The Computerized Accounting System application saga
Once a newly-established business is registered with the Securities and Exchange Commission (SEC), it must subsequently register with the Bureau of Internal Revenue (BIR) and secure a tax identification number (TIN). In addition, it must register books of account for record-keeping of transactions which will be used as the basis to compute its internal revenue taxes.
The first ever local regulations on bookkeeping is Revenue Regulations V-1 (RR V-1), also known as the “Bookkeeping Regulations,” issued in 1947. Since then, various revenue regulations amending RR V-1 were subsequently passed to keep abreast with corporate practices and global developments. Among these is Revenue Memorandum Circular No. 13-82, providing procedures for the issuance of a permit to use loose leaf books of account, records, invoices and receipts. The BIR issued this circular, presumably, to address the clamor of Philippine companies which were required to adopt the accounting system of their foreign headquarters. Nonetheless, manual bookkeeping remained the primary method of maintaining accounting records.
However, at the turn of the millennium, the technology boom paved the way for more efficient encoding of data through standardized digital programs and processes, especially in accounting and finance. This ushered in the use of the Computerized Accounting Systems (CAS).
In Revenue Memorandum Order (RMO) 29-2002, CAS is defined as the integration of different component systems to produce computerized books of account and computergenerated accounting records and documents. Under the RMO, all taxpayers engaged in business are expected to apply for permits before using their CAS or its components. Applications for CAS permits were to be filed at the Large Taxpayer Assistance Division ( LTAD) I or II, Large Taxpayer District Office (LTDO) and Revenue District Office (RDO) having jurisdiction over the taxpayer.
The use of a CAS without approval from the BIR will incur penalties of P25,000 on the first offense and P50,000 on the second offense pursuant to RMO 1-90, as amended by RMO 56-2000. If a taxpayer generates a sales invoice or official receipt from an unauthorized CAS, a penalty of P1,000 will be imposed for each document issued, but the maximum penalty shall not exceed P25,000 per year.
It was in the early 2000s, right after the worries generated by the so-called Y2K or Millennium bug, when CAS started to proliferate in the Philippines. Applications for CAS were processed, evaluated, and then approved by the BIR within a time frame of two to three months.
In 2014, the BIR raised concerns on the CAS approval process at the RDO level, as some permits may have been issued without the benefit of a thorough evaluation process. This prompted the former Commissioner to issue Revenue Special Order (RSO) 581-2015, which centralized the evaluation, recommendation, and approval processes to two Technical Working Groups ( TWG) — one for Large Taxpayers (LT) and the other for Non-Large Taxpayers (NonLT). Each group is composed of at least three personnel from the LTAD who are technically equipped to evaluate the CAS and at least one examiner from the BIR off ice where the applicant is registered. With the creation of the TWGs, the evaluation and approval process at the RDO and LTDO levels was canceled.
Under the centralized application process, the CAS walkthrough or systems demonstration is scheduled within four to six months from filing of the application. The walkthrough at the applicant’s place of business takes about four to six hours to complete. Thereafter, the TWG evaluating team may provide the applicant with a list of requirements and proposed modifications for improvement of the CAS which the taxpayer- applicant must comply with within 30 days.
In September 2016, the BIR released a draft Revenue Regulation mandating the accreditation of CAS, computerized books of account and/or its components, middleware and electronic storage systems, and issuance of the corresponding certificate of accreditation and/or permit to use (PTU).
Compared to the current CAS application process, the guidelines proposed in the draft RR are more convenient for CAS users. Once the accredited CAS is purchased from a developer, distributor or dealer (or simply called, “CAS Supplier”), the next step is to apply for the issuance of a PTU at the RDO level or LT level. It dispenses with the taxpayer’s walkthrough or systems demo, in view of the prior accreditation of the purchased CAS.
The question remains whether the BIR will be able to manage the task of accrediting the CAS Suppliers. In the absence of an efficient implementation plan, the snail’s pace application process at the taxpayer’s level may just end up being carried over to the accreditation process. That said, since there would be fewer applications to process (assuming there are fewer suppliers than actual users), this alternative should result in definite improvement compared to the current scenario.
Apart from revising procedural steps, it may also be worthy for the BIR to reevaluate the current number of personnel assigned to the TWGs in order to keep up with the work load and ensure that applications are reviewed in a timely manner. It is also necessary for the BIR to ensure that its IT personnel are receiving the appropriate skills training. With the constant upgrades of CAS and the increase of applications, the tasks of the evaluating team require continuing enhancement of their skills concurrent with the demands of their work.
The saga of the application to use CAS will continue until a more efficient process is in place. The proposed regulations accrediting CAS Suppliers are a step in the right direction. With innovation showing no signs of a slowdown, there are reasons to be optimistic about the future of bookkeeping and CAS registrations.
The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.