Taxpayers’ Christmas wish list for clarity on audits

This holiday season brings us more than gifts and surprises — it delivers a pause in Bureau of Internal Revenue (BIR) field audits and sparks hope for a tax system that’s clearer, smarter, and better for everyone.

On Nov. 24, the BIR issued Revenue Memorandum Circular (RMC) No. 107-2025 suspending all ongoing field audits and related field operations, including the issuance of Letters of Authority (LoAs), Mission Orders (MOs), and the examination and verification of taxpayers’ books of account, records, and other related transactions except for cases explicitly covered by the exceptions outlined in Section IV of the RMC. The suspension will stay in effect until the CIR issues an order lifting it.

While many taxpayers welcomed this as an early Christmas gift, questions quickly arose regarding the scope of the suspension and its exceptions. To clarify, the BIR released RMC No. 109-2025 on Dec. 12, providing detailed guidance.

ACTIVITIES COVERED BY THE SUSPENSION
The suspension applies to:

• Field activities under an LoA or MO involving contact or face-to-face meetings with taxpayers and on-site visits to taxpayers’ premises such as examining books, verifying records, and conducting audit-related onsite visits;

• Issuance of Subpoena Duces Tecum (SDT) related to audits or investigations except for cases under the stated exceptions;

• Conduct of Tax Mapping/Tax Compliance Verification Drive (TCVD), which involves verifying taxpayer compliance with basic administrative regulations and collecting data for potential LoA issuance.

EXCEPTIONS TO THE SUSPENSION
Certain activities remain active, including:

• Cases prescribing within six months from Nov. 24, including audits under an LoA covering multiple tax types where one is close to prescription;

• Processing and verification of estate tax returns, donor’s tax returns, capital gains tax returns, and withholding tax returns on the sale of real properties or shares of stock, together with the documentary stamp tax returns related thereto classified as ONETT cases;

• Requests for tax clearance from taxpayers due to retirement or business closure involving gross sales or receipts exceeding P1,000,000.00 or gross assets exceeding P3,000,000.00, requiring mandatory audits to confirm outstanding liabilities and ensure all obligations are settled before issuing a tax clearance;

• LoAs or MOs necessary for active criminal probes conducted by duly authorized enforcement units through verified intelligence reports, inter-agency referrals, third-party data validation, or risk-scoring anomalies, requiring immediate audit action because of potential tax fraud;

• Claims for refund or Tax Credit Certificate (TCC) applications where the issuance of an LoA is required by law — such as for Income Tax, VAT, and Excise Tax — ensuring compliance with statutory reporting deadlines under the Tax Code, as amended;

• Other matters or concerns where deadlines have been imposed by law — excluding those mandated by administrative orders — as well as deadlines under the orders of the Commissioner.

ACTIVITIES THAT CONTINUE
In addition to the above exceptions, the BIR clarified that the following activities may continue and are not covered by the suspension:

• Responses to issued assessment notices served before the suspension, allowing taxpayers to pay deficiency taxes, file a reply or protest within the statutory deadline, or submit supporting documents for reinvestigation;

• Payments from settlements or agreements finalized before the suspension, proceeding without further approval provided they are supported by an Agreement Form (QF-06-01-2024) signed by the relevant BIR officers and the taxpayer or authorized representative prior to the effectivity of the RMC;

• Collection letters, warrants of distraint or levy, warrants of garnishment, seizure notices, and similar correspondences for enforcing the collection of delinquent accounts, including letters sent to third parties such as the LRA, Register of Deeds, or Local Assessor to verify property holdings of delinquent taxpayers, as these are part of the collection process after audits are finalized and are considered receivable accounts of the BIR — not part of the audit itself;

• Sending or serving reminder letters for open stop-filer cases and follow-ups for required schedules such as SLS, SLSPL, alphalist, and inventory list, ensuring compliance with filing and reporting requirements;

• Voluntary settlements of known deficiency taxes during the suspension by filing a Revenue Settlement Form and paying the agreed amount, with any payment schedule agreed upon before the suspension continuing without further approval.

The BIR’s audit suspension is a welcome breather for taxpayers — but it is not a blanket freeze. The suspension applies only to field operations. Taxpayers still need to file returns, pay taxes due, and follow regular compliance schedules. Understanding these nuances ensures that taxpayers stay on the nice list and avoid surprises in the new year.

TAXPAYERS’ EXPECTATIONS POST-SUSPENSION
Taxpayers are looking forward to measures that will make audits more efficient, transparent, and balanced. Many hope for a more risk-based approach, where audit efforts focus on areas or profiles that present higher compliance risks.  At present, some taxpayers have experienced receiving multiple LoAs in close succession, creating operational challenges. Beyond managing audits, taxpayers also need sufficient time to review and improve their internal systems, processes, and controls based on observations from previous audits. A risk-based approach would help ensure that resources are used effectively and minimize unnecessary disruption for those with a strong compliance record. This could also help streamline audit processes, allow taxpayers the breathing room to strengthen compliance, and reduce these repetitive instances.

Taxpayers also value clarity and consistency in audit findings. There is a growing expectation for assessments to be well-supported and aligned with applicable tax rules and regulations, avoiding figures that may appear excessive. Strengthening internal review and validation processes can help ensure accuracy and fairness, fostering greater confidence in the audit system. These improvements would not only ease compliance but also promote a more collaborative relationship between taxpayers and the BIR moving forward.

As we step into the new year, clarity and collaboration remain key to a stronger tax environment. The audit suspension offers a timely pause, but it also opens the door for meaningful improvements in audit processes — balancing enforcement with fairness and efficiency. By embracing risk-based strategies and reinforcing quality controls, the BIR can continue to build trust and transparency, while taxpayers can look forward to a system that supports compliance without unnecessary strain. After all, the best gift for both sides is a tax framework that works better for everyone.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Via Marie Angela M. Valdez is an associate from the Tax Advisory & Compliance practice area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

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