n G.R. Case No. 222743, Medicard Philippines, Inc.

was issued assessments without

being issued a Letter of Authority (LOA) from the BIR. This lack of adherence to due
process effectively voided the assessments.
The ruling was later reiterated by BIR Revenue Memorandum Circular No. 75-2018.
To avoid being taken advantage of by corrupt revenue officers, taxpayers need to
learn the process of a BIR audit or investigation, and what validates or invalidates
such audit.
The BIR audit begins with the issuance of a LOA.
Prior to that, the taxpayer can be issued a letter notice to notify the taxpayer of any
discrepancy in the reports. Letter notices cannot replace LOAs, and as such do not
authorize further examinations or assessments.
This applies even if the letter notice already contains the exact deficiency determined
via the BIR’s database. In such cases, letter notices will need to be converted into
letters of authority before assessments can be issued.
LOAs need to be specific, containing which types of taxes will be audited and for
what taxable year. While sanctioning the audit of all types of taxes is allowed, LOAs
can only cover one taxable year. For audits of multiple years, separate LOAs need to
be issued.
The LOA needs to be served to the taxpayer within 30 calendar days of its issuance,
otherwise it is voided and will need to be revalidated.
Once the LOA has been issued, the actual audit can begin. The LOA will contain
which documents need to be submitted to the BIR. Failure to provide the requested
documents will subject the taxpayer to the issuance of Subpoena Duces Tecum.
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After the audit is finished, the BIR will issue a Notice for Informal Conference (NIC),
containing the taxpayer’s liabilities. The taxpayer can then contest the assessment
through an informal conference within 30 days from the issuance of the notice. If the
BIR is not convinced by the taxpayer’s argument, it will proceed with the issuance of
a Preliminary Assessment Notice (PAN).
The taxpayer will have 15 days to respond to the PAN, and only after the said period
prescribes can the BIR issue the Formal Letter of Demand (FLD) and the Final
Assessment Notice (FAN).
These documents (NIC, FLD, PAN, and FAN) need to be received by an authorized
representative of the taxpayer.
In the case of Mannasoft Technology Corp. vs Commissioner of Internal Revenue
(CTA Case No. 8745), the foregoing documents were received by persons not
authorized by the taxpayer. The Court of Tax Appeals (CTA) ruled that such receipt
does not count. As such, the CTA ruled that since the documents were not received by
the proper authorized representatives, the assessments issued for that audit are deemed
void as well.
Further, the burden of proving that the assessments were in fact received by the
taxpayer lies with the BIR. In the case of Commissioner of Internal Revenue vs Bank
of the Philippine Islands (G.R. Case No. 224327), the BIR failed to prove the receipt
of the final assessment. The SC ruled that, essentially, “no assessment was issued.”
There is also a 120-day period prescribed for the duration of audit, but this is
apparently not part of the due process. Even if the audit were to exceed the prescribed
period, it will not be invalidated.
The government needs to implement this period strictly, and limit the types of
investigation based on the size of the taxpayer’s business.
Microbusinesses, which will not be able to provide much in the way of assessments
anyway, should only be subjected to a tax mapping—with a one-week prescribed
period. Small, medium, and large enterprises will then be liable to tax mapping,
regular audits, and Run Against Tax Evaders (RATE) cases.
The audit should only last three months for small enterprises, six months for medium
enterprises, and nine months for large enterprises. RATE cases could be
recommended longer periods—six months for small enterprises, one year for medium
enterprises, and one to two years for large enterprises.
Conducting long audits that continually drain the taxpayer’s finances hurts only the
taxpayers and often used by corrupt revenue examiners. As such, violation of this
period should be grounds for the invalidation of the audit.

Read more: https://business.inquirer.net/259004/invalidating-bir-

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