, among other things, their names or styles, if any, and business addresses. However, in case of sales, receipts, or transfers in an amount of P50.00 or more, the invoices or receipts shall further show the name or style, if any, and business address of the purchaser, customer or client. Persons subject to tax whose gross sales, earning or receipts during the last preceding year exceed P20,000.00 shall for each sale or transaction, issue an invoice or receipt, irrespective of the value of the article sold or service rendered. (B.I.R. Ruling dated Oct. 28, 1957, File No. 106.02).

14(16). REQUIREMENTS IN THE ISSUANCE OF SALES INVOICES AND RECEIPTS: — The requirement of the Bookkeeping Regulations anent the issuance of sales invoices and receipts is not dependent on the amount of gross sales of a taxpayer. Such requirement covers all persons subject to an internal revenue tax. However, merchants whose gross annual sales do not exceed P20,000 during the preceding year need not issue sales invoices or receipts when the amount thereof is less than P2.00, but the same should be entered in a record of petty sales and transactions. Those whose gross sales during the preceding year exceed P20,000.00 shall issue an invoice or receipt covering any sales made by them, regardless of the amount thereof. (B.I.R. Ruling dated Nov. 25, 1957, File No. 105.02).

14(17). HOTEL RECEIPTS: — A hotel receipt shall be issued to each individual guest lodging in a hotel, notwithstanding the fact that charges corresponding to a group or company of lodgers are shouldered by only one of them, pursuant to Section 14 of Revenue Regulations No. V-7, in relation to section 226(b) of the Tax Code, as amended. (B.I.R. Ruling dated Aug. 17, 1956, File No. 105.02).

14(18). ROLL SHEETS FOR CASH REGISTER MACHINE: — Roll sheets for a cash register machine need not be registered. It is sufficient that the roll sheets are signed or initialed by the taxpayer or his bookkeeper or manager and show the dates of the transactions therein recorded and should be summarized at the end of the day and the total transferred to the journal or to the simplified bookkeeping records. (B.I.R. Ruling dated Sept. 16, 1955).

The use of the double entry bookkeeping system is sanctioned by the standard accounting system. The choice of the use of such bookkeeping system is left entirely to the discretion of the taxpayer (Ibid.)

14(19). VALUE OF ARTICLE SOLD IS P0.50 ONLY. — Where the value of the article purchased from a dealer is only P0.50, the said dealer cannot be required to issue a receipt therefor, the same being required only in case the value of the merchandise sold is P2.00 or more, pursuant to Section 14 of the Bookkeeping Regulations. However, if the said dealer is subject to percentage tax and his gross sales or receipts during the preceding year exceed P20,000.00, the said article valued at P0.50 should be covered by an invoice, in accordance with section 204 of the Tax Code. (B.I.R. Ruling dated July 1, 1954, File No. 106.02).

14(20). USE OF CASH REGISTER MACHINES. — Cash register machines are not required to be used by all business establishments. Under Section 14 of Revenue Regulations No. V-1, a cash register machine may be used only in lieu of record of petty sales or receipts wherein the amount received by a person which is less than P2.00 is recorded, in case no invoice or receipt is issued.

Agents or Examiners has the right to inspect the cord roll of the cash register machine even without first obtaining permission from this Office, such right being derived from his authority to inspect books of accounts and records of taxpayer. (B.I.R. Ruling dated July 6, 1954).

14(21). ISSUANCE OF AN INVOICE IS REQUIRED EVEN PURCHASE PRICE IS NOT PAID WHEN GOODS ARE DELIVERED. — The issuance of an invoice is nevertheless required even if, at the time the good are delivered to the purchaser, the value thereof is not paid. In the instant case, there is already a transfer of merchandise even if the value thereof is not paid. Where "consignment invoice" is used in the delivery of such goods, registration of the same with the proper authorities is required before using the. (B.I.R. Ruling dated May 4, 1954).

[26] As amended by Rev. Reg. No. 4-65, dated Jan. 22, 1965

15(1). INVOICES AND RECEIPTS. — Sale and installation of an article purchased are separate transactions. The sale and installation of air-conditioning units by the manufacturer thereof are distinct and separate and, therefore, should be invoiced separately. (B.I.R. Ruling No. 240, s. 1961).

15(2). WHEN ISSUANCE OF EITHER INVOICES AND RECEIPTS — SUFFICIENT. — The issuance by a merchant of cash sales invoices is sufficient, it not being necessary that he issue in addition sales receipts. The choice of issuing a receipt or invoice is entirely with the taxpayer. (B.I.R. Ruling No. 149, s. 1960).

15(3). DATA TO BE SHOWN IN SALES INVOICE OR RECEIPTS. — The invoice or receipt must contain the name, address and the business style, if any, of the taxpayer and such columns as may be necessary and appropriate for the business of the taxpayer concerned. The said invoices or receipts should be serially numbered, bound in booklets of 50 and 100 and prepared in duplicate. (B.I.R. Ruling No. 272, s. 1960).

15(4). NUMBERS OF RESIDENCE CERTIFICATE OF TENANTS NEED NOT BE INDICATED. — The serial numbers of residence certificates of tenants paying P50.00 or more as house or space rentals need not be indicated in the receipts issued for said payments. (B.I.R. Ruling No. 356, s. 1959).

15(5). PURPOSE OF INDICATING SERIAL NUMBER ON RECEIPTS AND INVOICES. — Section 204 of the Tax Code, implemented by Section 15 of the Bookkeeping Regulations provides that sales invoices should be serially numbered for the purposes of preventing duplication of sales invoices (B.I.R. Ruling No. 567 s, 1959).

15(6). ERROR IN NUMBERING INVOICES. — One who numbered the first set of his sales invoices from 1,000 to 3,000 and the second set from 2,500 to 3,000 has violated the provisions of Section 204 of the Tax Code, as implemented by Section 15 of the Bookkeeping Regulations. (B.I.R. Ruling No. 567, s. 1959).

15(7). KEEPERS OF RESTAURANTS TO ISSUE TWO SETS OF SALES INVOICES OR RECEIPTS. — Keepers of restaurants must issue two sets of invoices or receipts serially numbered in duplicate, one for each sale of food and refreshment and another for each sale of wine and liquor. (B.I.R. Ruling No. 395, s. 1959).

15(8). WHEN RESIDENCE CERTIFICATE NUMBER DATE AND PLACE OF ISSUE APPEAR IN SALES INVOICES OR RECEIPTS. — There is no law or regulations requiring that taxpayer who issues a sales invoice or receipt for each sale or transfer of his merchandise or for services rendered by him, valued at P50.00 or more, to attach to the said receipts or invoices the residence certificate of his customer or client. What is required by the provision of Section 204 of the Tax Code is that such receipts or invoice shall be serially numbered in duplicate and shall contain at least the name, address, and style, if any, of both the person issuing them and the purchaser, customer, or client. In addition, the aforesaid receipts shall also show the number, date and place of issue of the residence certificate of the purchaser, customer, or client, pursuant to Section 15 of Revenue Regulations No. V-I. A notation in the invoice to the effect that the number, date, and place of issue of the purchaser's or customer's residence certificate is on file in the taxpayer records is substantial compliance with the aforesaid requirements under the said Regulations. (B.I.R. Ruling No. 333. s, 1958).

15(9). SALES INVOICES OR RECEIPTS COVERING TRANSACTIONS OF P50.00 OR MORE SHOULD SHOW CLASS "A" RESIDENCE CERTIFICATE NUMBER, DATE AND PLACE OF ISSUE. —

In connection with the requirement of Section 15 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations, in relation to section 204 of the Tax Code to the effect that in the case of a sale or transfer of merchandise in the amount of P50.00 or more, the invoice or receipt shall show the name or style, if any, the business address of the purchaser or persons receiving the service as well as the number, date, and place of issue of his residence certificate, information is hereby given that these requirement of the regulations will be satisfied with the presentation by the purchaser of his class "A" residence certificate only, if he is subject to the residence tax. However, the residence certificate need not appear in the invoice or receipt when the other party to the transaction is a corporation or a registered partnership or association. (B.I.R. General Circular No. V-78, dated March 15, 1960).

[27] 16(1). AIRLINE PASSENGER TICKETS AND AIRWAY BILLS. — The issuance of an airline company of passenger tickets and airway bills which are serially numbered is sufficient compliance of Section 16 of the Bookkeeping Regulations. However, Section 19 of the same regulations also require that the receipts and airway bills should first be presented to the Bureau of Internal Revenue for registration and approval. (B.I.R. Ruling No. 10, s. 1958).

[28] Sec. 336, Commonwealth Act No. 466, as amended by sec. 12. Rep. Act No. 48; Sec. 1, Rep. Act No. 445

[29] Sec. 337, Commonwealth Act No. 466

17(1). TICKETS SOLD TO EXCLUSIVE MEMBERS OF AN ORGANIZATION. — That fact that tickets to a particular amusement place shall be sold exclusively to the members of an organization, club or society, will not of itself exempt said tickets from the registration requirements. However, exhibitions which are exempt from tax, such as those covered by Republic Act No. 722, the admission tickets to such exhibition need not be presented for registration. (B.I.R. Ruling No. 227, s. 1960).

17(2). COMPLIMENTARY ADMISSION TICKETS TO BENEFIT SHOWS. — The complimentary admission tickets to benefit shows are required to be registered with the office concerned before the same are used or disposed of, pursuant to Section 17 of Revenue Regulations No. V-I. (B.I.R. Ruling dated Jan. 5, 1954).

17(3). REGISTRATION OF TICKETS USED IN AMUSEMENT PLACES. — The 3rd paragraph of Section 17 of the Bookkeeping Regulations requires that before the admission tickets are used, they should be registered with the authorities concerned without any mention as to whether the operator, proprietor, lessee of the amusement place is subject to the amusement tax. (B.I.R. Ruling dated July 9, 1953).

17(4). ADMISSION TICKETS REGISTERED BEFORE THE SHOW. — The admission tickets to a proposed boxing exhibition are required to be registered with the Bureau of Internal Revenue before the same are sold or disposed of, pursuant to Section 17 of Revenue Regulations No. V-I. (B.I.R. Ruling dated Feb. 17, 1953).

[30] 18(1). HOW ENTRIES ARE MADE IN THE GENERAL JOURNAL. — Typewritten entries may be made in the general journal if the same may be necessary for the exigencies of the business. (B.I.R. Ruling dated Feb. 10, 1953)

18(2). PUBLISHING REPUBLIC ACT NO. 445. AMENDING SECTION 336 OF THE NATIONAL INTERNAL REVENUE CODE REGARDING THE LANGUAGE IN WHICH MERCHANTS, BOOKS AND ACCOUNTS ARE TO BE KEPT. — Republic Act No. 445 amended section 336 of the Tax Code by adding thereto a new provision which prohibits the keeping of books or records in a language other than a native language, English or Spanish. The books or record which must be kept only in native language, English or Spanish, are the journal and ledger or their equivalents prescribed under Section 334 of the Tax Code. They constitute the primary and official books of accounts which corporations, companies, partnerships, or persons shall keep, in which all transactions must be record and to which all supporting vouchers must relate. If the said primary and official books of accounts are not kept in a native language, English or Spanish, the taxpayer violates section 336 of the Tax Code, as amended by Republic Act No. 445, punishable under section 355 of the same Code.

However, if in addition to the said primary and official books of accounts, a taxpayer choose to keep other books or records, such additional books or records may be kept in a language other than a native language, English or Spanish, provided the entries in said additional books or records have a true and complete translation into a native language, English or Spanish, made by their bookkeeper or such taxpayer, or, in his absence by his manager and must certified under oath as correct by the said bookkeeper or manager, and such translation shall form an integral part of the primary and official books of accounts mentioned above. (B.I.R. General Circular No. V-102, Dec. 15, 1950).

18(3). POWER OF MUNICIPAL CORPORATIONS TO DESIGNATE LANGUAGE TO BE USED IN BOOKS OF ACCOUNTS. — The City Government of Manila possess the power to enact Ordinance requiring receipts in duplicate in English and Spanish duly signed showing the kind and number of articles delivered by laundries and dyeing and cleaning establishments . . ." The object of the Ordinance was, accordingly, the promotion of peace and good order and the prevention of fraud, deceit, cheating, and imposition. The convenience of the public would also presumably be served in a community where there is a Babel of tounges by having receipts made out in the official language. Reasonable restraints of a lawful business for such purpose are permissable under the police power. (Kwong Sing vs. City of Manila, 41 Phil. 103)

18(4). LANGUAGE TO BE USED IN THE BOOKS OF ACCOUNTS. — The Collector of Internal Revenue shall have power to make regulations, not inconsistent with law . . . That the regulations of the BIR shall, among other things, contain provisions specifying, prescribing or defining the manner in which the proper books, records, etc., shall be kept, do not empower the Collector to designate the language in which the entries in such books shall be made by merchants subject to the percentage tax. (K.S. Young et al. vs. James Rafferty, Collector, 33 Phil. 556)

"The requirement that the record must be kept in the form of a book of numbered pages certified to by the Revenue Agents is, of course, only an additional security against uncertainty and possible loss or disorder of parts of the records which might result if the record were kept on loose sheets of paper.(Ibid.)

18(5). BOOKS TO BE TRANSLATED. — Journal, ledger, or their equivalents if kept in a language other than in English, Spanish, or in a native language, must be translated. Other books and records kept in languages other than the three languages mentioned above must, likewise, be translated.

Thus, sales invoices kept in Chinese form part of the sales journal and should be translated. (Ruling, B.I.R. 106.1, July 12, 1940, Bull, 3rd Qtr. 1940)

Also, inventory sheets supporting journal entries should, if kept in Chinese, be translated. (Ruling, BIR 106.1, Feb. 28, 1941, Bull, 1st Qtr 1941)

[31] As amended by Sec. 1. Rev. Reg. No. V-35 and by Sec. 1, Rev. Reg. No. V-45

19(1). AUTHORITY TO USE LOOSE-LEAF LEDGERS AND INVOICES. — The use of loose-leaf general ledgers and sales invoices shall be authorized only by the Commissioner.

All applicants for the use of loose-leaf ledgers and invoices should be forwarded to the Commissioner of Internal Revenue together with the reasons or basis or the use therefor.

It may be stated in this connection that the use of loose-leaf ledgers and invoices should not be authorized as a matter of course. As a matter of fact, the use thereof should be discouraged and not encouraged because they only provide means for tax evasion. Such use should only be authorized in extremely meritorious cases. It is, therefore, necessary that the use of loose-leaf ledgers an invoices should be controlled by the Commissioner. (B.I.R. Unnumbered ruling dated Aug. 10, 1964)

19(2). CERTIFICATION AS TO THE USE OF INVOICES. — A sworn certificate attesting to the number of invoices used during a given fiscal or calendar year is required only in the case of loose-leaf invoices. There is no such requirement in the case where the taxpayer uses invoices in bound form.

Said certification should be filed within fifteen (15) days after the end of a fiscal year, unless upon request of the taxpayer before the lapse of the 15-day period, the Commissioner of Internal Revenue extends said period. (B.I.R. Ruling No. 66, s. 1961).

19(3). REGISTRATION OF BOOKS OF ACCOUNT OF A CORPORATION AND ITS SUBSIDIARIES. — Three companies formed an association for the purpose of marketing their products and promoting their interests in the industry. An office was put up in Manila under the management of a representative who will sell the products in the individual company's invoices and other sales forms and receiving payments also in the names of the respective companies.

Under the circumstances, the association is considered a separate and distinct entity from the three companies. Any income or compensation received by the association is subject to tax. Accordingly, its books of accounts must be registered prior to its use. (B.I.R. Ruling No. 27, s. 1961)

19(4). PRINTING OF INVOICES AND RECEIPTS. — Before ordering invoices and receipts for printing, a taxpayer must, if in the province, give a written notice to the Provincial Revenue Officer or municipal treasurer (now Collection Agent) stating therein the name and address of the printer, the number of booklets of sales invoices or receipts ordered, and the inclusive serial numbers thereof, together with a sample of the invoice or receipts ordered (B.I.R. Ruling No. 272, s. 1960)

19(5). RE-USE OF BOOKS OF ACCOUNTS WITHOUT REGISTRATION. — Books of accounts registered and use in 1959 used again for the year 1960 and succeeding years without need of further registration, provided that the portion pertaining to a particular year is properly labeled or marked. (B.I.R. Ruling No. 447, s. 1960)

19(6). OFFICE MANAGER COUNTER'S RECEIPT. — The so-called "office manager's counter receipt" which a company uses merely for internal control purposes and is not a basis of entries in the company's book of accounts need not be registered and approved in accordance with the Bookkeeping Regulations. (B.I.R. Ruling No. 238, s. 1960)

19(7). BOOKS OF ACCOUNTS USE BY EDUCATIONAL INSTITUTIONS. — A school which is a stock and profit corporation should, before using its books of accounts and receipts for tuition fees, present them for registration and approval. (B.I.R. Ruling No. 230, s. 1960).

19(8). RECORDING OF TRANSACTIONS IN DIFFERENT YEARS. — It is a part of business routine that at the end of every calendar or fiscal year, all corporations, companies, partnerships or persons required by law to pay internal revenue taxes have to close their invoices and receipts. But if the pages of the old books of account have not yet been exhausted, they can still be used for the succeeding years without need of further registration, provided that the portion pertaining to a particular year is properly labeled or marked. (Ruling. B.I.R. No. 447, Series of 1960). It is not advisable, however, to follow said ruling, i.e., to combine in one book of account the record of business transactions pertaining to different fiscal or calendar years because instead of keeping the book for five years only, as required by Section 21 of Revenue Regulations No. V-1, it is kept for a longer period and therefore, it can still be subject to inspection and examination by internal revenue officers.

19(9). PROCEDURE TO BE FOLLOWED IN THE REGISTRATION OF BOOKS OF ACCOUNT, INVOICES AND RECEIPTS. — Books of account, register or record:

In going about the registration of books of accounts, invoices, and receipts, the provision of Section 19 of Revenue Regulations No V-1 must be complied with. According to said section, persons who are required by law to keep books of account, records and invoices for recording their transaction, must present them first for approval and registration to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial or city treasurer, if in the province, before using any of the aforesaid books, records, registers, invoices or receipts. A register book for every books, register or record which has been approved must be kept showing:

(1) such information as of the date of approval;

(2) the name and address of the taxpayer;

(3) his citizenship;

(4) the number of the alien registration certificate or landing certificate, if an alien;

(5) the kind of business and schedule, paragraph and number of the privilege tax-receipt issued for the business if any;

(6) and the kind, volume, number of pages of sheets of the book, register or record. Every book, register or record so approved and registered shall be serially numbered for each taxpayer.

Before any book, register or record is presented for registration, an identification as to the kind of book, register or record, and the name and address of the owner, citizenship, the number of alien registration certificate or landing certificate, if an alien, the kind of business engaged in, and the schedule, paragraph and the number of privilege tax receipt issued for the business, if any, must be placed on the front cover by the owner thereof. The pages of the book, register or record must be serially numbered in a permanent and legible manner. If a book, register or record is approved, the following authentication shall be made by the approving officer on the reverse side of the front cover thereof:

"This _______________ volume No. ______________ with ______ pages or sheets is approved on this _________________ day of ____________ 196_____, for purposes of Revenue Regulations No. _____"

__________________

Signature

__________________

(Designation of Officer)

If the book, register or record presented for approval is a continuation of previous books, registers or record, besides the foregoing authentication, the following notation must be added to the authentication:

"Volume No. ______________ of his ____________ was approve on the day of ___________________, 196 _____"

__________________

(Signature)

___________________

(Designation of Officer)

Invoices and receipts —

A draft copy of invoices and receipts proposed to be used by the persons required to keep books of account and records must be presented to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval. All approved draft copies of invoices and receipts must be recorded in a register showing:

(1) date of approval;

(2) the name, address and kind of business of the taxpayers; and

(3) the schedule, paragraph, and the number of his privilege tax receipt.

No change can be made in the form or type of invoices or receipts used by the said without prior approval as required herein. Every invoice or receipt must be serially numbered. Furthermore, the approval shall be indicated by an appropriate stamp placed on the front cover, or on the back of the middle part of the last invoice or receipt of the booklet or pad approved; together with the signature of the officer authorized to approve the same.

The taxpayer, before ordering invoices and receipts or printing, must send a written notice of the name and address of the printer with whom he intends to place the order, and the total numbers of booklets and the inclusive serial numbers of the invoices or receipts ordered, to the Commissioner of Internal Revenue, if his place of business is in Manila, or to the provincial revenue officer or city or provincial treasurer, if in the province. (Section 19, Revenue Regulations No. V-1 as amended by Revenue Regulations No. V-45).

In applying the above-mentioned provision of the Bookkeeping Regulations, the Commissioner of Internal Revenue state that a confirmatory receipt issued by a company still in the process of incorporation which is similar to a "Broker's Advice" issued to an investor, to advise him that his money was used in paying his subscription to the company shares must be presented for approval and registration prior to the use thereof, pursuant to Section 19 of Revenue Regulations No V-I. (B.I.R. Ruling No. 94, February 5, 1960)

19(10). INVOICES AND RECEIPTS USED BY FRANCHISE GRANTEE. — As franchise taxes are internal revenue taxes, a franchise grantee is subject to the provisions of section 204 of the Tax Code, requiring person subject to an internal revenue tax to issue sales or commercial invoices or records, and Revenue Regulations No. V-I, which requires, among other things the presentation of said invoices and receipts for approval and registration prior to their use. (B.I.R. Ruling No. 285, 1960)

19(11). THE USE OF THE SO-CALLED "PURCHASE CONFIRMATION RECEIPTS. — The so-called "purchase confirmation official receipt" may be used without the prior approval of and registration with the Bureau of Internal Revenue, provided that said receipts pass IBM machines before the same are issued to customers. (B.I.R. Ruling No. 59, s. 1959)

19(12). USE OF LOOSE-LEAF JOB ORDER SHEETS NEED NOT BE REGISTERED. — Loose-leaf job order sheets can be used without previous authority from the Bureau of Internal Revenue, there being no requirement that they be in bound form. (B.I.R. Ruling No. 186, s. 1959).

19(13). REGISTRATION OF BOOKS, MANDATORY. — The requirement of submitting to the Bureau of Internal Revenue books of accounts, registers, records, invoices, receipts and other accounting records for approval and registration prior to their use in mandatory and the Commissioner has no power to exempt a taxpayer from complying with said requirements: (B.I.R. Ruling No. 138, s. 1959 and B.I.R. Ruling date Feb. 20, 1959).

19(14). PROCEDURE IN CHANGING BOOKS OF ACCOUNTS. — A taxpayer contemplating to change his books of accounts to suit the needs of his business should, before using the new books, present the latter for approval and registration in accordance with section 19 of Revenue Regulations No. V-I, as amended. The entries in the old books should be closed as of the date immediately preceding the date the new books are used.

Under Section 334 of the Tax Code, the choice of the principal books of accounts which a taxpayer should keep and use is limited to either the journal and ledger, or their equivalents, or the simplified set of bookkeeping records, depending upon whether or not his gross quarterly sales, earnings, receipts, or output exceed P5,000.00. (B.I.R. Ruling No. 526, s. 1958).

If a taxpayer has been employing a method of accounting different from that prescribed by Section 44(b) of Revenue Regulations No. 2, (regross income from long-term contracts) to be reported when contract is finally completed and accepted by said taxpayer, and application for permission to change such method and the basis upon which the income tax return is to be made should be filed with the Commissioner of Internal Revenue within ninety (90) days after the beginning of the taxable year to be covered by the return and the terms and conditions of the change should be agreed upon the Commissioner and the taxpayer. A statement showing the composition of all items appearing on the taxpayer's balance sheet and used in connection with the method of accounting formerly employed by him shall accompany his return, pursuant to Section 44(b) of said Regulations. (B.I.R. Ruling No. 526 s. 1958).

[32] As amended by Rev. Reg. No. V-77

20(1). JURISDICTION IN THE INSPECTION OF BOOKS OF ACCOUNTS. — Facts: "A" company has its head office located in Manila, and a factory at Quezon City. In the desire of said company to consolidate the filing of its income tax returns and business tax, it filed the same at the Regional Office in Manila. Question: Is the Regional Office of Quezon City totally deprived of jurisdiction to look into the records of the factory which is located in Quezon City?

Answer: As a rule, the regional office within whose territory the taxpayer is residing and where his principal place of business is located and where he files his returns and pays its taxes has jurisdiction to examine the taxpayer's returns and books of accounts and other records. The Manila regional office has the primary jurisdiction, for tax purposes, over the company's business operations.

However, the Quezon City regional office is not totally deprived of jurisdiction to look into the records of the company located at Quezon City, if the examination of the records therein is necessary in the determination of its tax liabilities, as the Manila regional office can exercise its jurisdiction only within the limits of its territory. For this purpose, therefore, of securing any and all information relative to the operations of the factory located in Quezon City, the regional office thereat will naturally have to be utilized to undertake the work of examination and investigation. (B.I.R. Ruling No. 2, s. 1964).

20(2). EXTENT OF AUTHORITY OF MUNICIPAL OFFICIALS TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS WITHIN THEIR DISTRICTS. — The matter of inspection or examination of books of merchants by municipal authorities solely for municipal purposes is a matter over which the Bureau of Internal Revenue has no business whatsoever to interfere, much less as to the legality thereof. Where such inspection or examination releases to internal revenue, this Office, in a previous ruling held:

". . . that the power of inspection and examination of the books of accounts of taxpayers is exclusively lodged with the provincial (now chief) revenue officers and their assistants or examiners applies only to acts of inspection and examination for internal revenue purposes and does not embrace those done by agents and inspectors of other government bureaus or offices for purposes which may be germane to their duties." (B.I.R. Ruling dated March 21, 1956, Int. Rev., Vol. 1, No. 3; B.I.R. Ruling dated August, 1964).

20(3). DUTIES OF TAX CENSUS EXAMINERS. — Section 7-b of Field Circular No. V-157 provides as follows: —

"(b) Tax Census Examiners are not authorized to conduct direct investigation of taxpayers, i.e., they are not allowed to examine books of accounts of taxpayers whose tax census statements are being verified, to interview them in their business establishments, or to call the taxpayer to their offices. Any discrepancy discovered by any Tax Census Examiner involving income, assets, liabilities shall be reported to the Chief of the Tax Census Branch who shall in turn forward the same for action to the corresponding Provincial Revenue officer if it is an ordinary case or to the Chief, Investigation Branch if the case is one where there is an indication of fraud."

The foregoing provisions of the circular are still in full force and effect.

Accordingly, your client may refuse to submit themselves to direct investigation by the Tax Census Examiners. Tax Census Examiners are authorized only to verify statements of income, assets and liabilities of taxpayers but not books of accounts. ((B.I.R. Ruling dated July 10, 1964).

20(4). PROCEDURE IN THE ISSUANCE OF AUTHORITY TO INVESTIGATE AND LETTERS OF CONFIRMATION. —

xxx xxx

SUBJECT: Amendments to Field Circular No. V-157, as amended by Revenue Memorandum Order No. 22-64.

To all internal revenue officers and others concerned:

It has been observed by this Office in the present procedures of the issuance of authorities to investigate and the corresponding letters of confirmation in Regional Offices Nos. 4, 5 and 6 that there are loopholes and defects which lead to ineffective control and supervision. In order, therefore, to achieve tighter control and closer supervision in the assignment, investigation and reporting of income tax returns and to achieve uniformity in procedure in all inspection districts, the following amendments to Field Circular No. V-157, as amended by Revenue Memorandum Circular No. 22-64, are hereby promulgated for the guidance of all concerned:

Section 1. Paragraph 3.d. of Field Circular No. V-157, as amended by Revenue Memorandum Circular No. 22-64, is hereby amended to read as follows:

"3d. Letters of Authority to Investigate shall be issued only by the following officials:

(1) The Chief Revenue Officer of Inspection Districts for the fieldmen under his jurisdiction.

(2) The Regional Director for the fieldmen of the Investigation Branch and the Alcohol & Tobacco Tax Branch.

(3) The Chiefs of the Investigation Division, Withholding Tax Division and Narcotic Drugs Division for the fieldmen of their respective divisions.

(4) The Director, Office of International Operations for the fieldmen under his jurisdiction.

(5) The Chief, Assessment Department for the fieldmen under special groups in the Department or those directly assigned by the Commissioner of Internal Revenue.

(6) For the fieldmen of inspection districts under the jurisdiction of Regional Offices Nos. 4, 5 and 6, the following procedure should be followed in the issuance of the authority to investigate.

xxx xxx

Section 2. Paragraph 10 of Field Circular No. 157, as amended by Memorandum Circular No. 22-64, is hereby further amended to read as follows:

"Henceforth, fieldmen will no longer sign the books of accounts upon termination of the investigation. Instead, a confirmation of the investigation should be sent to the taxpayer within thirty (30) days from the termination of the investigation. The confirmation letter to the taxpayer should contain information, informing the taxpayer that the corresponding report of investigation of his tax liabilities has been submitted and that the recommended discrepancies and deficiency tax, if any, are under consideration. This procedure will prevent or minimize unauthorized investigations as well as those conducted without any corresponding report of investigation being submitted. It will also obviate the signing of books of accounts of taxpayers by impostors.

The form prescribed shall be prepared in triplicate and should bear the same number as the authority to investigate. The original shall be sent to the taxpayer, the duplicate shall be attached to the report and the triplicate shall serve as the file copy.

The confirmation letter should be prepared by the Assistant Chief Revenue Officer for signature of the Assistant Regional Director and should be initialed by the Chief Revenue Officer before being forwarded to the Regional Office. In Inspection Districts where there is no Assistant Chief Revenue Officer, the confirmation letter should be prepared by the Chief Revenue Officer likewise for the signature of the Assistant Regional Director.

For cases handled by fieldmen in the Regional Office, the confirmation letter should be prepared by the Assistant Chief of the Branch, initialed by the Chief of the Branch and signed by the Assistant Regional Director. In the National Office, the confirmation letter should be prepared by the Assistant Chief of the Division concerned for the signature of the Chief of the Division. Confirmation letters for cases emanating from the Assessment Department should be prepared for the signature of the Assistant Revenue Operations Head. For cases handled by the Office of International Operations, the confirmation letter should be prepared by the Assistant Director for Audit, for signature of the Director.

The confirmation letter prepared in the inspection district should be forwarded immediately to the Administrative Branch of the regional office for recording. The latter should immediately forward the report to the Assistant Director for the signature of the confirmation letter, after which the docket should be returned to the Administrative Branch for the release of the original of the confirmation letter. Upon release of the original, the docket, together with the duplicate copy of the confirmation letter, should be forwarded immediately to the Income and Business Tax Branch for review and preparation of the demand. The triplicate copy of the confirmation letter should be forwarded to the Regional Director for attachment to his file copy of the authority to investigate.

The confirmation letter should be treated as an accountable form and the person authorized to prepare the same should be held accountable for all issuance of confirmation letters. He is required to keep a register in order to determine the letters of confirmation issued by his office.

Section 3. This Memorandum Circular supersedes all orders, circulars, instructions or portions thereof which are inconsistent herewith.

Section 4. This Revenue Memorandum Circular shall take effect upon approval. (Rev. Memo. Circular No. 35-65, dated Oct. 12, 1965).

20(5). EXAMINATION OF BOOKS WHERE OFFICE AND PLACE OF BUSINESS TRANSACTIONS ARE IN DIFFERENT PLACES. — Where a corporation has an office in Manila but all its manufacturing, selling and other transactions are conducted in Quezon City, the place of its business is deemed to be in the latter city. Accordingly, Regional District No. 4, Quezon City, has the authority to examine its books of accounts and other accounting records, it being necessary that said books and records be kept in the place of business of the corporation. (B.I.R. Ruling No. 92, s. 1961).

20(6). JURISDICTION TO INVESTIGATE BOOKS OF ACCOUNTS WHERE TAXPAYER'S BUSINESS IS LOCATED IN ONE PLACE AND THE PRINCIPAL OFFICE IN ANOTHER. — A corporation was incorporated in the Philippines with principal office in Manila for purely trading purposes. Later on, said corporation established a manufacturing division with factory in Quezon City, where at the same time sales of its manufactured products are conducted. The factory is deemed to be a separate business establishment and, therefore, must be provided with a separate C-14 privilege tax receipt. It must also register a separate business name in Quezon City for purposes of Section 203 of the Tax Code. Sales invoices originally registered by the corporation in Manila may be superimposed with its address in Quezon City when used in the latter City.

While the controlling books are registered and kept in Manila, the factory in Quezon City must keep such books and records as would clearly reflect all the transactions effected therein. All such records, such as the subsidiary ledger should be registered in Quezon City may be consolidated and returned for the percentage tax by the main office in Manila. (B.I.R. Ruling No. 7, s. 1962).

Where the taxpayer's factory is located in Makati, Rizal, and its "sales office," wherein most of its transactions are consummated in Manila, Regional Offices of Manila has jurisdiction to examine its books of accounts, provided that said books are kept in the "sales office." (B.I.R. Ruling No. 272, s. 1961).

20(7). COLLECTION AGENTS, POWERS AND DUTIES. — A collection agent can inquire or determine whether or not a taxpayer has paid the corresponding privilege taxes, such as the C-13, B-9, etc. However, he does not have the power to seize or confiscate goods subject to specific tax even if the tax has not been paid thereon.

A collection agent can seize defective instruments of weights and measures (Sec. 284, Tax Code). However, pursuant to paragraph III-8, Memorandum Circular No. 3, dated August 15, 1960 of the Department of Finance, the duties and responsibilities of collecting, among others, weights and measures, fees, repose with the local treasurers. He (collection agent) has also the power to apprehend bus conductors for not issuing tickets or receipts to passengers, such act being a patent violation of internal revenue law (Sec. 14, Tax Code). (B.I.R. Ruling No. 362, s. 1961).

Approves and registers books of accounts and invoices presented by taxpayers for their use and keeps records thereof, in accordance with Revenue Regulations No. V-1, except in cities and towns where the Provincial Revenue Offices are located. (Revenue Administrative Order No. 3-62, May 31, 1962).

Collection Agents are not internal revenue officers in the strict sense such that they cannot, under any circumstances perform, directly or indirectly, the functions, duties, and or legal prerogatives of Agents and Examiners or their assistants, unless delegated by the commissioner of Internal Revenue or the Secretary of Finance. They shall perform only such other duties and functions as were previously conferred upon Municipal and City Treasurers in the collection of internal revenue taxes in accordance with Republic Act No. 2665, (except collection of taxes on imported articles) and those otherwise not included and described under Memorandum Circulars Nos. 3 and 4 of the Secretary of Finance dated March 21, 1961 and August 15, 1961, respectively. However, with respect to fees, fines, forfeitures, costs and other moneys paid to the Justice of the Peace and Municipal Courts, the same should be collected by the Collection Agents and Clerks because the collection thereof is entrusted to the Commissioner of Internal Revenue. (Secs. 93 and 94, R.A. No. 296; Judiciary Act of 1948; B.I.R. Ruling No. 415, s. 1961; Division Memo. Circular No. 5, dated Nov. 10, 1961)

20(8). EXAMINATION OF BOOKS OF ACCOUNTS. — As a rule, the examination of a taxpayer's books of accounts is undertaken once only for each taxable period. However, there is no prohibition against further examination of said books if the circumstances so warrant.

The yearly examination of books of accounts is not only necessary but a duty which the Bureau of Internal Revenue must perform. In conducting such examination reference to other books kept within the five-years period immediately preceding the date of examination may be had. (B.I.R. Ruling No. 126, s. 1960).

Books of accounts are open to examination and inspection by internal revenue officers when properly authorized by the Commissioner of Internal Revenue, Director, or Provincial Revenue Officer (now Chief Revenue Officer). Said examination and inspection may be conducted in the taxpayer's place of business or outside thereof. In the latter case, however, the internal revenue officer concerned must issue a receipt. (B.I.R. Form No. 19.14) therefor. (B.I.R. Ruling No. 141, 1960).

20(9). INSPECTION OF BOOKS PREPARATORY TO ASSESSMENT. — As the inspection of books of accounts is a step preparatory to assessment and the power to assess internal revenue taxes belongs exclusively to the Bureau of Internal Revenue, municipal treasurers (now collection agents) may not inspect books of accounts, they not being empowered to assess (but only to collect) internal revenue taxes. (B.I.R. Ruling No. 215, s. 1960).

20(10). RE-EXAMINATION OF BOOKS OF ACCOUNTS. — Internal revenue officers, when duly authorized by their superiors, can re-examine the books of accounts of a taxpayer only where, subsequent to the previous examination, information is received indicating fraud, malfeasance, concealment or misrepresentation of material facts. (B.I.R. Ruling No. 315, s. 1960).

20(11). ADOPTION OF BOOKKEEPING SYSTEM. — Any bookkeeping system authorized under existing law or regulations may be adopted by a taxpayer. If any system is not understandable to the fieldmen of the Bureau of Internal Revenue, the taxpayer should explain it. If notwithstanding the explanation, the fieldmen cannot understand its operations, they may disregard the bookkeeping records kept by the taxpayer and resort to the best evidence available reflecting his operations. (B.I.R. Ruling No. 572, s. 1959).

20(12). WHERE TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS. — An internal revenue officer can examine a taxpayer's books of accounts and other accounting records either at the latter's place of business or establishment or outside thereof. Should the examination be done, outside the taxpayer's place of business, the internal revenue officer is duty bound to issue a receipt. (B.I.R. Form No. 19-14) for the books and records taken by him, and such examination can be undertaken only in his office, not elsewhere. (B.I.R. Ruling No. 552, s. 1959).

20(13). RIGHT OF REFUSE EXAMINATION. — A taxpayer has a right to refuse examination of his books of accounts where the revenue officer is not provided with the required letter of authority or where said officer fails or refuses to show, upon request of the taxpayer, his identification card, or where the examination is conducted in the presence of unauthorized persons. (B.I.R. Ruling No. 486, s. 1959).

20(14). WHEN BOOKS OF ACCOUNTS ARE TAKEN OUTSIDE OF TAXPAYER'S ESTABLISHMENT. — Internal revenue officers may examine the books of accounts of taxpayers in or outside the latter's place of business. But, when said officers take the books of accounts of taxpayer for purposes of examination outside the latter's place of business, they should issue a receipt on the required internal revenue form (B.I.R. Form No. 19.14). As a general rule, books of accounts of taxpayers should not be retained by internal revenue officers for more than sixty (60) days except (1) when the books, records or papers constitute the evidence of this Office in an unsettled case; (2) in case such records and papers pertain to a case pending in courts; (3) in all cases where fraud is evident and the records and papers must accompany the fieldman's report for evaluation purposes; and (4) in all cases where the records and papers have been seized by virtue of a search warrant and the court has not ordered their return to the taxpayer. (Sec. 20, Rev. Regs. No. V-1; Field Circular No. V-88)

The taxpayer's proof that his books of account has been examined by internal revenue officers is the certification or notation to the effect made by said officers on the inner side of either cover of the books examined.

As a matter of policy, this Office undertakes the examination of the books of accounts of taxpayers covering a particular period, only once. However, there is no prohibition on the re-examination of said books. Accordingly, books of accounts which were previously examined may be examined for the second time or more, if and when the subsequent examinations are duly authorized and the circumstances surrounding the case so warrant. (B.I.R. Ruling No. 87, s. 1959): (B.I.R. Ruling No. 486, s. 1959).

20(15). EXAMINATION OF BOOKS OF ACCOUNTS. — Internal Revenue Agents and Examiners may not examine a taxpayer's books of accounts and other accounting records without the necessary letter of authority. A letter of authority is a request to the taxpayer to permit the bearer thereof to conduct the necessary examination of said books and records, and signed either by the Commissioner of Internal Revenue, Deputy Commissioner of Internal Revenue, Chief, Investigation Division, or the Regional Director, Assistant Director or Provincial Revenue Officer (now Chief Revenue Officer) of the regional district concerned. (B.I.R. Ruling No. 640, s. 1959).

20(16). EXAMINATION CAN BE CONDUCTED ANY DAY OR TIME. — Books of accounts can be examined by the agents and examiners of the Bureau of Internal Revenue even on Sundays and holidays or after office hours, provided that they have been authorized to do so by the Commissioner of Internal Revenue or by their other superiors. (B.I.R. Ruling No. 388, s. 1959).

20(17). HOW EXAMINATION OR INVESTIGATION OF BOOKS OF ACCOUNTS IS CONDUCTED. — Fieldmen of this Bureau are provided with B.I.R. identification cards. Before conducting an examination or investigation, said fieldmen are required to show their identification cards to the taxpayer concerned in order to give the latter an opportunity to take note or copy, if he so desires, the name, designation and identification number of the investigating agent. Should an agent or examiner refuse to show his B.I.R. identification card, the taxpayer has the right to refuse examination. (Field Circulars Nos. V-48 and V-70).

The examination or investigation of taxpayers undertaken by virtue of the authority issued by the officers mentioned in paragraph 2 hereof is confined within the scope of said authority. (Field Circular No. V-89).

No fixed number of examiners are assigned in a given community or to a particular store. Agents or examiners may examine any store or business establishment within their respective districts when so ordered. (B.I.R. Ruling No. 87, s. 1959).

20(18). BRANCH ESTABLISHMENTS REQUIRED TO KEEP BOOKS OF ACCOUNTS. — Where a branch establishment need not keep and use the regular books of accounts, however, it is under obligation to keep such books and records as will clearly reflect the transactions being effected therein. (B.I.R. Ruling No. 373, s. 1959).

A branch establishment, the activities of which are limited to buying, storing and preparing copra for sale is, although said sales are perfected by the main office, under obligation to keep the use the necessary books of accounts. (B.I.R. Ruling No. 233, s. 1959).

Pursuant to section 20 of the Bookkeeping Regulations, all books registers and other records, and vouchers and other supporting papers required by said regulations shall be kept at all times at the place of business of the taxpayer. However, in the case of branch establishment, there shall be kept in that establishment such books and records as would clearly reflect all the transactions effected therein. Accordingly, where a sawmill has its principal office in Quezon City and a field office in another place where its sawmill is located, a complete set of books of accounts need not be kept in the latter office, it being enough that it keeps such books and records as would clearly reflect all the transactions effected therein. (B.I.R. Ruling No. 286, s. 1959).

20(19). WHERE TO KEEP BOOKS OF ACCOUNTS. — All books of accounts shall be kept at all times at the place of business of the taxpayer, subject to inspection of any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection. When required by the inspecting officer, the owner, bookkeeper, or manager shall give the necessary explanations regarding the items in the entries contained in said books. (B.I.R. Ruling No. 163, s. 1958).

20(20). ISSUANCE OF RECEIPTS (B.I.R. FORM NO. 19.14) FOR SEIZED DOCUMENTS, BOOKS, PAPERS AND ARTICLES. — It has been observed by this Office from the reports submitted by fieldmen that seizure of tax receipts, licenses, books, documents, papers and/or articles from taxpayers or persons with whom they have official dealings is not in accordance with the provisions of Field Circular No. V-19 dated October 28, 1947. Seizures are made with plain paper as receipts or with the required form (B.I.R. Form No. 19.14) but no reports on the results of the investigation are submitted. An inspection of the offices of Chief Revenue Officers and Regional Directors show that there are plenty of seized books, papers and other articles which are just lying around with no proper inventory and which pile up from year to year without any disposal thereof being made. Even if the case had been terminated, the seized articles remain in the custody of the Regional Director and Chief Revenue Officer to the extent that complaints have been received from taxpayers that articles seized from them have not been returned although the corresponding case had been terminated.

In view thereof and in order to insure an effective control in the seizure of articles from taxpayers and to pinpoint responsibility the following procedure is hereby promulgated for the compliance of all concerned:

Effective immediately all Chief Revenue Officers, Assistant Chief Revenue Officers, Group Supervisors, Examiners, Inspectors and other fieldmen authorized to investigate books of accounts are hereby enjoined to see to it that no other receipt except B.I.R. Form No. 19.14 is issued for seized tax receipts, licenses, books, documents, papers and/or articles from taxpayers or persons with whom they have official dealings.

Upon receipt of this Revenue Memorandum Circular sufficient number of receipt books should be requisitioned from the Property Division to last for a period of one (1) year for distribution to the fieldmen under their respective jurisdiction. In the National Office requisitions should be made by the Division Chiefs who have fieldmen conducting investigating work.

An inventory should be taken by the Chief Revenue Officer, Chief of Branch or Chief of Division concerned, of all the booklets of receipts in the possession of the fieldmen within their jurisdiction, which should be forwarded to the Chief Revenue Officer within their jurisdiction, which should be duly listed. Three extra copies of the list should be forward to the following officials:

(a) Regional Director

(b) Revenue Operations Head (Assessment or Specific Tax)

The Chief of the Property Division should determine from the copy of the list forwarded to him whether the booklets issued are all properly accounted for.

As much as possible each fieldmen should be issued a receipt book for which he shall be made accountable. In case there are not enough booklets to distribute, a common receipt book may be kept by the Chief Revenue Officer or Group Supervisor as the case may be, for the use of the district or the group as the needs may arise.

The receipt should be accomplished in triplicate and distributed as follows:

Original — to the Taxpayer.
Duplicate — to the Group Supervisors; if there is no group supervisor in the Unit to the Assistant Chief Revenue Officer; and if there is no Assistant Chief Revenue Officer to the Chief Revenue Officer.
Triplicate — should remain with the booklet.

All the blank spaces on the face of the receipt should be filled by the issuing officer who should sign his name clearly above his official title which should also be written clearly. Upon the settlement of the case, the blank spaces on the reverse side of the triplicate should likewise be accomplished.

At the end of the month, the revenue official who has supervision over fieldmen issuing the receipts and is in possession of the duplicate copies, should check the duplicates in his possession against the triplicates remaining with the receipt book in the possession of the fieldman, to determine the status of cases apprehended for which receipts have been issued during the month. If the cases have been settled, he should check whether the corresponding reports have been submitted. If there are cases not yet settled, he should, call the attention of the fieldmen to expedite settlement thereof. As soon as all the cases in a booklet have been settled, the receipt book should be surrendered by the fieldman to his immediate superior who shall in turn forward it to the Regional Office for permanent file in the Administrative Branch.

The Chief Revenue Officer or the Chief of Branch in the Regional Office should prepare a monthly report of receipts so issued containing the following information:
Number of receipt
Name of taxpayer
Nature of violation
Issuing Fieldman
Status of the case

The monthly report should also include a summary statement illustrated as follows:

(1) Number of receipts pending at the beginning of the month xxxx

(2) Number of receipts issued during the month xxxx

——

(3) Total Handled During the Month xxxx

(4) Number of receipts settled during the month xxxx

——

(5) Balance at the end of the month xxxx

====

Copies of this report should be furnished the Regional Director and the National Office.

The official who has custody of the records and articles seized should see to it that in all cases settled or closed, the seized articles composed of books, records, privilege tax receipts and licensees are returned to the owners immediately upon the settling or closing of the case. If the seized articles consist of fraudulent weights and measures, articles subject to specific tax and other similar articles which the law requires to be forfeited in favor of the government instead of returning them to the taxpayer from whom seized, the official concerned should take appropriate action towards disposing the said articles in accordance with law and regulations.

This Revenue Memorandum Circular revokes the provisions of Field Circular No. V-19, dated October 28, 1947 and is effective immediately (Rev. Memo. Circular No. 37-65, dated Oct. 13, 1965).

20(21). TAXPAYERS MAY BE REQUIRED TO PRODUCE THEIR BOOKS OF ACCOUNTS UNDER A SUBPOENA DUCES TECUM. — Section 20 of Revenue Regulations No. V-I (Bookkeeping Regulations) empowers internal revenue officers to take the books of accounts and related records or papers of the taxpayer for purposes of inspection and or examination. On the other hand, under Section 580 of the Revised Administrative Code, internal revenue agents, agent's assistants and examiners may require the production of documents under a subpoena duces tecum or otherwise. Accordingly, said officers, when duly authorized to examine or investigate a taxpayer, can validly order the latter to submit his books of accounts and related records or papers to the office of the former. (B.I.R. Ruling No. 251, s. 1958).

20(22). PROCEDURE IN THE INVESTIGATION OF BOOKS OF ACCOUNTS OF TAXPAYERS IN THE PROVINCES AND CITIES. — Pursuant to the provisions of field Circular No. V-70, every Fieldman of the Bureau of Internal Revenue assigned to field investigation work is required, before proceeding to a taxpayer to commence investigation, to secure from the Provincial Revenue Officer (now chief revenue officer), if in the province, a letter or memorandum instructing him to examine or investigate such taxpayer. Exception to this requirement are cases that requires immediate action on the spot, such as apprehension of merchants: (1) who do not issue sales receipts or invoices; (2) who keep private books of accounts; (3) who are not provided with the necessary privilege tax receipts; and (4) persons who possess illicit articles on which the specific tax is not paid. (B.I.R. Ruling dated May 23, 1957).

Except in the cases mentioned in Field Circular No. V-70 that requires immediate action, a taxpayer has the right to refuse inspection of his books and other records if and when the agent is not armed with a letter of authority instructing him to examine or investigate said books of accounts and records.

Agents of the Bureau of Internal Revenue are authorized to bring the books of accounts and other records of merchants to the office of the provincial revenue officer (now chief revenue officer) only upon issuance of official receipts showing the receipt of all books and records confiscated after apprehension. (Ibid.)

20(23). EXCLUSIVE POWER TO INVESTIGATE BOOKS OF ACCOUNTS. — The power to investigate, examine and determine tax liabilities of taxpayers devolves exclusively upon the provincial revenue agents (now chief revenue officers), pursuant to Department Order No. 12, dated Sept. 25, 1952). Accordingly, Deputy provincial treasurers (now collection agents) have no authority to require a taxpayer to present his books of accounts for examination. (B.I.R. Ruling dated Jan. 3, 1956; B.I.R. Ruling dated Feb. 18, 1954; March 21, 1956).

Under the provisions of Department Order No. 192, dated September 25, 1952, revoking Department Order No. 134, dated Dec. 5, 1950, provincial and city treasurer and their deputies are not empowered to inspect the books of accounts of merchants. The power to investigate, examine and determine the tax liabilities of taxpayers devolves exclusively upon the provincial revenue agents or examiners. (B.I.R. Ruling dated Feb. 18, 1954).

20(24). PROVISIONS OF SECTION 20, REVENUE REGULATIONS NO. V-I, MANDATORY. — Section 20 of the Bookkeeping Regulations is mandatory and may not be dispensed with for the purpose of bringing the said books by the certified public accountant to the public accounting office for audit purposes. (B.I.R Ruling dated Feb. 28, 1953).

20(25). RETURNS WHERE PERCENTAGE TAXES ARE KEPT. — The books of accounts and other records from which the figures shown in the percentage tax return were based should always be kept on file at the principal place of business of the taxpayer and shall be subject to inspection by the internal revenue officers duly authorized to examine the books of accounts of the said taxpayer.

Invoices, receipts and other supporting papers and documents relating to deductions from sales or receipts should be filed separately, kept and preserved in the manner prescribed by Revenue Regulations No. V-1.

The books of accounts and other records shall be maintained for a period of five years from the date of the last entry in the said books and records. (Revenue Regulations No. 3-64, dated March 10, 1964).

20(26). EXAMINATION OF BOOKS OF ACCOUNTS — WHEN PRODUCTION REQUIRED. —

Books of accounts and other business records of taxpayers are open to examination and inspection by internal revenue officers when properly authorized by the Commissioner, Regional Director, or Chief Revenue Officer. Said examination and inspection may be conducted in the taxpayer's place of business or outside thereof. In the latter case, however, the internal revenue concerned must issue a receipt (B.I.R Form No. 19.14) therefore. Under Section 580 of the Revised Administrative Code, internal revenue agents. Agent's Assistants and Examiners may require the production of books of accounts under a subpoena duces tecum. Accordingly, said officers, when duly authorized to exercise or investigate a taxpayer, can validly order the latter to submit his books of accounts and related records to the office of the former. (B.I.R. Ruling No. 251, s. 1958; Section 20, Rev. Regs. No. V-1; Field Circular No. V-88; B.I.R. Ruling No. 38, s. 1965).

[33] 21(1). PRESERVATION OF "GIFT CERTIFICATES". — Where the gift certificates issued by a taxpayer constitutes part of its accounting records, the same should be preserved for a period of at least five (5) years. Microfilms of said certificate cannot take the place of the original certificate. (B.I.R. Ruling No. 336, s. 1960).

21(2). PRESERVATION OF BOOKS OF ACCOUNTS COUNTED FROM THE DATE OF LAST ENTRY. — The period of five (5) years within which books of accounts, invoices, receipts and other accounting records should be preserved is counted from the date of last entry, in case of books of accounts, registers and other accounting records, and from the dates appearing thereon, in the case of invoices and receipts. However, as entries in the books of accounts have to be supported with the corresponding invoices, receipts or vouchers, it is advisable to preserve said invoices; receipts and vouchers for five (5) years from the date of last entry of the book in which they have been entered. (B.I.R. Ruling No. 130, s. 1959).

Sales invoices, vouchers, journal vouchers and receipts supporting the entries or postings in entries of at least five years counted not from the dates of accomplishment or issuance thereof but from the date of last entry in the books to which they relate. (Ibid.)

21(3). PERSONS RETIRING FROM BUSINESS. — The obligation to preserve the books and other accounting records of a taxpayer for a period of at least five (5) years from the date of last entry in each book applies to persons who have retired from business and whose books and other records had already been examined. (B.I.R. Ruling No. 130, s. 1959).

21(4). PERIOD WITHIN WHICH THE BUREAU MAY EXERCISE THE RIGHT TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS. — The right of the Bureau of Internal Revenue to examine and/or inspect books of accounts and other accounting records of taxpayers does not prescribe. Accordingly, the books of accounts and other accounting records of a factory which ceased to operate on Dec. 31, 1954 may be examined or inspected by authorized internal revenue officers any time. However, Section 337 of the Tax Code provides that books of accounts and other accounting records of taxpayers shall be kept for a period of at least five (5) years from the date of last entry and shall be subject to examination and inspection at any time by internal revenue officers. Hence, taxpayers cannot be compelled to preserve the said books and accounting records for a period of over five (5) years. (B.I.R. Ruling No. 414, s. 1959).

21(5). MEANING OF THE PHRASE, "LAST ENTRY". — The term, "last entry," as used in section 337 of the Tax Code, refers to a particular business transaction or an item thereof that is entered or posted last or latest in the books of accounts when the same was closed. (B.I.R. Ruling No. 401, s. 1958).

The phrase "last entry" has no reference to a particular business transaction or an item thereof that is entered or posted last or latest in the book when the name was closed. For purposes of determining the period of at least five years within which the books shall be kept, the same shall be recorded from the date of the last entry in said books. (Ibid.)

21(6). WHERE TO KEEP BOOKS OF ACCOUNTS. — The provisions of section 21 of the Bookkeeping Regulations, requiring that all books of accounts and other records of taxpayers be kept at all times in his place of business is mandatory. (B.I.R. Ruling dated Jan. 24, 1956).

21(7). PRESERVATION OF BOOKS OF ACCOUNTS AND OTHER RECORDS. — Preservation of microfilm copies of books of accounts does not satisfy the requirements of section 337 of the National Internal Revenue Code. Said section implies that the records to be preserved by taxpayers for a period of five (5) years from date of last entry made therein must be originals thereof. This requirement is necessary for the reason that the originals of the books of accounts are the best evidence to prove the entries made therein. (B.I.R. Ruling dated Feb. 20, 1954).

21(8). BOOKS OF ACCOUNTS CANNOT BE AUDITED OUTSIDE OF TAXPAYER'S ESTABLISHMENT. — A certified public accountant, in the exercise of his profession, particularly in auditing the books of accounts of a taxpayer, cannot bring such books outside the business establishment of his client without violating section 21 of the Bookkeeping Regulations. The law does not provide any exception to these requirements. (B.I.R. Ruling dated April 16, 1953).

21(9). KEEPING OF RECORDS. — The books of accounts and other records from which the figures shown in the percentage tax return were based should always be kept on file at the principal place of business of the taxpayer and shall be subject to inspection by internal revenue officers duly authorized to examine the books of accounts of the said taxpayer.

The books of accounts and other records shall be maintained for a period of five years from the date of the last entry in the said books and records.

(Revenue Regulations No. 3-64, March 10, 1964, re Filing of monthly percentage tax return and payment of tax due thereon.)

21(10). PRESERVATION OF BOOKS OF ACCOUNTS, PENALTY FOR FAILURE TO KEEP THE SAME. — Besides being a violation of section 4 of Act No. 3292, which provides that the merchants' books and records "shall be preserved by them for a period of at least five years from the date of the last entry in each Book" and "shall be subject to examination and inspection at any time by internal revenue officers," is penalized by section 2741 of the Administrative Code, which does not refer exclusively to rules and regulations issued by the Bureau of Internal Revenue, but to any lawful regulation of the Bureau of Internal Revenue whether issued by the same or by the Department of Finance. (People of the Phil. Is. vs. Alberto Tan Chaco, CA No. 44133, Nov. 28, 1936; Off. Gaz., Vo. XXXV pp. 1773, Aug. 21, 1937).

[34] 22(1). RULES GOVERNING THE DISSOLUTION OF THE PARTNERSHIP RELATION TO THE APPLICATION AND ENFORCEMENT OF THE BOOKKEEPING REGULATIONS, (ETC.; FACTS. — "A, B, C, D, and E" formed and operated a registered general partnership on June 30, 1956 which was to continue for a period of ten (10) years for the business of buying and selling of general merchandise. On June 30, 1959, partners "C" and "E", decided to quit from the partnership, so a Deed of Dissolution was executed among all the partners and, at the time, new articles of partnership was formed and executed by the remaining partners "A" and "B" with the admission of a new partner "F", in order to take over and continue the business of the dissolved partnership under the same business name and location with the understanding that the new partnership shall assume all the assets and liabilities of said dissolved partnership. Both instruments were duly registered with the Securities & Exchange Commission. . . . The books of accounts of the dissolved partnership were not closed, neither inventory was taken, nor income tax return was filed for the period covering from January 1, 1959 to June 30, 1959. However, the new partnership filed its income tax return for 1959 showing all the transactions covering the period from January 1, 1959 to December 31, 1959 in accordance with the stipulated provision of the new Articles of Partnership which took effect on January 1, 1959.

RULING: (1) The old partnership was considered dissolved on June 30, 1959. (Art. 1830(1) (c), New Civil Code. 'It is a well established general rule that an existing partnership is dissolved and a new partnership is formed whenever a partner retires or a new one is admitted." (40 Am. Jur. 298). Therefore, the privilege tax receipt secured by the said partnership for 1959 was deemed retired on the date of its dissolution, pursuant to Section 181 of the National Internal Revenue Code.

2) The dissolved partnership should file its income tax return covering the period from January 1, 1959 to June 30, 1959 within thirty (30) days after the approval of the resolution authorizing its dissolution in accordance with Section 244 of the Income Tax Regulations. The filing of the income tax returns covering the period from Jan. 1, 1959 to Dec. 31, 1959 by the new partnership which assumed the assets and liabilities of the old partnership was not in conformity with the aforesaid Regulations for those two partnerships have distinct and separate juridical personality.

3) The new partnership violated Section 3 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations for not adopting a new set of books of accounts. The books of accounts of the dissolved partnership cannot be used by the new partnership. The provisions of Section 22 of the aforesaid Regulations provide that all taxpayers required by these regulations to keep books of accounts and other records who retire from business or cease to pursue their calling shall, within ten (10) days from date of such retirement, or within such period of time as may be allowed by the Commissioner of Internal Revenue to submit their books of account and other records to the Bureau of Internal Revenue.

4) A partnership which neglects to make a return at the time or times specified by the Tax Code shall be liable to a fine of not exceeding P20,000.00 (Sec. 74, Tax Code; Sec. 240, Income Tax Regulations). Failure of the new partnership to provide itself with a new set of books of accounts is punishable by a fine of not more than P300.00 or by imprisonment for not more than six months, or both. (Sec. 352, Tax Code).

5) Assuming that the old partnership was dissolved on December 31, 1959, the basis of the privilege tax receipt (C-13) to be secured by the new partnership for 1960 is not the gross annual sales realized by the former. The latter shall be liable only for P10.00 for the same year as initial graduated fixed annual tax prescribed by Section 182 (A)(2) of the Tax Code. The reason being that the two partnerships are distinct juridical persons regardless of the fact that the business of the new partnership is but a continuation of the business of the old partnership.

6) Assuming again that the old partnership was dissolved on December 31, 1959, the basis of the payment of additional residence tax (C-1) for 1960 by the new partnership is not the total receipts or earnings of the dissolved partnership for the same reason adduced in No. 5. (B.I.R. Ruling No. 96, s. 1963).

22(2). REQUISITES UPON RETIRING FROM BUSINESS. — Persons who retire from business are required to submit to the Bureau of Internal Revenue, within ten (10) days from such retirement or within such period as may be allowed by the Commissioner of Internal Revenue, their books of accounts and other accounting records for examination. And in case of transfer of ownership of the business, the transferor should submit to the Bureau within thirty (30) days from the date of transfer an inventory of the stocks on hand at the time of such transfer. (B.I.R. Ruling No. 610, s. 1959).

[35] Sec. 352, Commonwealth Act No. 466.

[36] Sec. 335, Commonwealth Act No. 466, as amended by sec. 13, Rep.

Reg. Act No. 48

VI(1). FALSE OR FICTITIOUS ENTRIES. — Any person who shall knowingly make false or fictitious entries in the books of accounts or accounting records of persons subject to internal revenue tax or who shall abet or aid in any manner in the making or writing of said entries shall be liable to a fine of not less than P500.00 nor more than P5,000.00 or to an imprisonment for a period of not less than six months and one day nor more than five years or both such fine and imprisonment. The same penalty applies in the case of false or fictitious entries in sales invoices and receipts. (B.I.R. Ruling No. 548, s. 1959).

VI(2). SCHEDULE OF COMPROMISES. — General Circular No. V-240, March 15, 1957 — Subject: — Prescribing schedules of compromises for violations of the penal provisions of the laws on taxes on business and occupation, documentary stamp tax, mining taxes, amusement taxes, firearms tax, and weights and measures, fees, provides in part, as follows:

xxx xxx xxx

"UNDER SCHEDULE "C" —

(a) Engaging in business without first securing 10.00

tax receipt for every capital investment of P2,500.00

or fractional part thereof, penalty not to exceed. 300.00

(b)Failure to post privilege tax-receipt in a conspicuous place 10.00

for every P1,000.00, or fractional part thereof, of

unrecorded gross sales or receipts, penalty not to exceed 300.00

(d)Failure to render return of gross sales of receipts

correctly or within the time allowed:

When voluntarily rendered 10.00

for every P100.00 or fractional part thereof of the

regular tax assessed, penalty not to exceed P5,000.00.

When rendered upon demand of an internal revenue officer 20.00

for every P100.00, or fractional part thereof of the regular

tax assessed, penalty not to exceed P10,000.00

(e)Failure to produce books of accounts or other 300.00

records upon demands of an internal revenue officer

for every capital investment of P2,500.00 or

fractional part thereof, penalty not to exceed P300.00.

(f) Failure to register privilege tax receipt or business name

within the time prescribed by law 5.00

for every capital investment of P2,500.00 or fractional

part thereof, penalty not to exceed P300.00.

(g) Failure to inform the Bureau of Internal Revenue

of retirement from business:

When voluntarily presented 5.00

for every capital investment of P5,000.00, or

fractional part thereof, penalty not to exceed P300.00.

When discovered by an internal revenue officer 10.00

for every capital investment of P5,000.00, or

fractional part thereof, penalty not to exceed P300.00.

(h.) Failure to record in the sales invoices or repurchaser in

the case of sales, receipts or transfers in

the amount of P50.00 or more 10.00

(i) Failure to keep books of account and other records in the

establishment or office of the taxpayer for every capital

investment of P100.00, or fractional part thereof, penalty

not to exceed P300.00. 10.00

UNDER SCHEDULE "D"

(a) Engaging in the practice of an occupation

without first securing tax-receipt 10.00

(b) Failure to register the name of style as

prescribed under Section 203 of the Tax Code 10.00

xxx xxx xxx

[37] 24(1). PAYMENT OF COMPROMISE PENALTY FOR FAILURE TO KEEP BOOKS AND OTHER ACCOUNTING RECORDS. — One cannot be compelled to produce books of accounts which he failed to keep and for which failure he was already made to pay a compromise penalty. (B.I.R. Ruling No. 447, s. 1960).

[38] 25(1). COMPROMISE PENALTIES FOR VIOLATIONS OF THE BOOKKEEPING REGULATIONS. — Effective Feb. 16, 1957, taxpayers who violate any of the provisions of the Bookkeeping Regulations shall be liable to the compromise penalty prescribed by General Circular No. V-236 (as amended by General Circular No. V-240). (B.I.R. Ruling No. 188, s. 1960).

25(2). PENALTY FOR FAILURE TO PRESERVE BOOKS OF ACCOUNTS. — The penalty imposable on taxpayers who fail to keep their books of accounts for a period of at least five (5) years from the date of last entry and to produce said books upon demand made within the said period by an authorized internal revenue officer is a fine of not more than P300.00 or imprisonment of not more than six (6) months, or both, regardless of whether or not the same books have been previously examined by internal revenue officers. (B.I.R. Ruling No. 248, s. 1958)

[39] 27(1). PUBLICATIONS OF THE BOOKKEEPING REGULATIONS (REVENUE REGULATIONS) IN THE OFFICIAL GAZETTE. —

1) No. V-1, 43, O.G. No. 11, p. 4563, November, 1947

2) No. V-13, 47 O.G. No. 8, p. 4048, August, 1951

3) No. V-20, 48 O.G. No. 1, p. 13, January, 1952

4) No. V-35, 49 O.G. No. 1, p. 11, January, 1953

5) No. V-43, 52 O.G. No. 3, p. 1234, March, 1956

6) No. V-45, 52 O.G. No. 4, p. 1876, April, 1956

7) No. V-58, 53 O.G. No. 19, p. 6486, Oct. 15, 1957

8) No. V-77, 58 O.G. No. 6, p. 1086, Feb. 5, 1962

9) No. 5-62, 58 O.G. No. 45, p. 7359, Nov. 5, 1962