Direct answer
A Notice of Discrepancy calls for discussion of identified differences. It is not the protest stage for an FLD/FAN. Read the notice, preserve proof of receipt and reconcile each item under the applicable rules.
Identify the Notice of Discrepancy
First, confirm that the document is a Notice of Discrepancy under RR No. 22-2020. It gives the taxpayer an opportunity to explain the identified differences before the later assessment stages. An LOA, PAN, FLD/FAN or collection notice serves a different purpose.
BIR RMO No. 1-2026 now requires the NOD to say that it is not yet an assessment and to state the discrepancies clearly and specifically. Any later assessment should be anchored only on issues that remain unresolved after the discrepancy discussion.
Use the NOD process and 30-day cap
The prescribed Annex A form calls for the taxpayer to present its side within five days from receipt. RR No. 22-2020 also provides that the Discussion of Discrepancy and submission of supporting documents must not extend beyond 30 days from receipt. Check the actual issued notice and act immediately; this is not a universal response or appeal period for every BIR document.
- 1Receive and classify
Record receipt, confirm that the document is an NOD, identify each discrepancy and preserve the envelope, electronic service record or acknowledgment.
- 2Discuss and submit
Present the explanation and supporting records within the NOD process. Keep the signed minutes required by RMO No. 1-2026 and proof of every submission.
- 3Close or isolate unresolved items
Reconcile resolved items in writing. If issues remain, the investigating office may endorse the case for a PAN within 10 days from conclusion of the discussion.
- 4Use the next document’s own remedy
A PAN response and an FLD/FAN administrative protest are later, separate stages with their own rules. Do not carry the NOD discussion clock into those stages.
Evidence and action 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. |
If the issue is a numerical difference, explain it with the reconciliation and records. If the reconciliation is unfinished, identify what remains open without conceding an unresolved legal issue.
Prepare for the next document
The discussion may leave some items unresolved. A PAN, if issued, is a proposed-assessment stage; an FLD/FAN is the formal assessment whose administrative protest follows Section 228 and the applicable regulations. The NOD’s discussion period is not an FLD/FAN protest period, and an explanation submitted at NOD stage should not be assumed to preserve a later remedy.
When a later assessment document arrives, consult the assessment protest guide and calculate its own deadline from verified service. Assess the need for counsel against the clock, complexity, exposure and quality of records rather than a fixed 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
General notice
General information only. This article is not legal or tax advice and does not create an attorney-client relationship. Laws, regulations and procedures may change. Their application depends on the facts, documents, procedural events and timing. Consult a qualified Philippine lawyer before acting or refraining from acting. For assistance, contact inquiries@nopuentelawfirm.com.
Topics covered:
BIRNODTax AssessmentAudit DefensePhilippines