The Philippines’ overhaul of its tax audit framework is prompting companies and advisers to rethink audit readiness as a continuous, data-driven process, with greater emphasis on governance, documentation and cross-tax consistency.
In November 2025, the Bureau of Internal Revenue (BIR) ordered the suspension of all field audits and related operations nationwide as part of a review of audit practices and internal controls. Examinations resumed in January 2026 under a new framework aimed at reducing overlap, limiting discretion and making case selection more system-driven.
‘There is greater attention to how figures appear across returns, not just whether they are technically correct’
The changes are already impacting how advisers approach audit engagements. ‘With tighter rules on audit authority and scope, firms are more deliberate in confirming coverage at the outset and in monitoring how the audit develops,’ says Danica Godornes, a partner at DivinaLaw.
Audits go integrated
A central feature of the new framework is the move to a single electronic letter of authority (eLA) per taxable year, replacing the previous practice of issuing separate audit authorities, such as for VAT. This allows the BIR to review all internal revenue taxes together, enabling a more holistic assessment of taxpayer positions.
‘The move to a single eLA per taxable year has reduced repetitive document requests and allowed the BIR to evaluate transactions in a more integrated manner, rather than revisiting the same records under different audit cycles,’ says Godornes.
For advisers, this has changed how audit engagements begin. Instead of focusing on individual tax types, firms now conduct full-year reviews that map how positions intersect across income tax, VAT and withholding tax, particularly where transactions have multiple tax implications.
The revised framework also places stronger controls on audit authority
Stronger controls
Alongside the structural changes, the BIR has introduced a system-assisted, risk-based audit selection process, with cases drawn from centrally approved, data-driven lists.
‘There is greater attention to how figures appear across returns, not just whether they are technically correct,’ Godornes says. ‘Variances in revenue, margins, VAT declarations or withholding profiles are now viewed through the lens of how they might be read by the BIR’s selection system.’
The revised framework also places stronger controls on audit authority, with clearer boundaries on what examiners can review and how assessments are issued. Assessments must now be grounded in substantiated findings within the defined scope, reinforcing due process protections.
Digital tools, including an online verifier for letters of authority, further increase transparency by allowing taxpayers to confirm the legitimacy of audit notices and examining officers.
Transition challenges
In practice, though, the transition has been less straightforward, particularly for audits already underway before the suspension. A key issue has been the use of replacement eLAs to consolidate multiple audits covering the same taxable year.
Early implementation has required active management
Clarifications from the BIR established that a replacement eLA is intended to preserve continuity rather than create a new audit. It should not reset timelines, invalidate prior steps or expand the scope of the examination, and is subject to a ‘no regression’ rule that prevents cases from moving backwards in the assessment process.
Still, early implementation has required active management.
‘The issuance of replacement eLAs often coincided with the reassignment of cases and the consolidation of audit teams,’ Godornes says. ‘This created situations where examiners approached the audit as if it were starting anew, or where requests appeared to go beyond the original scope.’
Readiness becomes routine
Over time, industry practitioners expect the most significant impact to be on risk management and documentation practices, as the link between data, audit selection and audit execution tightens.
Standardised checklists are shaping expectations on how records should be organised, prompting firms to guide clients towards maintaining audit-ready documentation throughout the year rather than assembling it reactively. At the same time, companies are paying closer attention to inconsistencies or outliers in filings that could trigger audits under the new system.
Companies should reassess prior filings and revisit key tax positions
For Senen Quizon, business tax leader at Deloitte Philippines, the reforms highlight the need to embed audit readiness into routine compliance processes.
‘Gaps in compliance may be linked to limited knowledge of evolving regulatory requirements compounded by limited access to subject matter experts,’ he says. ‘To strengthen compliance posture, proactive measures need to be in place.’ He points to making audit readiness a part of the annual compliance process review and conducting tax health checks to ensure compliance issues are addressed before a tax audit.
Be prepared
Early engagement with advisers is also becoming more important. Pearl Cabali, tax partner at PJS Law, says companies should reassess prior filings, revisit key tax positions and ensure documentation is aligned across all major tax types. ‘Early advisory involvement can help manage audit scope, anticipate issues and position responses more effectively under the new framework,’ she explains.
‘Ensure supporting documents are complete and readily retrievable’
On a practical level, Godornes recommends that companies preparing for their next audit cycle start with a review of issues already raised in previous examinations. ‘In many cases, exposures do not come from new transactions but from recurring treatments that have already been questioned before,’ she says.
She adds that companies should stress-test high-risk accounts – such as major expense items, input VAT claims and withholding taxes – while ensuring supporting documents are ‘complete, internally consistent and readily retrievable’.
Operational preparedness is equally important. ‘Where internal audit handling is not clearly defined, delays and inconsistent explanations tend to arise,’ she says.
