If you received a BIR Letter of Authority or a Notice of Discrepancy, the most important thing to understand is this: an LOA starts or authorizes the audit, while a Notice of Discrepancy tells you what the BIR found during that audit and gives you a chance to explain before a formal assessment is issued. They are not the same document, they come at different stages, and they require different responses.

Quick Answer: What Is the Difference Between an LOA and a Notice of Discrepancy?

Document	Simple meaning	When it appears	What you should do
Letter of Authority (LOA/eLA)	The BIR’s authority for named revenue officers to examine your books and records	Usually at the start of a tax audit	Check if it is valid, note the covered taxable period, verify the named officers, organize records
Notice of Discrepancy (NOD/ND)	The BIR’s written notice of preliminary discrepancies found during the audit	After the BIR has reviewed your records and found possible deficiency taxes	Reconcile the findings, prepare explanations, submit supporting documents within the allowed period

In practical terms, the LOA asks, “May these BIR officers audit you?” The Notice of Discrepancy says, “Here are the issues we found; explain or support your position before this becomes a formal assessment.”

What Is a BIR Letter of Authority?

A Letter of Authority, commonly called an LOA, is the document that gives specific BIR revenue officers the legal authority to examine a taxpayer’s books of accounts, accounting records, tax returns, invoices, receipts, schedules, and supporting documents for a particular taxable period.

Under Section 6 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 8424 and later tax laws, the Commissioner of Internal Revenue or a duly authorized representative may authorize the examination of a taxpayer and assess the correct amount of tax after a return has been filed. The Supreme Court explained in Medicard Philippines, Inc. v. Commissioner of Internal Revenue that, unless the examination is conducted by the Commissioner or a duly authorized representative, a BIR tax agent generally needs prior authority through an LOA before examining a taxpayer’s records. (Supreme Court E-Library)

Today, the BIR often refers to electronic Letters of Authority or eLAs. Revenue Memorandum Order No. 1-2026 expressly covers the issuance of electronic Letters of Authority, Mission Orders, and Tax Verification Notices as part of the BIR’s resumed and revised audit procedures following the audit suspension under RMC No. 107-2025.

A valid LOA normally tells you:

the taxpayer being audited;
the taxable year or taxable period covered;
the internal revenue tax types involved, if specified;
the names of the revenue officers and group supervisor assigned;
the BIR office handling the audit, such as the Revenue District Office, Regional Investigation Division, or Large Taxpayers office;
the LOA or eLA number and date of issue.

This matters because the LOA is not just a formality. In Medicard, the Supreme Court held that an LOA empowers the appropriate revenue officer to examine books and records for the purpose of collecting the correct amount of tax. (Supreme Court E-Library)

What Is a Notice of Discrepancy?

A Notice of Discrepancy, often shortened to NOD or ND, is the BIR’s written notice informing the taxpayer of discrepancies found during the audit or investigation.

Revenue Regulations No. 22-2020 amended the tax assessment due process rules by requiring the preparation of a Notice of Discrepancy instead of the old Notice of Informal Conference. The regulation states that if a taxpayer is found liable for deficiency taxes during an investigation by a Revenue Officer, the taxpayer must be informed through a Notice of Discrepancy so the taxpayer can present and explain his or her side.

The NOD is important, but it is not yet the final tax assessment. It is a due process step before the BIR proceeds to a Preliminary Assessment Notice (PAN).

Revenue Memorandum Circular No. 102-2020 prescribed the revised format for the Notice of Discrepancy to give taxpayers an opportunity to present and explain their side on discrepancies found during the audit or investigation.

LOA vs Notice of Discrepancy: The Legal Difference

The difference is best understood by looking at the tax audit timeline.

1. The LOA gives authority to audit

The LOA is the legal basis for the BIR officers’ examination of your books. Without a valid LOA, or if the audit is conducted by officers not properly authorized, the resulting assessment may be challenged for lack of authority and violation of due process.

In Commissioner of Internal Revenue v. McDonald’s Philippines Realty Corporation, the Supreme Court said that identifying the revenue officers in the LOA is a jurisdictional requirement of a valid BIR audit or investigation. The Court also said that a memorandum of assignment or referral memorandum is not a substitute for an LOA because an LOA is a special authority granted to particular revenue officers, not a general authority for “any” officer to audit. (Supreme Court E-Library)

2. The Notice of Discrepancy gives you a chance to answer findings

The Notice of Discrepancy does not authorize the audit. It comes after the audit has already produced initial findings.

Under RR No. 22-2020, the Discussion of Discrepancy must not extend beyond 30 days from receipt of the Notice of Discrepancy. During this period, the taxpayer may explain the discrepancy and submit supporting documents.

If the taxpayer still disagrees with the findings, documents must be submitted during the discussion or within 30 days from receipt of the Notice of Discrepancy. If the issues remain unresolved, the BIR may endorse the case for issuance of a Preliminary Assessment Notice within 10 days from the conclusion of the discussion.

Why the Difference Matters in Real Life

Many taxpayers panic when they receive any BIR letter. But your response should depend on which document you received.

If you received an LOA

Your first concern is authority and scope.

Check:

Is your name, business name, or corporation correctly stated?
Is the taxable year or period clear?
Are the revenue officers who contacted you named in the LOA?
Is the BIR asking for records outside the period covered?
Has the case been transferred to new officers without a new or amended LOA?
Are the requested documents connected to the covered tax types and period?

The Supreme Court has cancelled assessments where BIR officers exceeded the scope of the LOA. In CIR v. Lancaster Philippines, Inc., the Court held that the audit process normally starts with an LOA, which gives notice that the taxpayer is under investigation and authorizes designated officers to examine records for a particular period. The Court agreed that the officers exceeded their authority when the assessment involved a period outside the LOA’s coverage. (Supreme Court E-Library)

If you received a Notice of Discrepancy

Your first concern is substance and proof.

Check:

What taxes are being questioned: income tax, VAT, percentage tax, withholding tax, documentary stamp tax, or others?
What is the exact discrepancy: undeclared sales, unsupported expenses, VAT mismatch, withholding tax deficiency, third-party information mismatch, inventory variance, or late remittance?
What documents support your position?
Can the discrepancy be reconciled through schedules and explanations?
Are there computational errors, wrong assumptions, or duplicated amounts?
Are some findings based on transactions outside the taxable period covered by the LOA?

Do not treat the NOD as a final bill. It is your chance to reduce, explain, or eliminate findings before the BIR escalates the case to a PAN.

Usual BIR Audit Flow: From LOA to Final Assessment

A typical BIR deficiency tax audit may proceed this way:

Issuance and service of LOA or eLA The BIR authorizes named officers to audit the taxpayer for a specific period.
Submission of books and records The taxpayer submits requested documents, usually through the assigned Revenue Officer or BIR office. Always keep receiving copies, transmittal letters, and stamped acknowledgments.
BIR examination and reconciliation The Revenue Officer reviews returns, books, invoices, withholding tax records, VAT schedules, alphalists, third-party data, and other documents.
Notice of Discrepancy If discrepancies are found, the BIR issues an NOD and schedules a Discussion of Discrepancy.
Discussion of Discrepancy and document submission The taxpayer explains, reconciles, and submits support. The discussion period must not go beyond 30 days from receipt of the NOD under RR No. 22-2020.
Preliminary Assessment Notice If unresolved, the BIR may issue a PAN. Under RR No. 18-2013, if the taxpayer fails to respond to the PAN within 15 days from receipt, the taxpayer is considered in default and the BIR may issue a Formal Letter of Demand and Final Assessment Notice. (Bir Cdn)
Formal Letter of Demand / Final Assessment Notice The FLD/FAN is the formal assessment. It must state the facts, law, rules, regulations, or jurisprudence on which it is based; otherwise, the assessment is void. (Bir Cdn)
Administrative protest A taxpayer may protest the FLD/FAN within 30 days from receipt. For a request for reinvestigation, supporting documents must be submitted within 60 days from filing the protest. (Supreme Court E-Library)
Final Decision on Disputed Assessment or appeal Depending on the BIR action or inaction, the taxpayer may have remedies before the Commissioner or the Court of Tax Appeals. The CTA’s jurisdiction includes disputed assessments and other matters arising under the NIRC or laws administered by the BIR. (Supreme Court E-Library)

Practical Checklist: What to Do When You Receive an LOA

Step 1: Record the date of receipt

Deadlines are often counted from receipt. Write down:

date and time received;
name of the person who received it;
mode of service;
name of the BIR officer who served it;
documents attached.

Step 2: Verify the LOA details

Do not focus only on the amount of potential exposure. At the LOA stage, the key issue is whether the audit is properly authorized.

Look for:

LOA or eLA number;
issuing official;
taxpayer name and TIN;
taxable year or period;
tax types covered;
names of revenue officers;
BIR office handling the audit.

Step 3: Match the officers

If Officer A and Officer B are named in the LOA, but Officer C is conducting the audit, ask for the legal authority of Officer C. In McDonald’s Philippines Realty, the Supreme Court ruled that reassignment or substitution of officers requires a separate or amended LOA; a mere internal memorandum is not enough. (Supreme Court E-Library)

Step 4: Create a document control file

Prepare one folder, physical or digital, for:

LOA/eLA;
BIR document requests;
transmittal letters;
stamped receiving copies;
emails and meeting notes;
submitted schedules;
copies of books and tax returns;
minutes or summaries of meetings.

Step 5: Submit only organized, relevant records

Avoid dumping disorganized records. A clear reconciliation schedule often helps more than boxes of documents without explanation.

Practical Checklist: What to Do When You Receive a Notice of Discrepancy

Step 1: Do not ignore the NOD

The NOD is not final, but ignoring it can make the BIR’s initial findings harder to reverse. Failure to address discrepancies may lead to a PAN.

Step 2: Ask for the details of discrepancy

The NOD should identify the discrepancies. If the explanation is too broad, request the working schedules or details needed to understand the finding.

Common NOD issues include:

sales per VAT returns do not match income tax returns;
sales per third-party information exceed declared sales;
purchases are unsupported by invoices or receipts;
expenses are not properly substantiated;
withholding taxes were not withheld or remitted;
VAT input tax was claimed without valid invoices;
compensation or expanded withholding tax alphalists do not match returns;
related-party transactions lack documentation;
inventory movements do not match cost of sales.

Step 3: Prepare reconciliations, not just explanations

A good response usually includes:

a written explanation;
summary reconciliation table;
supporting schedules;
copies of tax returns;
invoices, receipts, contracts, official receipts, billing statements, bank records, and ledgers;
proof of withholding tax remittance;
proof of tax payments;
accounting entries showing timing differences.

Step 4: Watch the 30-day discussion window

RR No. 22-2020 states that the Discussion of Discrepancy must not extend beyond 30 days from receipt of the NOD. If you need more time to gather documents, make the request in writing and still work within the 30-day framework.

Step 5: Avoid careless admissions

During discussions, be factual and careful. It is fine to clarify, reconcile, and explain. But avoid casually admitting liability before reviewing the documents, computations, legal basis, and period covered.

Documents Commonly Needed in LOA and NOD Responses

Category	Examples
Registration	BIR Certificate of Registration, ATP, books registration, registered business address documents
Tax returns	Income tax returns, VAT or percentage tax returns, withholding tax returns, documentary stamp tax returns
Financial records	Audited financial statements, trial balance, general ledger, subsidiary ledgers, bank reconciliations
Sales support	Sales invoices, official receipts, billing statements, contracts, POS reports, sales journals
Purchases and expenses	Supplier invoices, receipts, proof of payment, contracts, purchase orders, delivery receipts
VAT documents	Input VAT schedules, output VAT schedules, VAT relief files where applicable, importation documents
Withholding tax	BIR Forms 1601, 1604, alphalists, certificates of tax withheld, proof of remittance
Payroll	Payroll registers, employment contracts, benefits schedules, final pay records
Foreign or cross-border support	Intercompany agreements, invoices from foreign suppliers, transfer pricing documentation, tax residency certificates, proof of remittance

For foreign documents, authentication may become important if the document will be formally relied on in proceedings or its authenticity is questioned. The DFA’s apostille system applies to documents covered by the Apostille Convention, and the DFA appointment system notes that authentication services are handled through online appointment at DFA Aseana and consular offices with authentication services. (DFA Appointment System)

Common Mistakes Taxpayers Make

Mistake 1: Thinking an LOA is already a tax bill

An LOA is not a deficiency tax assessment. It is the authority to audit. You do not protest it the same way you protest a FAN, although you may raise authority or scope issues if there are defects.

Mistake 2: Thinking a Notice of Discrepancy is final

A Notice of Discrepancy is not yet the final assessment. It is a chance to explain before the PAN stage. The best time to fix factual errors is often at the NOD stage, before numbers harden into a formal assessment.

Mistake 3: Missing the PAN and FAN deadlines

After the NOD stage, deadlines become stricter. A PAN generally gives 15 days to respond. An FLD/FAN generally gives 30 days to file a valid administrative protest. If the FAN is not protested on time, the assessment may become final, executory, and demandable. (Bir Cdn)

Mistake 4: Failing to keep proof of submission

If you submit documents without a stamped receiving copy, email acknowledgment, or transmittal record, you may later have difficulty proving what was submitted and when.

Mistake 5: Ignoring LOA defects until too late

LOA defects can be serious. Examples include an officer not named in the LOA conducting the audit, a period outside the LOA being examined, or a replacement officer continuing the audit without a new or amended LOA. The Supreme Court treated these authority issues seriously in McDonald’s Philippines Realty, Medicard, and Lancaster. (Supreme Court E-Library)

Mistake 6: Submitting explanations without numbers

A narrative letter is rarely enough. BIR findings are usually numerical. Your response should include schedules that reconcile the BIR’s figures against your returns, books, and supporting documents.

Special Notes for Foreigners and Foreign-Owned Businesses

Foreigners, foreign corporations, expats, and overseas owners can receive BIR audit documents if they are registered taxpayers, doing business in the Philippines, earning Philippine-source income, operating through a branch, or connected to a Philippine corporation.

Practical issues often arise when:

the owner or director is abroad and cannot personally attend BIR meetings;
accounting records are kept by a foreign parent company;
intercompany charges are supported by foreign invoices or agreements;
documents are in another language;
Philippine staff received the LOA or NOD but failed to alert management quickly;
the company changed address but did not update BIR registration details.

For foreign-owned companies, make sure the Philippine entity has proper authority documents for the representative dealing with the BIR, such as a board resolution, secretary’s certificate, notarized authorization, or special power of attorney where appropriate.

If documents were executed abroad, consider whether certified copies, translations, notarization, consular authentication, or apostille may be needed, especially if the dispute may later reach the Court of Tax Appeals.

Frequently Asked Questions

Is a Notice of Discrepancy the same as an LOA?

No. An LOA authorizes the BIR audit. A Notice of Discrepancy informs you of preliminary findings discovered during that audit and gives you a chance to explain before a PAN is issued.

Can the BIR issue a Notice of Discrepancy without an LOA?

In a regular audit involving examination of books and records for deficiency tax assessment, the BIR generally needs proper authority through an LOA or eLA. If there was no valid LOA, or the officer who conducted the audit was not authorized, that may affect the validity of the assessment. The Supreme Court in Medicard held that absence of an LOA violated the taxpayer’s due process rights. (Supreme Court E-Library)

Is a Notice of Discrepancy already a tax assessment?

No. A Notice of Discrepancy is not yet the final assessment. It comes before the PAN. If the discrepancy is not resolved, the BIR may proceed to issue a Preliminary Assessment Notice and later a Formal Letter of Demand / Final Assessment Notice.

How many days do I have to answer a Notice of Discrepancy?

Under RR No. 22-2020, the Discussion of Discrepancy must not extend beyond 30 days from receipt of the Notice of Discrepancy, including the submission of supporting documents. Some NOD templates may set an earlier date for the initial discussion, so act immediately upon receipt.

What happens if I ignore the Notice of Discrepancy?

If you do not explain, reconcile, or support your position, the BIR may treat the discrepancies as unresolved and endorse the case for issuance of a PAN. This can move the case closer to a formal assessment.

What should I check first when I receive an LOA?

Check the taxpayer name, TIN, taxable period, tax types, issuing office, LOA number, date, and names of the revenue officers. Also verify whether the officers asking for documents are the same officers named in the LOA.

Can a different BIR officer continue the audit if the original officer was reassigned?

Not automatically. In CIR v. McDonald’s Philippines Realty Corporation, the Supreme Court ruled that reassignment or substitution of revenue officers requires a separate or amended LOA for the substitute officer. A memorandum of assignment or referral memorandum is not enough. (Supreme Court E-Library)

Can the BIR examine years not stated in the LOA?

Generally, the BIR officers must stay within the authority granted by the LOA. In CIR v. Lancaster Philippines, Inc., the Supreme Court sustained the cancellation of an assessment where the officers exceeded the LOA’s period of examination. (Supreme Court E-Library)

What is the difference between a PAN and a Notice of Discrepancy?

The Notice of Discrepancy comes earlier and is meant for discussion and reconciliation of initial findings. A PAN is a formal preliminary assessment notice issued when the BIR believes there is sufficient basis to assess deficiency taxes after review.

What is the most important thing to do after receiving either document?

For an LOA, verify authority and scope. For a Notice of Discrepancy, focus on reconciling the findings with documents and numbers. In both cases, record the date of receipt, keep complete copies, and respond in writing with organized support.

Key Takeaways

An LOA authorizes the audit; a Notice of Discrepancy reports preliminary audit findings.
The LOA should identify the taxpayer, covered period, and authorized revenue officers.
A Notice of Discrepancy is not yet a final tax assessment, but it is a serious due process stage.
The Discussion of Discrepancy generally must be completed within 30 days from receipt of the NOD.
If unresolved, the BIR may issue a PAN, then an FLD/FAN.
FAN deadlines are stricter: a protest must generally be filed within 30 days from receipt.
LOA defects, unauthorized officers, and assessments outside the LOA period can be legally significant.
The best response is organized, written, document-backed, and deadline-conscious.