TAXWISE OR OTHERWISE

n late 2025, amid growing concerns about corruption allegations against certain government agencies, the attention shifted to the Bureau of Internal Revenue (BIR), as several Senators expressed serious concerns regarding its use of Letters of Authority (LoAs) and Mission Orders (MOs). Complaints from business groups and taxpayers prompted the Senate Blue Ribbon Committee to open a formal investigation into the alleged misuse and “weaponization” of LoAs by BIR per-sonnel as a “money-making scheme.”

In response to mounting public outcry, Finance Secretary Frederick D. Go and newly appointed BIR Commissioner Charlito Martin R. Mendoza announced on Nov. 24 the immediate suspension of all filed audits and related activi-ties of the BIR. The halt, which covers the issuance of LoAs and MOs, as well as the examination and verification of taxpayers’ books of account and records, was formalized through Revenue Memorandum Circular (RMC) No. 107-2025.

I hope that the suspension provided taxpayers with much-needed temporary relief, allowing them to move through the 2025 holiday season without scrambling to meet deadlines or retrieving boxes of documents to respond to BIR assess-ments. I also hope it offered them peace of mind, knowing they would not have to brace for a new BIR letter initiating an audit of their books for yet another taxable period.

However, it is noteworthy that the suspension of the audit and other field operations of the BIR is not absolute and not without exceptions. Naturally, this has given rise to a host of questions following the release of RMC 107-2025.

Taxpayers have been asking which specific cases are actually covered by the suspension and how the BIR intends to handle cases where only certain tax periods or particular tax types are set to prescribe within six months from the RMC’s effectivity (i.e., from Nov. 24, 2025, or until May 24, 2026). There is also lingering uncertainty on whether waivers of the defense of prescription executed before the issuance of the RMC will still be honored, and whether the BIR will still accept new waivers even after the suspension took effect.

Questions have likewise surfaced on whether the issuance of a subpoena duces tecum (SDT) falls within the scope of the suspension. Equally pressing are the concerns of taxpayers whose cases are supposedly covered by the suspension but are already willing to settle at the early stages of the audit. Will the BIR issue any formal notice or documentation to support the closure of these cases, such as a Final Decision on Disputed Assessment, despite the temporary halt in audit operations? And finally, how long will this suspension last?

Fortunately, some of these concerns were addressed by the BIR in RMC No. 109-2025.

Under this RMC, the BIR reiterated that it can assess deficiency taxes within three years from the deadline for filing the return, or from the actual date of filing, whichever is later. Thus, for cases prescribing within six months from Nov. 24, the audit and investigation activities of the BIR will continue. To protect the government’s right to assess within the three-year period, LoAs covering different tax types, where at least one tax type is prescribing on or before May 24, may also proceed. This means that for cases involving all internal revenue taxes for the year ended Dec. 31, 2023, considering that the withholding tax on compensation returns from January to April 2023, first quarter VAT returns and expanded and final withholding tax returns will prescribe before May 24, 2026, the BIR examiners are allowed to resume their investigations.

As to the covered BIR activities, the RMC clarified that the suspension includes the issuance of SDTs, except for those falling under the exceptions provided, as well as tax mapping/tax compliance verification drive (TCVD). The suspension covers the service of assessment notices up to the Final Decision on Disputed Assessment.

However, it was emphasized that issuance of Collection Letters, Seizure Notices, and similar correspondences for enforcing collection of delinquent accounts are not suspended as these are already considered final and receivable accounts of the BIR.

However, several key questions remain unanswered. The RMC does not provide guidance on whether previously executed waivers will be honored, and whether new waivers may still be accepted during the suspension period. There are differ-ing interpretations on this among BIR offices.

Additionally, while the RMC mentions that taxpayers who have already agreed to settle the deficiency taxes prior to the suspension may proceed with the payment without requiring approval, taxpayers understandably seek assurance that a formal notice or letter will be issued, aside from the Agreement Form, to properly document the closure of the case. Unfortunately, this concern was not addressed.

For taxpayers wishing to settle and close their ongoing tax audit cases but are affected by the suspension, it would be beneficial for the BIR to permit continued coordination with the assigned examiners toward a possible set-tlement, and that any such resolution will still be properly documented.

The RMC reiterated that audits will remain suspended until the CIR officially issues an order lifting the suspension. I trust that the BIR will use this time to improve the overall audit framework to ensure a more transparent and standardized process, and not merely to address the concerns on the issuance of multiple LoAs and MOs.

RMCs 107 and 109-2025 mark an important first step by the BIR toward addressing long-standing concerns and operational challenges. This move signals its willingness to listen and adapt, laying out the groundwork for an audit system that values consistency, transparency, and respect for taxpayers’ rights across all BIR offices.

As we wait for further guidance from the BIR, the hope is that this suspension is more than a temporary pause, but a true turning point. If the BIR can leverage this period to rebuild the framework so that the audit program is clear, fair, and consistently applied, the benefits will extend beyond the assessment process. It will also strengthen trust in our government, improve voluntary tax compliance, and create a more stable environment for businesses and individuals seeking a fair and reliable system.

To achieve this, the BIR could consider engaging with stakeholders across various industries, seeking input from private tax and legal experts, and taking inspiration from best practices used by international tax authorities. These collaborative efforts will ensure that any reforms are practical, inclusive, and aligned with economic realities of business. In the long run, a clearer and more accountable tax audit framework is not only beneficial but also essential to building a healthier tax environment for the country.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Angelika Valmonte is a manager in the Tax Services group of Isla Lipana & Co., the Philippine member firm of the PwC global network.

+63 (2) 8845-2728
valmonte.angelika@pwc.com