BIR Revenue Officer Replaced During an Audit? The New Officer Needs a New LOA
Yes.
When a BIR audit is reassigned, the new revenue officer needs a new or amended Letter of Authority (LOA) that names him or her. A memorandum of assignment or referral memorandum signed by a revenue district officer or another subordinate official is not enough. The Supreme Court ruled that an audit continued by an officer who is not named in the LOA is unauthorized, and the assessment that comes from it is void (Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp., G.R. No. 242670, May 10, 2021).
Read the full text: Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp., G.R. No. 242670, May 10, 2021 (Third Division)
Does a new BIR revenue officer need a new LOA?
Yes.
An LOA is the authority given to named revenue officers to examine the books of one taxpayer for a stated period. It is not a general pass that any BIR officer may use. Under Sections 6(A), 10(c) and 13 of the Tax Code, only the Commissioner of Internal Revenue or his duly authorized representative may grant that authority. Our guide on the BIR Letter of Authority (LOA) explains what a valid LOA must show.
BIR rules say the same thing. Revenue Memorandum Order (RMO) No. 43-90 requires a new LOA for any reassignment or transfer of a case to another revenue officer. The Supreme Court held that this rule is consistent with the Tax Code and remains in force.
What happened in the McDonald's case?
The BIR issued an LOA dated August 31, 2007 to examine the taxpayer's books for taxable year 2006. The LOA named the revenue officers assigned.
In December 2008, one of those officers was reassigned. A referral memorandum directed a different revenue officer to continue the audit under the existing LOA.
No new LOA was issued, and the old one was not amended to add her name.
The BIR later issued a formal letter of demand. After the taxpayer's protest, a deficiency VAT assessment of ₱16,229,506.83 remained.
The Court of Tax Appeals (CTA) Division declared the assessment void because the officer who continued the audit had no LOA. The CTA En Banc agreed.
The Supreme Court denied the Commissioner's petition and affirmed the CTA.
Why is a memorandum of assignment not enough?
The Court gave three reasons:
Due process. The LOA must name the officers so the taxpayer can check that the people asking for its records have authority. The Court treated the naming of the authorized officers in the LOA as a jurisdictional requirement of a valid audit and assessment.
Only the Commissioner or his authorized representative can grant the authority. A memorandum of assignment or referral memorandum is signed by a revenue district officer or another subordinate official. It tells the taxpayer that the case was reassigned. It does not give the new officer the power to examine.
The BIR's own rules require it. RMO No. 43-90 calls for a new LOA when a case is reassigned.
The Court relied on its earlier ruling that an assessment issued without authority to examine the taxpayer is void (Medicard Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017).
Who may sign an LOA?
As the Court read RMO No. 43-90, only Regional Directors, Deputy Commissioners and the Commissioner may issue and sign LOAs. Other officials may do so only with the Commissioner's prior authorization.
Has the Supreme Court applied the rule again?
Yes.
Four days later, in Himlayang Pilipino Plans, Inc. v. Commissioner of Internal Revenue, G.R. No. 241848, May 14, 2021, the LOA for taxable year 2009 named one revenue officer, but another officer did the audit under a memorandum of assignment signed by the revenue district officer. The Court declared the formal letter of demand and the assessment notices, which totalled ₱11,793,573.91, unauthorized. It took up the issue even though the taxpayer raised it late in the CTA, because lack of authority goes to the validity of the assessment itself.
What do the 2026 BIR rules say about replacement LOAs?
The BIR now issues electronic LOAs (eLAs). Under Revenue Memorandum Order (RMO) No. 22-2026, issued in August 2026, a Replacement eLA is issued when the original revenue officer or group supervisor can no longer continue the audit because of transfer, retirement, resignation, leave, absence or similar reasons, as long as the period to assess has not lapsed. The head of the investigating office must serve it on the taxpayer with a letter notice that gives the serial number and date of the original eLA and says that the original is cancelled.
A Replacement eLA is not a new or separate audit authority, and it cannot expand or alter the original scope, taxable period or tax types. Under Revenue Memorandum Circular (RMC) No. 14-2026, a letter from the taxpayer questioning a Replacement eLA does not suspend the audit.
For taxpayers, the point is practical. When a case is reassigned, ask for the Replacement eLA and the letter notice that should come with it. Our post on whether the BIR can audit the same year twice explains replacement and consolidated eLAs.
What should you do when a new officer takes over your audit?
Ask for the LOA or Replacement eLA that names the new officer. Compare the names with your copy of the original LOA.
Verify the document with the BIR before you rely on it.
Keep a record of the date the new officer took over and of every request, notice or report the officer signed.
If no new LOA or Replacement eLA is shown, say so in writing and reserve your objection. Refusing to cooperate outright is risky, so keep answering the BIR while you object.
Raise the defect again in your reply to the Preliminary Assessment Notice, in your protest to the Final Assessment Notice, and before the CTA if the case gets there.
Frequently asked questions
Does a defective LOA cancel my tax liability for good?
It voids the assessment that came from the unauthorized audit. It does not decide whether tax is actually due. Whether the BIR can still issue a new assessment depends on how far back the BIR can assess.
Is a memorandum of assignment useless?
No.
It tells you that your case was reassigned and to whom. But it is notice only. It is not proof that the new officer has authority to examine your books.
Can I raise the missing LOA late in the case?
The Supreme Court considered it in Himlayang Pilipino Plans even though it was first raised in a motion for reconsideration before the CTA En Banc. Do not rely on that. Raise it in writing as early as you can.
Sources
Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp., G.R. No. 242670, May 10, 2021 (Third Division)
Himlayang Pilipino Plans, Inc. v. Commissioner of Internal Revenue, G.R. No. 241848, May 14, 2021 (First Division)
Medicard Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017 (Third Division)
National Internal Revenue Code of 1997, as amended, Sections 6(A), 10(c) and 13
Revenue Memorandum Order No. 43-90, September 20, 1990 (Bureau of Internal Revenue)
Revenue Memorandum Order No. 22-2026, August 2026 (Bureau of Internal Revenue)
Revenue Memorandum Circular No. 14-2026, March 4, 2026 (Bureau of Internal Revenue)
Facing a BIR audit, assessment or tax dispute?
Aureada CPA Law Firm's CPA-lawyers handle BIR audits, assessment protests, refund claims and Court of Tax Appeals cases from our Makati and Lucena offices. See our tax services.
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This article is general information as of its publication date, not legal advice, and does not create a lawyer-client relationship. For advice on your situation, consult a lawyer.
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