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LoA 101, BIR Letter of Authority, Manage, Overcome. Avoid High Assessment. Avoid Subpoena

1 Views· 11/26/23
Aryel Narvasa
Aryel Narvasa

Call 09173071316 or 09088807568... The proper issuance of a letter of authority (LOA), which is a written official authority issued by the Bureau of Internal Revenue (BIR) to its representatives to conduct a tax audit, is a strict legal requirement for the validity of a BIR tax assessment. The LOA informs the taxpayer that an audit or examination of its books of account will be conducted by the BIR through the authorized representatives specifically named therein. Without a valid LOA, an assessment is void for violating the taxpayer’s right to due process of law. In this article, we will discuss recent rulings of the Court of Tax Appeals (CTA), as well as common issues involving LOAs, memoranda of assignment, “revalidation or reassignment notices” and the like.
In Orient Overseas Container Line Ltd. vs CIR (CTA Case 9179, Aug. 2, 2018), the CTA held that only those BIR officials authorized to issue an LOA can modify or amend a previously issued LOA. The CTA ruled that an “OIC-Chief of BIR Large Taxpayers Service Regular Large Taxpayers Audit Division II” not having been duly authorized by the Commissioner of Internal Revenue (CIR), is bereft of any power to authorize the examination of the taxpayer or to modify or amend a previously issued LOA. Thus, the memorandum of assignment that was signed by the said “OIC-Chief of BIR Large Taxpayers Service Regular Large Taxpayers Audit Division II” did not validly authorize the revenue officers to whom the audit or examination of taxpayer’s accounts was transferred. In recent cases, the CTA emphasized that a valid LOA is necessary in an assessment case, and that any assessment carried out without a previously issued valid LOA is void.
The CTA has also consistently held that, in case of continuation by another revenue officer of the audit examination of the taxpayer’s books or reassignment of such audit to another revenue officer, a new LOA must be issued. This new LOA must name the new revenue officers who will continue the audit or to whom the audit will be reassigned. Thus, in a recent ruling, the CTA held that the assessment was void due to lack of authority of the revenue officer who conducted the audit or investigation of the books of the taxpayer. In this case, the revenue officer who continued and completed the conduct of audit or investigation of the taxpayer’s books of account only had a revalidation or reassignment notice, and no new LOA was issued to authorize the new revenue officer to conduct the audit or investigation.
Also, the CTA held that the revenue officers identified in a memorandum of assignment, who were not named in a previously issued LOA and not armed with any LOA at all, are not authorized to conduct an audit. The CTA concluded that the revenue officers in the memorandum of assignment had no authority to conduct the audit, and thus, the assessment was void.
The rule is that, unless authorized by the CIR, himself or his duly authorized representative, through an LOA, an examination of the taxpayer cannot be validly undertaken. CTTO

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