In the complex landscape of taxation, ensuring a just process is crucial. Procedural Due Process stands as a cornerstone, safeguarding taxpayers' rights during assessments. This blog post navigates the key stages of Procedural Due Process in Tax Assessment, shedding light on each step of the journey.
Issuance of a Letter of Authority (LOA): Embark on the journey with the issuance of a Letter of Authority (LOA). This official document grants the Bureau of Internal Revenue (BIR) the power to scrutinize a taxpayer's records. Transparency at this stage is vital for establishing the legitimacy of the tax assessment process.
Tax Audit or Investigation: With the LOA in hand, tax authorities conduct a meticulous Tax Audit or Investigation. Transparency, cooperation, and accurate record-keeping become paramount for a smooth and fair audit process, ensuring compliance with tax laws.
Issuance of Notice of Informal Conference (NIC) / Notice of Discrepancy (NOD): Following RR 7-2018 and RR No. 22-2020, tax authorities may issue a Notice of Informal Conference (NIC) or a Notice of Discrepancy (NOD). These notices provide an opportunity for the taxpayer to discuss and clarify perceived discrepancies, fostering open communication and resolving potential misunderstandings.
Issuance of Preliminary Assessment Notice (PAN): The Preliminary Assessment Notice (PAN) formally communicates initial findings, detailing assessed deficiencies and providing the taxpayer a chance to respond. Two-way communication is crucial, allowing the taxpayer to present counterarguments or provide additional documentation.
Issuance of Final Assessment Notice (FAN) or Formal Letter of Demand (FLD): Post-PAN, tax authorities issue the Final Assessment Notice (FAN) or a Formal Letter of Demand (FLD). This critical juncture informs the taxpayer of the final assessment. Transparency and clarity in detailing the basis for the assessment are essential, representing the last opportunity for the taxpayer to contest before formal legal proceedings.
Administrative Action / Inaction on Disputed Matters: In case of a dispute, the taxpayer may take administrative action, filing appeals, requesting reconsideration, or seeking alternative dispute resolution mechanisms. Timely actions from tax authorities ensure a fair and prompt resolution.
ASSESSMENT PROCEEDINGS FLOWCHART
NOTICE OF DISCREPANCY FLOWCHART
Procedural Due Process in Tax Assessment is a precision dance requiring transparency and open communication. Effectively navigating this process is crucial for both tax authorities and taxpayers to uphold fairness and justice. As we traverse each stage, remember that a well-defined and transparent procedural framework fosters trust, contributing to an effective and equitable tax system.
As a seasoned CPA lawyer with a deep understanding of tax intricacies, Atty. Aureada bring expertise honed through a decade of navigating complex legal landscapes. For personalized and comprehensive legal guidance tailored to your needs, reach out to Atty. Yasser Aureada, CPA at yaureada@aureadacpalawfirm.com or contact him at 09359071258.
Disclaimer: This article offers general conceptual guidance and does not replace expert advice. Consult a tax or legal professional for specific details relevant to your situation.
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