Breaking down LoA controversies: Lessons for businesses

As 2025 draws to a close, taxpayers are looking forward to a stabler and more predictable tax audit environment following the Bureau of Internal Revenue’s (BIR) Revenue Memorandum Circular (RMC) No. 107-2025.

- NESTINE P. BUISAN

The circular suspended the issuance of Letters of Authority (LoAs) and Mission Orders (MOs), as well as the examination of taxpayer records, following numerous complaints regarding irregularities and inconsistencies in the tax audit process. While the BIR typically suspends audits during the holiday season, the RMC stands out for starting the suspension earlier and extending it until the Commissioner formally lifts it.

The RMC also underscored a lingering concern among taxpayers: the issuance and handling of LoAs and tax assessments, being criticized by some as leading to costly disputes and prolonged uncertainty for businesses.

By itself, an LoA formally initiates a tax investigation and authorizes BIR officers to review a taxpayer's records. Its issuance must strictly comply with the Tax Code and BIR regulations. Failure to do so renders assessments void, as affirmed by jurisprudence and Court of Tax Appeals (CTA) rulings.

Here are recent court decisions from the recent years that reveal systemic challenges regarding the proper issuance of LOAs that businesses should take note of:

TAX INVESTIGATIONS MAY ONLY BE CONDUCTED BY AUTHORIZED REPRESENTATIVES INDICATED IN THE LOA

In multiple 2025 CTA rulings, the Court invalidated BIR assessments for lack of proper LoA. In March, the CTA canceled the Warrant of Distraint and/or Levy along with the Assessment Notices because the reassigned Revenue Officer acted under a Memorandum of Assignment, without the authority of an LoA. Similarly, the tax court voided assessments where the revenue officers solely relied on a Memorandum of Assignment, with the LoA issued belatedly two years after the assessment notices were issued. In one other case, the Court struck down all Assessment Notices as the recommending Group Supervisor was not named in the Loa.