San Beda College of Law 2005 CENTRALIZED BAR

OPERATIONS
MEMORY AID IN TAXATION LAW
ANNEX N
ASSESSMENT PROCESS
169
Commissioner
rejects the
explanation
Commissioner
accepts the
explanation
No
Yes
Taxpayer and BIR
come to an
agreement
No
Commissioner issues Letter of
authority
Assessment
process ends
A
A
Taxpayer
Responds within
15 days
Start
Start
BIR Audit!Tax In"estigation
#reliminary $indings
No
Yes
Is taxpayer
lia%le for
deficiency tax
#ost&Reporting 'otice!
Informal Conference Letter
Assessment process ends
Taxpayer and BIR
fails to agree
Informal
Conference
%etween taxpayer
and BIR
#re&Assessment 'otice (#A')
Taxpayer
Responds within
15 days
$ormal Letter of
*emand
Assessment
process
ends
Commissioner recei"es the
position paper of the
taxpayer
Taxpayer fails to
su%mit the
documents
+nfa"ora%le to the
taxpayer
$a"ora%le to the
taxpayer
Yes
Issuance of the Commissioner final
decision on the disputed assessment
#R,T-.T/ Taxpayer shall file
protest re0uesting for
rein"estigation or reconsideration
If commissioner does not
act on the protest within
112 days from receipt of
the documents
No
Taxpayer
Responds within
32 days
Assessment
%ecomes final and
executory
Taxpayer su%mits
the documents
Taxpayer must
su%mit w!in 42 days
all documents
necessary for
rein"estigation
Assessment
process
ends
Commissioner
resol"es the
assessment %ased on
the documents
B
B
$ormal Letter of
*emand
Taxpayer may appeal to the
Commissioner within 32 days from
receipt of final decision
Appeal to the Court of Tax Appeals if
commissioner denies the protest or fails to act
within 112 days from receipt of documents
Appeal to the Court
of Tax Appeals
C
C
Appeal to the
.upreme Court
END
END
Assessment %ecomes final
and executory5 Taxpayer
must pay the go"ernment
within 30 days
San Beda College of Law 2005 CENTRALIZED BAR
OPERATIONS
MEMORY AID IN TAXATION LAW
NOTES:
The FORMAL ASSESSMENT NOTICE (FAN) must %e issued within 3 years from the time the return was filed
unless a wai"er is issued within the 3&year period or there was a failure to file or there is fraud6
170
San Beda College of Law 2005 CENTRALIZED BAR
OPERATIONS
MEMORY AID IN TAXATION LAW
LETTER OF AUTHORITY is an official document that empowers a Re"enue ,fficer to examine and scrutini7e a
Taxpayer8s %oo9s of accounts and other accounting records: in order to determine the Taxpayer8s correct
internal re"enue tax lia%ilities6
It must %e ser"ed to the concerned Taxpayer within thirty (32) days from its date of issuance:
otherwise: it shall %ecome null and "oid6 The Taxpayer shall then ha"e the right to refuse the ser"ice of
this LA: unless the LA is re"alidated6
WHO MAY ISSUE LETTER OF AUTHORITY?
After a return has %een filed: the Commissioner or his duly authori7ed representati"e may authori7e the
examination of the %oo9s of any taxpayer and the assessment of the correct amount of tax6 (section 4:
'IRC)
The Re"enue Regional *irector shall appro"e and sign all Las for all audit cases within his regional
jurisdiction: except/ (a) cases in"ol"ing ci"il or criminal tax fraud falling under the jurisdiction of the Tax
$raud *i"ision of the -nforcement .er"ice5 and (%) policy cases under audit %y .pecial Teams in the
'ational ,ffice6 (RA;, 34&<<)
AUDIT : A Re"enue ,fficer is allowed only one hundred twenty (1=2) days from the date of receipt of a
Letter of Authority %y the Taxpayer to conduct the audit and su%mit the re0uired report of in"estigation6
If the Re"enue ,fficer is una%le to su%mit his final report of in"estigation within the 1=2&day period: he
must then su%mit a #rogress Report to his >ead of ,ffice: and surrender the Letter of Authority for
re"alidation6
NOTICE FOR INFORMAL CONFERENCE is a written notice informing a Taxpayer that the findings of the audit
conducted on his %oo9s of accounts and accounting records indicate that additional taxes or deficiency
assessments ha"e to %e paid6
If: after the culmination of an audit: a Re"enue ,fficer recommends the imposition of deficiency
assessments: this recommendation is communicated %y the Bureau to the Taxpayer concerned during an
informal conference called for this purpose6 The Taxpayer shall then ha"e fifteen (15) days from the date
of his receipt of the 'otice for Informal Conference to explain his side6
ADMINISTRATIE DECISION ON A DISPUTED ASSESSMENT! The decision of the Commissioner or his duly authori7ed
representati"e shall
(a) state the facts: applica%le law: rules and regulations: or jurisprudence on which such decision is
%ased5 otherwise: the decision shall %e "oid: in which case: the same shall not %e considered a
decision on a disputed assessment5
(%) that the same is final decision6
Constructi"e .er"ice of the decision/
(1) 'o response is recei"ed from the taxpayer within the prescri%ed period from date of the posting
of the mail5
(=) The decision is personally ser"ed on the taxpayer or his duly authori7ed representati"e: who
refused to ac9nowledged receipt thereof5
(3) By lea"ing the decision in the premises of the taxpayer and this fact of constructi"e ser"ice is
attested to: witnessed and signed %y at least two re"enue officers other than the re"enue officer
who constructi"ely ser"ed the same6 The re"enue officer who constructi"ely ser"ed the same
shall ma9e a written report on the matter which shall form part of the doc9et of the case6
"EOPARDY ASSESSMENT is a tax assessment made %y an authori7ed Re"enue ,fficer without the %enefit of
complete or partial audit: in light of the R,8s %elief that the assessment and collection of a deficiency tax
will %e jeopardi7ed %y delay caused %y the Taxpayer8s failure to/
(a) Comply with audit and in"estigation re0uirements to present his %oo9s of accounts and!or
pertinent records: or
(%) .u%stantiate all or any of the deductions: exemptions or credits claimed in his return6
PRE ASSESSMENT NOTICE is a communication issued %y the Regional Assessment *i"ision: or any other
concerned BIR ,ffice: informing a Taxpayer who has %een audited of the findings of the Re"enue ,fficer:
following the re"iew of these findings6
If the Taxpayer disagrees with the findings stated in the #A': he shall then ha"e fifteen (15) days from
his receipt of the #A' to file a written reply contesting the proposed assessment6
INSTANCES WHEREIN PAN IS NO LON#ER RE$UIRED /
171
San Beda College of Law 2005 CENTRALIZED BAR
OPERATIONS
MEMORY AID IN TAXATION LAW
16 ?hen the finding for any deficiency tax is the result of mathematical error in the computation of the
tax appearing on the face of the tax return filed %y the taxpayer5 or
=6 ?hen a discrepancy has %een determined %etween the tax withheld and the amount actually remitted
%y the withholding agent5 or
36 ?hen a taxpayer who opted to claim a refund or tax credit of excess credita%le withholding tax for a
taxa%le period was determined to ha"e carried o"er and automatically applied the same amount
claimed against the estimated tax lia%ilities for the taxa%le 0uarter or 0uarters of the succeeding
taxa%le year5 or
@6 ?hen the excise tax due on excisa%le articles has not %een paid5 or
56 ?hen an article locally purchased or imported %y an exempt person: such as: %ut not limited to:
"ehicles: capital e0uipment: machineries and spare parts: has %een sold: traded or transferred to
non&exempt persons6

NOTICE OF ASSESSMENT OR FORMAL LETTER OF DEMAND is a declaration of deficiency taxes issued to a Taxpayer
who fails to respond to a #re&Assessment 'otice within the prescri%ed period of time: or whose reply to
the #A' was found to %e without merit6 The 'otice of Assessment shall inform the Taxpayer of this fact:
and that the report of in"estigation su%mitted %y the Re"enue ,fficer conducting the audit shall %e gi"en
due course6
CHARACTERISTICS OF A ALID PROTEST
A protest is considered "alid if it satisfies the following conditions/
It is made in writing: and addressed to the Commissioner of Internal Re"enue5
It contains the information: and complies with the conditions re0uired %y .ec6 4 of Re"enue
Regulations 'o6 1=&155 to wit/
a6) 'ame of the taxpayer and address for the immediate past three (3) taxa%le year6
%6) 'ature of re0uest whether rein"estigation or reconsideration specifying newly disco"ered
e"idence he intends to present if it is a re0uest for in"estigation6
c6) The taxa%le periods co"ered6
d6) Assessment num%er6
e6) *ate of receipt of assessment notice or letter of demand6
f6) Itemi7ed statement of the findings to which the taxpayer agrees as a %asis for computing the tax
due: which amount should %e paid immediately upon the filing of the protest6 $or this purpose:
the protest shall not %e deemed "alidly filed unless payment of the agreed portion of the tax is
paid first6
g6) The itemi7ed schedule of the adjustments with which the taxpayer does not agree6
h6) A statement of facts and!or law in support of the protest6
The taxpayer shall state the facts, applicable law, rules and regulations or jurisprudence on which
his protest is based: otherwise: his protest shall %e considered "oid and without force and effect on the e"ent
the letter of protest su%mitted %y the taxpayer is accepted6
17