Receiving a BIR Notice of Discrepancy can be alarming. This guide walks you through the exact steps to take within the 30-day response window to protect your business from escalating assessments.
Direct answer
A Notice of Discrepancy begins a discussion of identified differences; it is not an FLD/FAN protest. Read the notice, preserve receipt and reconcile each item under the applicable discussion rules.
Confirm that the document is a NOD
BIR communications have different purposes. A Notice of Discrepancy under RR No. 22-2020 is intended to identify discrepancies and provide an opportunity to explain them before the subsequent assessment stages. It must not be confused with a Letter of Authority, PAN, FLD/FAN or collection notice.
Use the discussion period deliberately
RR No. 22-2020 provides that the discussion of discrepancies should not extend beyond 30 days from receipt of the NOD. This is not a universal response or appeal period for every BIR notice. Read the actual invitation and document requests, arrange the discussion and preserve written submissions and acknowledgments.
Build a reconciliation worksheet
| BIR item | Taxpayer explanation | Evidence and unresolved point |
|---|---|---|
| Sales difference | Reconcile timing, cancelled entries and reporting classifications | Invoices, ledger and return cross-reference. |
| Expense disallowance | Identify business purpose, legal basis and substantiation | Contract, invoice, payment and withholding records. |
| Withholding mismatch | Reconcile payee, base, rate and period | Certificates, returns and remittance records. |
Do not submit a generic denial where the issue is numerical, or concede a legal issue merely because a reconciliation is unfinished. Explain differences that remain open and the records needed to resolve them.
Prepare for the next document
The discussion may not resolve every item. Monitor for a PAN and, later, an FLD/FAN, each with its own rules and deadlines. Read the assessment protest guide when a formal assessment arrives. The decision to obtain counsel should reflect deadlines, complexity, exposure and record quality, not an arbitrary peso threshold.
Related assistance
For the next step, see BIR controversy counsel, BIR notice review. Engagement depends on conflict checking and an agreed scope.
Sources and further reading
Important
This article provides general information, not advice on a particular matter. The applicable law, documents, procedural events and facts must be checked. Reading it does not create an attorney-client relationship.
Topics covered:
BIRNODTax AssessmentAudit DefensePhilippines
Legal DisclaimerThis article is published by Nopuente Law Firm for general informational and educational purposes only. It does not constitute legal advice and does not create an attorney-client relationship. The information may not reflect the most current legal developments and may not apply to your specific circumstances. Laws, regulations, and BIR issuances in the Philippines are subject to change without notice. Do not act or refrain from acting based on this article without first consulting a qualified Philippine lawyer who can advise you on the specific facts of your situation. For legal assistance, contact us at inquiries@nopuentelawfirm.com.