Statutory requirement and functions of a letter of authority

THE Bureau of Internal Revenue (BIR) recently issued Revenue Memorandum Circular (RMC) 75-2018 emphasizing the mandatory statutory requirement of a letter of authority (LOA) and its functions.

The LOA’s necessity was affirmed when the Supreme Court (SC), in Medicard Philippines Inc. v. CIR (General Register No. 222743, 5 April 2017), ruled that no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authorization of the commissioner of internal revenue (CIR) or his duly authorized representative through an LOA. The absence of an LOA in any tax assessment issued is a violation of the taxpayer’s right to due process and is, therefore, “undeniably void.”

The SC further explained that:

- The circumstances enumerated under Section 6 of the Tax Code, as amended, where the taxpayer may be assessed through best evidence obtainable, inventory taking, or surveillance, among others, have nothing to do with the LOA. These are simply means of examining the taxpayer to arrive at the correct amount of taxes. Tax agents other than the CIR may not validly conduct any of these kinds of examinations, unless authorized by the CIR.

- A letter notice (LN) is entirely different and serves a different purpose than an LOA. It is not found in the Tax Code and it is not an authority to conduct an audit examination of the taxpayer, leading to the issuance of deficiency assessments. Due process demands that, after an LN has served its purpose, the revenue officer should have properly secured an LOA before further examining and assessing the taxpayer.

Any examiner or revenue officer initiating tax assessments or performing assessment functions without an LOA will be subject to appropriate administrative sanctions.

Please be guided accordingly.



Certified Public Accountants

Punongbayan & Araullo (P&A) is

the Philippine member firm

of Grant Thornton International Ltd.


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