Preliminary Assessment Notice (PAN)
Updated June 13, 2026
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Definition
A Preliminary Assessment Notice (PAN) is a written notice from the Bureau of Internal Revenue (BIR) informing a taxpayer of proposed deficiency taxes and the facts and law on which they are based. The taxpayer may respond within 15 days from receipt before the BIR issues a Formal Letter of Demand and Final Assessment Notice (FLD/FAN).
Section 228 of the National Internal Revenue Code requires the Commissioner to first notify the taxpayer of the findings before issuing an assessment, except in listed cases such as a mathematical error on the face of the return or a discrepancy between tax withheld and tax remitted. The PAN is that notice. Under RR 12-99, as amended by RR 18-2013, it must show in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based. The taxpayer has 15 days from receipt to respond in writing. If the taxpayer does not respond, or responds but disagrees, the BIR issues a Formal Letter of Demand and Final Assessment Notice (FLD/FAN). The response is a letter with supporting documents; there is no separate BIR form for it.
Detailed explanation
What is a Preliminary Assessment Notice?
A Preliminary Assessment Notice (PAN) is a written notice from the Bureau of Internal Revenue (BIR) proposing deficiency taxes based on the BIR's examination findings. Section 228 of the National Internal Revenue Code requires the Commissioner to first notify the taxpayer of the findings before an assessment is issued, so the taxpayer can respond before the assessment is made.
The PAN is not an assessment; it invites the taxpayer to present counter-arguments and documents. It is the first formal step in the due process the law requires before deficiency taxes are assessed.
Legal Basis and Authority
The PAN rests on NIRC §228 (Protesting of Assessment) and on RR 12-99, as amended by RR 18-2013, which set out the due process steps. Section 228 lists cases where no preassessment notice is needed, such as a mathematical error on the face of the return, a discrepancy between tax withheld and tax remitted, or unpaid excise tax on exciseable articles. It also provides that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment is void.
Key Characteristics of a PAN
A PAN shows in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based, along with the taxpayer's name and TIN, the period covered, and the proposed deficiency taxes. It is issued after the examination, which is usually covered by a Letter of Authority, and before the Formal Letter of Demand and Final Assessment Notice (FLD/FAN).
Response Period and Taxpayer Rights
The taxpayer has 15 days from receipt of the PAN to respond in writing. The response may include objections to each finding, supporting documents, and amended returns. It is submitted to the BIR office that issued the PAN, and the taxpayer should keep proof of submission.
If the taxpayer does not respond within 15 days, the taxpayer is considered in default and the BIR issues the FLD/FAN. If the taxpayer responds but the BIR is not persuaded, the BIR also issues the FLD/FAN. In either case the taxpayer may still protest the FLD/FAN within 30 days from receipt.
Common Findings in a PAN
PANs typically address underdeclared income, disallowed deductions, unsupported tax credits, related-party pricing adjustments, and unpaid withholding taxes. For example, a PAN may propose additional income tax where reported income does not match bank deposits or information returns filed by payors such as BIR Form 2307 data.
Value-added tax (VAT) findings are also common, particularly where input VAT was claimed without valid VAT invoices or where output VAT was underreported compared with sales records.
From PAN to Final Assessment
A PAN does not create an obligation to pay. The FLD/FAN is the assessment and demands payment. It may be protested administratively through a request for reconsideration or reinvestigation within 30 days from receipt, with all supporting documents submitted within 60 days from filing the protest. If the protest is denied, or not acted on within 180 days from submission of documents, the taxpayer may appeal to the Court of Tax Appeals within 30 days; otherwise, the decision becomes final, executory and demandable (NIRC §228).
Practical Implications for Taxpayers
Receiving a PAN should prompt immediate action. Review the findings, gather supporting documents, and consult a tax professional or CPA if needed. A well-supported response can reduce or eliminate the proposed deficiency. Ignoring a PAN or sending a weak response makes an FLD/FAN on the BIR's original figures more likely.
The 15-day period is counted from the date the taxpayer receives the notice, not from the date it was issued, so taxpayers should keep proof of the date of receipt.
Prescription
The BIR must assess within three years after the last day for filing the return, or from the actual filing date if the return was filed late (NIRC §203). For a false or fraudulent return with intent to evade tax, or a failure to file, the period is ten years from discovery (NIRC §222). A taxpayer who receives a PAN for a prescribed period should raise prescription in the response.
Why it matters
A PAN is your formal opportunity to challenge the BIR's proposed tax adjustments before they become final and enforceable. Ignoring or mishandling a PAN can result in a large tax bill, penalties, and interest. Understanding the PAN process and responding promptly with solid documentation is critical to protecting your tax position and avoiding unnecessary assessments.
How it works
BIR Issues the PAN
After examining your returns, usually under a Letter of Authority, the BIR sends you a written Preliminary Assessment Notice detailing the proposed deficiency taxes, the period involved, and the facts and law behind them. You have 15 days from receipt to respond.
Taxpayer Reviews and Responds
You have 15 days from receipt to submit a written response with objections, supporting documents, or evidence contradicting the BIR's findings. Your response should be detailed, cite relevant laws, and include copies of receipts, invoices, or other proof.
BIR Evaluates Response
The BIR reviews your response and supporting documents. If convinced, it may reduce or drop the proposed deficiency. If not, or if you did not respond, it issues a Formal Letter of Demand and Final Assessment Notice (FLD/FAN).
Formal Letter of Demand and Final Assessment Notice
If the BIR maintains its position, it issues the FLD/FAN. You may protest it with the BIR by filing a request for reconsideration or reinvestigation within 30 days from receipt, and you must submit all supporting documents within 60 days from filing the protest. If the protest is denied, or not acted on within 180 days from submission of documents, you may appeal to the Court of Tax Appeals within 30 days (NIRC §228).
Examples
Employee with an unreported sideline
Maria Santos, a bank employee earning ₱720,000 a year, received a PAN proposing ₱71,000 of additional income tax because the BIR found ₱300,000 of professional fees from a sideline that it could not match to a return. With the fees added, tax on ₱1,020,000 would be ₱157,500 against the ₱86,500 already due on her salary. She responded with a copy of the Form 1701 she had filed reporting the fees, and the BIR dropped the finding (NIRC §228).
Self-employed consultant with disallowed deductions
Juan dela Cruz, a management consultant whose taxable income falls in the 25% bracket, received a PAN proposing ₱125,000 in additional tax because the BIR disallowed ₱500,000 in claimed office rental expenses for lack of contracts and invoices. He submitted signed lease agreements and the lessor's invoices. The BIR allowed ₱400,000 of the deduction, reducing the proposed deficiency to ₱25,000 (25% of the ₱100,000 still disallowed), before surcharge and interest (NIRC §34(A)).
VAT-registered retailer with input tax credit dispute
Anna Reyes, owner of a VAT-registered retail store, received a PAN proposing a ₱85,000 VAT deficiency because the BIR questioned ₱85,000 of input VAT claimed on purchases from suppliers it could not confirm as VAT-registered. She provided VAT invoices from VAT-registered wholesalers covering ₱70,000 of the input VAT. The BIR accepted those and reduced the proposed deficiency to ₱15,000 (NIRC §110(A), §113).
Corporate taxpayer with transfer pricing adjustment
TechCorp Philippines received a PAN proposing ₱2,500,000 additional corporate income tax for transfer pricing adjustments on intercompany service fees paid to its parent company in Singapore. TechCorp submitted a contemporaneous transfer pricing study and comparable uncontrolled price analysis. The BIR accepted the study and reduced the adjustment by 60% (NIRC §50; RR 2-2013 transfer pricing guidelines).
Common misconceptions
- Myth: A PAN is a final tax bill that I must pay immediately.
- Fact: A PAN is preliminary. You have 15 days from receipt to respond and challenge it. The assessment that demands payment is the Formal Letter of Demand and Final Assessment Notice (FLD/FAN), which can itself be protested within 30 days (NIRC §228).
- Myth: If I do not respond to a PAN, the proposed assessment is automatically withdrawn.
- Fact: If you do not respond within 15 days, you are considered in default and the BIR issues a Formal Letter of Demand and Final Assessment Notice based on its findings. Silence is not a defense (RR 12-99, as amended by RR 18-2013).
- Myth: I can ignore a PAN if I believe it is wrong and wait to appeal it later.
- Fact: Not responding forfeits your chance to resolve the findings before the FLD/FAN is issued. What matters later is the protest of the FLD/FAN within 30 days; an assessment that is not protested on time becomes final and can no longer be questioned in the Court of Tax Appeals (NIRC §228).
- Myth: A PAN with any missing detail is automatically invalid.
- Fact: Section 228 requires that the taxpayer be informed in writing of the law and the facts on which the assessment is made; an assessment that does not do so is void. The proper response is to point out the defect, and any substantive objections, within the response and protest periods.
- Myth: I can extend the 15-day response period by requesting an extension from the BIR.
- Fact: The 15-day period is set by regulation, and a taxpayer who misses it is considered in default. Submit your response within the 15 days (RR 12-99, as amended by RR 18-2013).
Questions people ask
What should I do immediately upon receiving a PAN?
Review the notice carefully to confirm you are the correct taxpayer and understand each proposed finding. Note the 15-day response deadline, counted from receipt. Gather the supporting documents (invoices, bank statements, contracts) related to each finding, and consult a tax professional or CPA if the findings are complex or large. Begin drafting your response right away.
Can I request an extension of the 15-day response period?
The 15-day period to respond to a PAN is set by regulation, and a taxpayer who does not respond within it is considered in default, after which the BIR issues the FLD/FAN. Do not count on an extension; submit your response within the 15 days, even if some supporting documents must follow (RR 12-99, as amended by RR 18-2013).
What should my response to a PAN include?
Your response should be a detailed, written letter addressing each proposed finding. For each one, state your objection, cite the law or regulation supporting your position, and attach supporting documents (invoices, contracts, bank statements). Be specific and factual. Submit it to the BIR office that issued the PAN and keep a received copy or proof of delivery.
What happens if I do not respond to the PAN within 15 days?
If you do not respond within 15 days, you are considered in default and the BIR issues a Formal Letter of Demand and Final Assessment Notice (FLD/FAN). You can still protest the FLD/FAN with the BIR within 30 days from receipt. If you do not protest within 30 days, the assessment becomes final, executory and demandable, and you can no longer question it in the Court of Tax Appeals (NIRC §228).
Is a PAN the same as a Formal Assessment Notice (FAN)?
No. A PAN is preliminary and invites your response. The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) is the assessment itself and demands payment. An FLD/FAN is first protested with the BIR within 30 days; only the BIR's decision on the protest, or its failure to act within 180 days from submission of documents, can be appealed to the Court of Tax Appeals (NIRC §228).
Can I appeal a PAN directly to the Court of Tax Appeals?
No. A PAN is not an assessment and cannot be appealed to the CTA. You respond to the PAN; if an FLD/FAN follows, you protest it with the BIR within 30 days of receipt and submit supporting documents within 60 days of the protest. If the protest is denied, or not acted on within 180 days, you may appeal to the CTA within 30 days (NIRC §228).
What if the BIR issued a PAN but I never received it?
Section 228 requires the BIR to notify the taxpayer of its findings, and an assessment that does not inform the taxpayer in writing of the law and facts on which it is based is void. If you did not receive the PAN, raise this in your protest of the FLD/FAN, with evidence such as the absence of any delivery record, and protest the substance of the assessment at the same time within 30 days.
Can the BIR issue a PAN for tax years that are already closed or prescribed?
Generally, the BIR must assess within three years after the last day for filing the return, or from the actual filing date if the return was filed late. For a false or fraudulent return with intent to evade tax, or a failure to file, the period is ten years from discovery of the falsity, fraud or omission. If you receive a PAN for a period that has prescribed, raise prescription in your response (NIRC §203, §222).
In practice
- PANs are issued after the BIR completes its initial examination phase and identifies proposed adjustments; they are a standard part of the formal assessment process for all tax types (income tax, VAT, excise tax, etc.).
- Taxpayers who respond within 15 days with organized supporting documents and clear objections can get proposed findings reduced or dropped before the FLD/FAN is issued.
- The 15-day response period is counted from the date of receipt, not issuance; taxpayers should confirm receipt via registered mail or hand delivery to establish the start date.
- PANs issued to large corporations or high-income individuals often include detailed audit schedules, transaction-level adjustments, and references to specific documents reviewed, requiring careful analysis and targeted responses.
- Failure to respond to a PAN leads to an FLD/FAN, and an FLD/FAN that is not protested within 30 days becomes final and can be enforced through collection remedies such as distraint and levy.
Next steps
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- LawPhil Project (Arellano Law Foundation). “NIRC §228 (assessment, PAN/FAN due process): full text.” lawphil.net. NIRC of 1997 (RA 8424), Sec. 228. Source checked .
- Bureau of Internal Revenue. “BIR RR 12-1999 / 18-2013: assessment due process (PAN).” bir.gov.ph. Bureau of Internal Revenue, Revenue Regulations on assessment. Source checked .