What Is a BIR Letter Notice (LN) and How Is It Different From a Letter of Authority (LOA)?

A BIR Letter Notice (LN) is an automated notification that the Bureau of Internal Revenue’s data-matching systems — RELIEF, the Tax Reconciliation System (TRS), or Third-Party Matching with the Bureau of Customs (TPM-BOC) — found a discrepancy between a taxpayer’s declared figures and information a third party reported about that taxpayer. An LN is not an audit authorization: only a Letter of Authority (LOA), naming a specific revenue officer and taxable period, gives the BIR the power to examine a taxpayer’s books and issue an assessment.

This guide is a companion to What Is a BIR Letter of Authority and What Are Your Rights During an Audit?. It covers what triggers an LN, how it legally differs from an LOA, what the Supreme Court and BIR’s own issuances say about the limits of an LN, and a worked example of how a RELIEF mismatch turns into a Letter Notice.

What triggers a BIR Letter Notice? #

A Letter Notice is generated when the BIR’s computerized third-party information (TPI) matching finds that a taxpayer’s declared sales, purchases, or income does not tie to what a counterparty, customs record, or other third-party source reported. RMO No. 13-2012 prescribes the revised guidelines for handling LNs generated through this matching and covers the income, value-added, and percentage tax liabilities of taxpayers flagged under three programs: the Reconciliation of Listing for Enforcement (RELIEF) system, which cross-matches RELIEF SLSP sales and purchase listings between counterparties; the Tax Reconciliation System (TRS); and Third-Party Matching against Bureau of Customs (TPM-BOC) import data.

Because an LN is machine-generated from a data comparison, it is issued without any revenue officer having reviewed the taxpayer’s actual books — the BIR calls this a “no-contact audit.” The LN simply tells the taxpayer that a mismatch exists and states the amount involved; it does not, by itself, mean the taxpayer’s return is wrong or that additional tax is owed.

How is a Letter Notice different from a Letter of Authority? #

An LN and an LOA look similar — both are letters from the BIR referencing a possible tax problem — but they differ in legal basis, what they authorize, and how a taxpayer should respond to each. An LOA is the only document the National Internal Revenue Code (NIRC) recognizes as granting authority to examine a taxpayer’s books; an LN is a notice of a data mismatch that exists nowhere in the NIRC itself.

For a full walkthrough of LOA validity requirements and audit rights once one is served, see What Is a BIR Letter of Authority and What Are Your Rights During an Audit?

Can the BIR assess you based on a Letter Notice alone? #

No. The Supreme Court has ruled directly on this point: an LN cannot substitute for an LOA, and any assessment issued without a proper LOA is void for violating the taxpayer’s right to due process. In Medicard Philippines, Inc. v. Commissioner of Internal Revenue (G.R. No. 222743, April 5, 2017), the BIR issued an LN to Medicard based on a discrepancy between the company’s VAT filings and third-party data, but never converted that LN into an LOA before a revenue officer examined Medicard’s records and issued a deficiency VAT assessment. The Supreme Court struck the assessment down. As the Court explained the distinction between the two documents:

“An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax… On the other hand, an LN is entirely different and serves a different purpose than an LOA. Due process demands that after an LN has served its purpose, the revenue officer should have properly secured an LOA before proceeding with the further examination and assessment of the petitioner. Unfortunately, this was not done in this case.”

Following Medicard, the BIR itself confirmed the same rule in Revenue Memorandum Circular (RMC) No. 75-2018, which recognizes that “no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authorization of the Commissioner of the BIR or his duly authorized representative through a[n] LOA.” A Letter Notice, by itself, is not that authorization — but it is also not something a taxpayer can safely ignore, because an unresolved LN is exactly the kind of discrepancy the BIR can carry forward into a subsequent LOA covering the same period.

What does RMO No. 13-2012 say about handling a Letter Notice? #

RMO No. 13-2012 sets internal deadlines for how quickly BIR revenue officers must act on an LN once it is assigned, and gives taxpayers a defined window to contest or explain the flagged discrepancy before the case escalates. For an LN that has been assigned or referred to a revenue officer, the Order requires that:

“The RO assigned shall resolve the LN discrepancy within thirty (30) days from receipt of original assignment/referral.”

If the discrepancy is not resolved within that window and the revenue officer has not taken one of the specific alternative actions the Order allows (such as recommending administrative sanctions), the case is escalated up the BIR’s chain for further action — which can include the issuance of a proper LOA. This internal timeline is a strong practical reason not to sit on an LN: the 30-day clock the Order gives the assigned revenue officer is also, in effect, the taxpayer’s window to submit an explanation before the case moves toward escalation.

Worked example: a RELIEF SLSP mismatch triggers an LN #

A supplier’s own RELIEF SLSP filing reporting a sale that a buyer never recorded as a purchase — or reported at a different amount — is one of the most common ways a Letter Notice gets triggered, because RELIEF cross-matches one taxpayer’s reported sales against the counterparty’s reported purchases.

Suppose Taxpayer X, a retail distributor, buys ₱850,000 in inventory (VAT-exclusive) from Supplier Y during the third quarter. Supplier Y’s RELIEF SLSP Summary List of Sales reports the full ₱850,000 sale to Taxpayer X. But Taxpayer X’s own books recorded only ₱650,000 in purchases from Supplier Y that quarter — the remaining ₱200,000 relates to a shipment Taxpayer X received and booked in the following quarter, even though Supplier Y invoiced and reported it in Q3.

The BIR’s RELIEF matching flags the ₱200,000 gap and generates an LN addressed to Taxpayer X, citing the mismatch between what Supplier Y reported as a sale and what Taxpayer X declared as a purchase. At this stage:

• The LN does not mean Taxpayer X owes additional tax — it means the two datasets don’t tie out yet.
• Taxpayer X should pull the specific invoice, delivery receipt, and its own purchase ledger entry to show the ₱200,000 was booked in the following period — a timing difference, not an unreported purchase.
• Taxpayer X submits this explanation and documentation to the BIR office handling the LN, within the resolution window RMO No. 13-2012 gives the assigned revenue officer.
• If the explanation and documents reconcile the discrepancy, the LN is typically closed without further action. If Taxpayer X ignores the LN or cannot support the timing explanation, the BIR may escalate — potentially culminating in a proper LOA naming a revenue officer to examine Taxpayer X’s books for that quarter.

The same pattern applies to other common causes RELIEF mismatches trace back to: a cancelled or replaced official receipt that the supplier didn’t net out of its SLSP, a sale the supplier tagged to the wrong buyer’s TIN, or returns and allowances recorded by one party but not reflected in the other’s listing. See RELIEF SLSP vs BIR Form 2550Q: How to Reconcile Your Sales and Purchases Listing for how to trace these gaps back to their source before they turn into an LN in the first place.

What should you do when you receive a Letter Notice? #

Treat an LN as an invitation to reconcile, not as a bill to pay or an audit to comply with — but do not ignore it. A practical response:

1. Read the LN carefully to identify which data source (RELIEF, TRS, or TPM-BOC) and which specific figures the discrepancy involves.
2. Pull the underlying documents — invoices, official receipts, delivery records, and your own SLSP or return workpapers — for the period cited.
3. Identify the likely cause: a timing difference between periods, a cancelled or replaced invoice, returns and allowances, an inter-branch reporting mismatch, or a supplier/customer tagging the transaction to the wrong TIN.
4. Submit a written explanation with supporting documents to the BIR office handling the LN, within the resolution window the assigned revenue officer is working under.
5. Keep records of what was submitted and when, in case the LN is later escalated toward a formal LOA covering the same period.

Do not assume that because an LN references a specific peso figure, that amount is automatically assessable — the Supreme Court’s ruling in Medicard is precisely that an LN carries no assessment authority on its own. At the same time, do not assume the LN can simply be set aside; an unresolved discrepancy is exactly the kind of finding the BIR can carry into a subsequent, properly issued LOA.

Frequently asked questions #

What is a BIR Letter Notice (LN)? #

A BIR Letter Notice (LN) is a computer-generated notification that the BIR’s RELIEF, Tax Reconciliation System (TRS), or Third-Party Matching-Bureau of Customs (TPM-BOC) data-matching programs found a discrepancy between a taxpayer’s declared sales, purchases, or income and figures reported about that taxpayer by a third party, such as a supplier’s or customer’s own filings.

Can the BIR assess and collect tax based on a Letter Notice alone? #

No. In Medicard Philippines, Inc. v. Commissioner of Internal Revenue (G.R. No. 222743, April 5, 2017), the Supreme Court ruled that a Letter Notice is not found in the National Internal Revenue Code and does not authorize an examination, while a Letter of Authority is specifically required by law before the BIR can examine a taxpayer’s books. An assessment issued without a proper LOA is void for violating due process.

How is a Letter Notice different from a Letter of Authority? #

A Letter Notice merely flags a data discrepancy found through computerized matching and does not name a revenue officer or authorize document examination. A Letter of Authority is the specific document that names a revenue officer and taxable period and empowers that officer to examine a taxpayer’s books of accounts — it is the only document the law recognizes as authorizing a BIR audit.

What should a taxpayer do after receiving a Letter Notice? #

A taxpayer should review the discrepancy the LN cites, gather supporting records such as invoices, official receipts, and ledgers, and respond in writing to explain the mismatch — common causes include timing differences, cancelled or replaced invoices, and a supplier or customer misreporting or mistagging the transaction. The taxpayer should not assume the LN’s figure is automatically correct, and should not treat the LN itself as an audit demand requiring full document production.

Does the BIR ever convert a Letter Notice into a full audit? #

Yes. If a taxpayer does not resolve the discrepancy the LN raises, the BIR may follow up by issuing a proper Letter of Authority naming a specific revenue officer and taxable period, which then authorizes a full examination of the taxpayer’s books covering that period — the LN itself is only the trigger, not the authority, for that examination.

Summary #

A BIR Letter Notice (LN) is a computer-generated flag from the BIR’s RELIEF, TRS, or TPM-BOC data-matching programs under RMO No. 13-2012 — it tells a taxpayer that a discrepancy exists between declared figures and third-party data, but it does not authorize an audit or an assessment. Only a Letter of Authority (LOA), naming a specific revenue officer and taxable period, gives the BIR that authority; the Supreme Court confirmed this distinction in Medicard Philippines, Inc. v. Commissioner of Internal Revenue (G.R. No. 222743), and the BIR reaffirmed it in RMC No. 75-2018. A taxpayer who receives an LN should reconcile and respond with documentation rather than either ignoring it or treating it as a final bill — an unresolved LN can still lead to a proper LOA covering the same discrepancy. For the rules that apply once an LOA is actually issued, see What Is a BIR Letter of Authority and What Are Your Rights During an Audit?, and for reconciling the RELIEF data most LNs are built from, see RELIEF SLSP vs BIR Form 2550Q: How to Reconcile Your Sales and Purchases Listing.