How Does a BIR Tax Assessment Work, and How Do You Protest It?
A BIR tax assessment is the end of a process the law makes the BIR follow, and each notice gives you a short, fixed window to answer.
Quick answer
The BIR must tell you its findings before it assesses you, in writing, with the law and the facts it relies on; an assessment that does not do this is void (NIRC Section 228). The usual path is a Letter of Authority, a Notice of Discrepancy (30 days to explain), a Preliminary Assessment Notice (15 days to reply), then a Formal Letter of Demand and Final Assessment Notice (FLD/FAN). You have 30 days from receipt of the FLD/FAN to protest. Miss it and the assessment becomes final.
First action: write down the date you received each notice, because every deadline runs from receipt, and gather the records the notice questions.
What are the stages of a BIR tax assessment?
Sections 6(A) and 13 of the National Internal Revenue Code let a Revenue Officer examine you “pursuant to a Letter of Authority.” The steps are in Revenue Regulations No. 12-99, as amended by RR No. 18-2013, RR No. 7-2018 and RR No. 22-2020; the BIR’s listings for 2021 to 2026 show no later amendment. Each stage starts its own deadline:
| Stage | What it is | Your deadline | Counted from |
|---|---|---|---|
| Letter of Authority (LOA) | Authority for a named officer to examine you | None; answer document requests | Not applicable |
| Notice of Discrepancy (NOD) | Initial audit findings | 30 days to explain, with documents | Receipt of the NOD |
| Preliminary Assessment Notice (PAN) | Proposed assessment | 15 days to reply | Receipt of the PAN |
| FLD/FAN | The assessment and demand to pay | 30 days to file a protest | Receipt of the FLD/FAN |
| Documents (reinvestigation only) | Evidence for your protest | 60 days | Filing of the protest |
| BIR decision on protest | Final Decision on a Disputed Assessment | BIR has 180 days | Filing (reconsideration) or submission of documents (reinvestigation) |
| Appeal to the Court of Tax Appeals | Petition for review | 30 days | Receipt of the denial, or lapse of the 180 days |
If the discussion does not settle the matter, the case is endorsed for a PAN within 10 days (RR 22-2020). If you ignore the PAN, you are in default and the FLD/FAN issues; if you disagree, it follows within 15 days of your reply (RR 18-2013).
When is an assessment void?
- No Letter of Authority. In Medicard Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017, the Supreme Court voided an assessment made without an LOA; a letter notice did not take its place.
- No written notice of the law and the facts. Section 228 makes the assessment void if you are not “informed in writing of the law and the facts”; RR 18-2013 applies this to the FLD/FAN and the final decision. In Commissioner of Internal Revenue v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010, an assessment was void because the BIR could not prove the taxpayer received the PAN.
RR 18-2013 allows personal, substituted or mail/courier service to your registered or known address, so keep your address current through BIR ORUS.
When can the BIR skip the PAN?
Section 228(a) to (e) lists five cases where the BIR may issue the FLD/FAN outright (RR 18-2013):
- (a) a mathematical error on the face of the return;
- (b) tax withheld but not fully remitted by the withholding agent;
- (c) excess creditable withholding tax claimed as a refund or credit but also carried over to the next year;
- (d) unpaid excise tax on excisable articles; and
- (e) a tax-exempt purchase or import, such as a vehicle or equipment, later transferred to a non-exempt person.
The FLD/FAN must still state the law and facts, and you can still protest within 30 days.
How do you protest a FAN: reconsideration or reinvestigation?
Within 30 days from receipt of the FLD/FAN, file a written protest of one of two types (RR 18-2013):
- Request for reconsideration: re-evaluation on the existing records, with no new evidence. The 60-day document rule does not apply.
- Request for reinvestigation: re-evaluation on new or additional evidence, which you must name in the protest and submit in full within 60 days of filing, or you lose the right to dispute the assessment with new evidence.
The protest must state its type, the date of the assessment notice and the law or jurisprudence it relies on, or it is “void and without force and effect.” Items you do not contest become final and collectible. File at the office named in the FLD/FAN.
What happens after the protest: 180 days and the CTA
Under Section 228 and RR 18-2013, the 180 days run from filing (reconsideration) or document submission (reinvestigation):
- Denial by the Commissioner’s representative: appeal to the Court of Tax Appeals (CTA), or elevate to the Commissioner, within 30 days from receipt.
- Denial by the Commissioner: appeal to the CTA within 30 days from receipt. A motion for reconsideration does not stop the 30 days.
- No action within 180 days: appeal to the CTA within 30 days after the 180 days end, or wait for the decision and appeal within 30 days of receiving it. The options are mutually exclusive (Lascona Land Co., Inc. v. Commissioner of Internal Revenue, G.R. No. 171251, March 5, 2012).
Under Section 11 of RA 1125, as amended by RA 9282, an appeal does not by itself stop collection, but the CTA may suspend it and require a deposit or a surety bond of up to double the amount.
How long does the BIR have to assess and collect?
An assessment issued after these NIRC periods is void.
| Rule | Period | Starts from | Basis |
|---|---|---|---|
| Ordinary assessment | 3 years | Due date of the return, or filing date if late | Section 203 |
| False or fraudulent return, or no return | 10 years | Discovery of the falsity, fraud or omission | Section 222(a) |
| Written waiver | Period agreed in writing | Must be signed before the 3 years end | Section 222(b) |
| Collection after assessment | 5 years | The assessment | Section 222(c) |
| Suspension of the periods | Paused for set events | Granted reinvestigation, taxpayer not found or abroad, and others | Section 223 |
In Commissioner of Internal Revenue v. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010, waivers that did not meet the BIR’s own requirements did not extend the period, so the assessments were void.
What penalties apply, and what changed for micro and small taxpayers?
Section 248 sets a 25% surcharge for late filing or payment (50% for willful neglect or fraud). Section 249, as amended by TRAIN (RA 10963), sets interest at double the legal rate; the legal rate is 6% under BSP Circular No. 799, as applied in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, so interest is 12% a year. The Ease of Paying Taxes Act (RA 11976) classes taxpayers with gross sales under ₱3,000,000 as micro and ₱3,000,000 to under ₱20,000,000 as small, and RR No. 6-2024 gives them lower rates going forward:
| Penalty | Most taxpayers | Micro and small taxpayers |
|---|---|---|
| Surcharge (late filing or payment) | 25% | 10% |
| Surcharge (willful neglect or fraud) | 50% | 50%, no reduction |
| Interest a year | 12% | 6% |
| Failure to file information returns | ₱1,000 each, up to ₱25,000 a year | ₱500 each, up to ₱12,500 a year |
| Compromise penalty, Sections 113, 237, 238 (no fraud) | Schedule in RMO No. 7-2015 | 50% of that schedule |
Can you settle an assessment for less?
Section 204(A) allows a compromise when the assessment’s validity is reasonably doubtful (minimum 40% of the basic tax) or you clearly cannot pay (minimum 10%). Basic tax above ₱1,000,000, or a lower offer, needs Evaluation Board approval.
Micro taxpayers, until December 31, 2026: RR No. 4-2026 (digest) offers a one-time abatement of delinquent accounts, preliminary or final assessments and stop-filer cases existing as of December 31, 2025, where basic tax and penalties total ₱80,000 or less for a taxable year. Apply manually at your RDO, per taxable year, and pay a ₱5,000 fee on BIR Form No. 0605 within five working days.
Does this apply to you?
- Applies when: a BIR notice concerns national internal revenue taxes of an individual or small business.
- Changes when: the notice is from a local treasurer or the Bureau of Customs, or concerns a refund.
- Confirm first: receipt dates, taxable year, the LOA, your gross-sales group and any waiver.
Fictional example: an online seller’s FAN
This example is invented. Ana, a sole proprietor with gross sales of about ₱2,400,000, is a micro taxpayer. She gets a PAN in December 2025 for taxable year 2023, then a FLD/FAN on March 2, 2026, so her protest is due April 1. She files for reinvestigation on March 25 (documents due May 24) and submits on May 20, so the BIR’s 180 days run to November 16, 2026; without a decision she can appeal to the CTA by December 16, 2026.
Kung hindi lalampas ng ₱80,000 ang total na basic tax at penalties niya para sa 2023, puwede rin niyang i-consider ang RR 4-2026 abatement bago mag-December 31, 2026, dahil may PAN na siya as of December 31, 2025. What could change this: no LOA, a FAN without the law and facts, or prescription.
Your options and what to do next
If you received a Notice of Discrepancy or a PAN
Answer in writing at the issuing office within 30 days (NOD) or 15 days (PAN), with documents. A missed PAN reply does not end your right to protest the FAN.
If you received a FLD/FAN
Protest within 30 days of receipt, choosing reconsideration or reinvestigation. Bring the FAN, returns, books, invoices, withholding certificates and proof of receipt dates. Raise prescription, a missing LOA or missing facts and law in the protest.
If the protest is denied or not decided
Appeal to the CTA within 30 days, or, for inaction, wait for the decision. Engage a tax lawyer or CPA early.
If you agree with the findings or cannot pay
Pay the uncontested amount to stop interest, or seek a Section 204 compromise or the RR 4-2026 abatement. A final assessment can be enforced by warrants of distraint and levy, served under RR No. 12-2025.
Where to get help
- BIR: your Revenue District Office (on your notice and registration), or (02) 8538-3200 and contact_us@bir.gov.ph, as listed on the BIR website (checked November 11, 2026).
- Court of Tax Appeals: National Government Center, Senator Miriam P. Defensor-Santiago Avenue, North Triangle, Diliman, Quezon City 1104 (directions); trunk lines 8920-2303, 8920-3909, 8920-4239 and 8920-4249, per the CTA website (checked November 11, 2026). Fees and e-filing rules were not verified; ask the CTA.
- Professional help: a CPA or tax lawyer; we could not verify a free legal-aid route for tax cases.
See how Philippine income tax works, the invoicing rules audits check, and more tax questions answered.
Key takeaways
- Deadlines run from receipt: 30 days (NOD), 15 days (PAN), 30 days to protest the FAN.
- No LOA, or no written law and facts, means a void assessment.
- Reinvestigation: all documents within 60 days.
- No decision in 180 days: appeal within 30 days, or wait.
- The BIR has 3 years to assess (10 for fraud or no return) and 5 years to collect.
- Micro and small taxpayers pay 10% surcharge and 6% interest; micro abatement ends December 31, 2026.
Frequently asked questions
What is the difference between a PAN and a FAN?
A Preliminary Assessment Notice proposes an assessment and gives you 15 days from receipt to reply. The FLD/FAN is the assessment itself; you have 30 days from receipt to protest it (Section 228, RR 18-2013).
Can I still protest if I missed the 15-day PAN reply?
Yes. Missing the PAN reply puts you in default and the BIR issues the FLD/FAN, but you still have 30 days from its receipt to file a protest.
Is an assessment valid without a Letter of Authority?
No. In Medicard Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017, an assessment made without a Letter of Authority was declared void.
Should I sign a waiver of the statute of limitations?
Only after reading it closely. A waiver signed before the three-year period ends extends it to the agreed date (Section 222(b)); a defective waiver does not, as held in CIR v. Kudos Metal Corporation, G.R. No. 178087.
What if the BIR does not decide my protest within 180 days?
Appeal to the Court of Tax Appeals within 30 days after the 180 days end, or wait for the decision and appeal within 30 days of receiving it. Choosing one bars the other.
Does an appeal to the Court of Tax Appeals stop BIR collection?
Not automatically. The CTA may suspend collection and require a deposit or a surety bond of up to double the amount (RA 1125, Section 11, as amended by RA 9282).
Ano ang mangyayari kung hindi ako nag-protest sa FAN within 30 days?
Magiging final, executory and demandable ang assessment. Hindi ka na puwedeng mag-request ng reconsideration o reinvestigation, at puwede nang mag-collect ang BIR, kasama ang warrant of distraint and levy.
Pwede bang i-compromise ang tax assessment kung wala talaga akong pambayad?
Oo, sa ilalim ng Section 204(A). Ang minimum ay 10% ng basic assessed tax kung financial incapacity, at kailangan ng Evaluation Board approval kung lampas ₱1,000,000 ang basic tax.
Micro taxpayer ako, mas mababa ba ang penalty ko?
Oo. Sa RR 6-2024, 10% ang surcharge imbes na 25%, at 6% ang interest imbes na 12%. Pero 50% pa rin ang surcharge kung may willful neglect o fraudulent return.
Unsa ang buhaton nako kung nakadawat ko og Notice of Discrepancy gikan sa BIR?
Isulat dayon ang petsa nga nadawat nimo. Ubos sa RR 22-2020, aduna kay 30 ka adlaw aron ipasabot ang imong kiliran ug isumite ang mga dokumento sa dili pa ipadala ang kaso para sa PAN.
Sources
- NIRC of 1997 (RA 8424), Sections 6(A), 13, 203, 204, 222, 223, 228, 248, 249 and 250.
- RA 10963 (TRAIN), Section 75 (Section 249 interest).
- RA 11976 (Ease of Paying Taxes Act), Sections 3 (Section 21(B)), 41 (Section 248) and 45.
- RA 9282, Section 9 (Section 11 of RA 1125).
- BIR RR No. 18-2013, RR No. 7-2018 and RR No. 22-2020, amending RR No. 12-99.
- BIR RR No. 6-2024, RR No. 4-2026 and RR No. 12-2025.
- Medicard Philippines, Inc. v. CIR, G.R. No. 222743, April 5, 2017; CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010.
- Lascona Land Co., Inc. v. CIR, G.R. No. 171251, March 5, 2012; CIR v. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010; Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013.
Sources rechecked as of: November 11, 2026
This guide is general information about Philippine tax law, not tax or legal advice for your situation; see our legal disclaimer.
Last correction: November 11, 2026. Added Article and FAQPage structured data that matches the ten visible FAQs; the guide’s text is unchanged. Checked: RR No. 4-2026 (BIR digest: ₱80,000 threshold per taxable year, ₱5,000 fee on Form 0605 within five working days, availment until December 31, 2026); and the fictional example’s dates.
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