[Ask the Tax Whiz] What is an eLA or LOA?

What is an eLA or LOA? How many times can I be audited by the BIR?

An eLA is an electronic Letter of Authority issued by the Bureau of Internal Revenue to examine the books and records of a taxpayer for a particular taxable period, e.g. taxable year 2019. The eLA is electronically generated and its issuance is through the electronic Letter of Authority Monitoring System (eLAMS).

For income tax purposes, the BIR can audit a taxpayer only once in a taxable year, except in the following cases:

1. When the commissioner determines that fraud, irregularities, or mistakes were committed
2. When the taxpayer requests reinvestigation
3. When the taxpayer’s capital gains tax liabilities must be verified
4. When the commissioner chooses to exercise his or her power under Section 5(B) of the National Internal Revenue Code to obtain information from other persons, in which case, another or separate examination and inspection may be made

How do I get selected for audit? What do I need to do if I get selected?

In general, all taxpayers may be audited by the BIR. Every year, an audit program is prepared setting selection criteria and priority taxpayers who will be subject to audit and investigation by the following offices: Audit Divisions under the Large Taxpayers Service and Enforcement Service in the National Office, and the Revenue District Offices, Assessment Divisions, and Regional Investigation Divisions under the Revenue Regions.

A taxpayer who is selected for audit is required to receive the issued eLA upon presentation by the assigned and authorized Revenue Officer (RO) to conduct the audit, and to present and/or submit his books of accounts and other related accounting records within the required time from receipt of the eLA.

When does the audit process begin? Is there a prescription period for an audit to be valid?

The audit process begins with the service of a duly issued eLA to a taxpayer selected for audit. 

An assessment must be made within 3 years from the last day prescribed by law for the filing of the tax return, for the tax that is being subjected to assessment or from the day the return was filed, if filed late.

What is a PAN? What is an FLD/FAN?

The PAN or Preliminary Assessment Notice is an official but not final assessment issued by the BIR commissioner or the commissioner’s duly authorized representative informing a taxpayer of his or her deficiency tax/es, showing details of the facts, laws, rules and regulations, and/or jurisprudence as basis of the assessment. If the taxpayer disagrees with the findings presented in the PAN, he or she has 15 days from receipt of the PAN to file a written reply contesting the proposed assessment.

The FLD/FAN or Formal Letter of Demand/Final Assessment Notice is a written demand to pay deficiency taxes issued to a taxpayer who fails to respond to a PAN within the prescribed period, or whose reply lacks merit or basis.

How do I know if the assessment is valid? Where can I ask questions or assistance when I get audited by the BIR?

The assessment must be presented with the facts, laws, rules and regulations, or jurisprudence on which it is based, otherwise, the FLD/FAN shall be void.

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For tax assistance during a BIR audit, visit www.acg.ph or email mon@acg.ph. – Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.