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[Ask the Tax Whiz] What are the different types of BIR letters and what are their purpose? (Part 2)

The Philippine Tax Whiz discusses subpoena duces tecum, notice of discrepancy, preliminary assessment notices, final assessment notices, and formal letters of demand.

Read Part 1.


There are nine types of different letters that may be issued by the BIR: mission orders, benchmarking notices, letters of authority (LOA), subpoena duces tecum (SDT), Notice of Discrepancy (NOD), Preliminary Assessment Notice (PAN), Final Assessment Notice (FAN) and Formal Letter of Demand (FLD), Final Decision on Disputed Assessment (FDDA), and the Warrant of Distraint and/or Levy (WDL).

The second part of this three-part series will cover Subpoena Duces Tecum (SDT), Notice of Discrepancy (NOD), Preliminary Assessment Notices (PAN), Final Assessment Notices (FAN), and Formal Letters of Demand (FLD).

Subpoena Duces Tecum (SDT)

After the issuance service of LOA, taxpayers are required to present accounting records and other related documents to the Revenue Officer in order for the latter to be able to conduct their audit. Failure to submit these required documents will lead to the issuance of First, Second, and Final Notices. If the taxpayer still fails to comply with these notices, then the BIR may issue a subpoena duces tecum. It is, essentially, an order for the taxpayer to produce the required documents, and will contain explicitly what the taxpayer needs to present and submit to the BIR.

If, despite the issuance of an SDT, the taxpayer still fails to submit or submits incomplete requirements, then the issuing office of the BIR may forward the case to the Prosecution Division at the National Office or the Legal Division at the Regional Office, as the case may be.

Notice of Discrepancy (NOD)

Revenue Memorandum Circular (RMC) No. 102-2020 prescribes the revised format for the Notice of Discrepancy. Its main objective is to provide taxpayers an opportunity to explain their side as to the discrepancies found as a result of the audit/investigation of their tax liabilities. As provided under the RMC, the NOD contains:

  1. Full name, address, and tax identification number (TIN) of the taxpayer;
  2. The covered taxable period of the NOD pursuant to a duly issued Letter of Authority (LOA) and the LOA number and date;
  3. Reference to an attached details of discrepancy which do not constitute a deficiency tax assessment yet, as expressly stated in the NOD;
  4. An invitation for the taxpayer or its duly authorized representative to present and explain defenses and arguments against the BIR’s findings in a designated address within five (5) days from the receipt of the NOD. The counsel or representative must be authorized in writing in accordance with the required authorization document by the BIR;
  5. A notice to the taxpayer  – if he fails to appear on the scheduled date of discussion without prior notice, it would be construed as a waiver of his right to a discussion of discrepancy and that he does not object to any of the findings from the BIR’s investigation;
  6. If the taxpayer failure to reconcile and present/submit supporting documents would result to the issuance of Preliminary Assessment Notice (PAN); and
  7. The NOD shall be signed by the Revenue District Officer (RDO) or the Chief of the Investigating Office, as applicable and once received, may be countersigned by the taxpayer’s representative to document receipt.

In case a taxpayer needs more time to present the documents, the taxpayer must submit all necessary documents that support their explanation within thirty (30) days after receipt of the NOD.

Preliminary Assessment Notice (PAN)

If the BIR and the taxpayer fails to resolve their issue even after the issuance of the NOD, the BIR will issue a Preliminary Assessment Notice (PAN), to which the taxpayer may reply to, in writing, within 15 days of receipt. During that period, the taxpayer may file a reply letter to PAN containing the taxpayer’s arguments and discussions of disagreements based on the facts of the taxpayer’s circumstances and applicable laws, rules and regulations. Additional supporting documents may be submitted in order to substantiate the taxpayer’s claims.

Final Assessment Notice (FAN) and Formal Letter of Demand (FLD)

If the taxpayer fails to respond to the PAN within 15 days, the BIR shall issue a Final Assessment Notice (FAN) and Formal Letter of Demand (FLD). As defined in RMC 15-2020, the FLD/FAN is the calling for payment of a taxpayer’s deficiency tax liabilities and shall likewise state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based. Failure to indicate the said information shall render the assessment void.

In case the taxpayer does not agree with the assessment, they may make an administrative protest by the filing of either a Request for Reconsideration or a Request for Reinvestigation, which must be done within 30 days from receipt of the FLD/FAN. RR 18-2013 provides the difference between Reconsideration and Reinvestigation:

  • A Request for Reconsideration refers to a plea for reevaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both.
  • A Request for Reinvestigation refers to a plea for reevaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or of law or both. The taxpayer shall submit all relevant supporting documents in support of his protest within 60 days from date of filing of his letter of protest, otherwise, the assessment shall become final.

The same RR provides that the taxpayer must state, in their protest:

  1. The nature of protest whether reconsideration or reinvestigation, specifying newly discovered or additional evidence he intends to present if it is a request for reinvestigation
  2. Date of the assessment notice
  3. The applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect.

If there are several issues involved in the FLD/FAN and the taxpayer only disputes or protests against the validity of some of the issues raised, then the assessment attributable to the undisputed issue or issues becomes final, executory and demandable, thereby requiring the taxpayer to pay the deficiency tax or taxes attributable thereto. Similarly, if the taxpayer does not file a protest against the FLD/FAN within the 30-day period, the assessment shall become final, executory and demandable, with no recourse for request for reconsideration or re-investigation. 

Originally Published in Rappler.

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