Facing a BIR Notice of Discrepancy? Here’s Your Essential Guide

Yasser Aureada
Sep 2
2 min read

Updated: Sep 3

Introduction

Receiving a Notice of Discrepancy (NOD) from the Bureau of Internal Revenue (BIR) may sound alarming, but it doesn’t mean you already owe additional taxes. Instead, it’s an early warning stage in the BIR audit process—giving you the chance to respond before a formal tax assessment is made.

What is a Notice of Discrepancy?

A Notice of Discrepancy, introduced under Revenue Regulations No. 22-2020, informs taxpayers of possible issues in their filings, such as undeclared income or mismatched VAT reports.

Key Point: The NOD is not a tax bill. It gives you the right to explain and present documents before the BIR issues an assessment.

Common Reasons You Might Receive an NOD

Undeclared or underreported income
Unsupported or disallowed expenses
Differences between VAT returns and sales invoices
Non-filing or late filing of returns
Third-party mismatches (e.g., 2307s, bank data)

How to Respond to an NOD

Act Fast – You have 5 days to attend the discussion and 30 days to submit documents.
Review Carefully – Understand each discrepancy listed.
Prepare Proof – Gather receipts, ledgers, bank records, and contracts.
Attend the Meeting – Be clear and professional in explaining your side.
Consider Settlement – Paying early (if valid) avoids penalties and interest.
Get Expert Help – A CPA or tax lawyer strengthens your defense.

Example Case

ABC Trading declared ₱10M in sales, but BIR found ₱12M. After the NOD discussion, ₱1.5M was clarified as a timing issue, while ₱500k was admitted as unreported. By paying tax only on ₱500k at the NOD stage, ABC avoided a costly assessment.

Key Takeaways

An NOD is a warning, not a demand.
Deadlines matter—missing them leads to higher penalties.
Early resolution saves money and stress.
Proper record-keeping reduces audit risks.

Conclusion

A Notice of Discrepancy is an opportunity to clear up issues before they escalate into a full-blown tax assessment. With timely action and the right guidance, you can protect your business, avoid unnecessary penalties, and stay compliant.

Need Help With a BIR Notice of Discrepancy?

Our CPA-law firm specializes in tax audits and BIR assessments. If you’ve received an NOD or want to prepare your business for possible audits, contact us today.

Contact us today for a consultation.

Tel: (02) 3224 5601

Mobile: +63-935-907-1258

Email: info@aureadalaw.com