Know Your Rights: Pre Tax Assessment Stage - Atty. Gilbert P. Aslor - Licensed Tax and Corporate Lawyer in Makati, Philippines

Know Your Rights: Pre Tax Assessment Stage

Adequate preparation is the key to winning this stage. As Sun Tzu said, “every battle is won or lost before it is fought”. The same is true when you are under tax audit and just received your electronic Letter of Authority (eLA). The way to avoid astronomical amounts of deficiency tax assessments is made before a formal deficiency tax assessment is even issued.

I will try to explain to you what happens when during the pre-assessment stage and the remedies that are available to you during this time:


“A LOA is the authority given to the appropriate revenue officer to examine the books of account and other accounting records of the taxpayer in order to determine the taxpayer’s correct internal revenue liabilities and for the purpose of collecting the correct amount of tax, in accordance with Section 5 of the Tax Code, which gives the CIR the power to obtain information, to summon/examine, and take testimony of persons. The LOA commences the audit process and informs the taxpayer that it is under audit for possible deficiency tax assessment.” (CIR v De La Salle University, Inc. G.R. Nos. 196596, 198841, & 198941, November 9, 2016.)

It is a common misconception among taxpayers that a Letter of Authority (LOA) or an eLA is synonymous to a Letter Notice (LN).  While there are many differences between the two Letters, the more significant one is that an LN cannot authorize the BIR examiner to commence or at any stage conduct a tax audit investigation. Only a validly issued LOA/eLA can have such power and authority.

I want to emphasize the importance of an LOA/eLA mainly because this single and often neglected document is BIR’s key that opens up every taxpayer’s Pandora’s box. Without a valid LOA/eLA, the entire tax audit process can be declared invalid. Listed below is a general guide for you to check the validity of an LOA/eLA:

  1. Only the Commissioner of Internal Revenue (CIR), Deputy Commissioner, or the Regional Director are authorized to issue an LOA/eLA.

  2. Only the examiners named explicitly in the LOA/eLA are authorized to conduct the tax audit.

  3. An LOA/eLA must specify the specific taxable year covered by the audit. An eLA containing multiple but specific taxable years or periods is valid, but an eLA covering tax audit of unspecified taxable years is not.

  4. An LOA/eLA must contain the tax types covered by the tax audit. Only the tax types covered by the LOA/eLA may subject to a tax audit and be issued with a deficiency tax assessment.

  5. The LOA/eLA must be served within 30 days from the date of its issuance.

  6. Service of LOA/eLA may be effected through personal service, substituted service, or mail to the taxpayer named therein or to such person/s authorized to receive the same.

A List of Documentary Requirements usually accompanies an LOA/eLA, and the deadline for the submission is generally within 10-days upon its receipt. If the taxpayer fails to submit the requested documents within the given period, the BIR may issue a second (2nd) and final notice. If the taxpayer still fails to submit the requested documents within the period provided in the 2nd and final notice, a subpoena duces tecum (SDT) may soon follow.


An SDT is usually avoidable and is only issued by the BIR if the taxpayer fails to submit the requested documents after the lapse of the period provided in the 2nd and final notice. The scary thing with SDTs is that a criminal case usually follows if the taxpayer still fails to comply.

Unlike an LOA/eLA were the BIR merely requests the submission of copies of the documents in the List of Documentary Requirements, an SDT, on the other hand, requires the submission of original documents in a specific place, date and time provided therein.

From time to time, and only for meritorious cases, the examiner may allow an extension of time, provided you are able to substantially comply with the documentary requirements you are mandated to submit on the original deadline.


After the examiner conducted his audit, he will issue a Notice of Discrepancy (NOD). An NOD is the document issued by the BIR if they found that the taxpayer is liable for deficiency tax/taxes. Basically, it is the examiner’s initial findings. NOD and the Discussion of Discrepancy (DOD) replaced the Notice of Informal Conference (NIC) when BIR issued Revenue Regulations No. 22-2020 dated September 15, 2020.

An NOD aims to: (1) to fully apprise the taxpayer of the examiner’s noted discrepancies based on his initial report of the investigation, (2) to allow the former to present his side, and (3) refute the discrepancies noted through the Discussion of Discrepancies (DOD) with the examiner.

The DOD shall in no case exceed thirty (30) days from receipt of the NOD. During the DOD, the taxpayer is given the opportunity to present his side, explain the discrepancies found during the investigation, and submit documents to support his position. The taxpayer is also allowed to submit additional documents after DOD, but in no case shall the submission go beyond 30 days from receipt of the NOD.

The NOD and DOD phase is one of the taxpayer’s earlier opportunities of reducing the deficiency tax assessment. The key here is to convince your examiner that: (1) your position/explanation is meritorious, (2) it is supported by competent and reliable evidence, and (3) the examiner misappreciated some facts that resulted in the discrepancies noted.

If after the NOD and DOD, the taxpayer is still liable for deficiency taxes, or the taxpayer failed to fully address all the issues raised by the examiner during the NOD and DOD the docket will be endorsed for the issuance of the Preliminary Assessment Notice.

A detailed discussion of the Assessment Stage is in part 2.

The discussion above does not constitute legal advice and is meant for general information only. For more info or should you need legal advise tailor-fitted to your specific need, you may contact Atty. GPA.

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