A taxpayer receives a Subpoena Duces Tecum, or SDT, from the Bureau of Internal Revenue. It is not yet an assessment. It is not yet a final demand to pay. But it is serious. An SDT is a legal process requiring the taxpayer to appear and/or produce books of accounts, invoices, receipts, contracts, schedules, returns, and other records relevant to a tax audit or investigation.
The first reaction is usually fear. Some taxpayers immediately worry about what may happen if they cannot produce all the documents required. Others are tempted to respond the wrong way by creating unnecessary confrontation, making accusations, calling other agencies, filing unfounded legal protests, or posting the matter on social media. That is not the proper way to handle an SDT.
The BIR has authority under Section 5 of the National Internal Revenue Code of 1997, as amended, to examine records, obtain information, summon persons, and require the production of documents for purposes of determining tax liability. Under Revenue Memorandum Order No. 10-2013, the BIR may issue an SDT when a taxpayer fails to submit required documents or submits incomplete records. In short, the subpoena should be treated as a legal matter, not as a public relations problem.
What if the documents were lost?
One practical and lawful step is to execute an Affidavit of Loss. For example, if the taxpayer’s receipts, invoices, books, or other records were lost due to transfer of office, flood, fire, theft, misplacement, or loss while in the custody of a former employee, bookkeeper, or accountant, the taxpayer should not simply say, “Nawala po.” A verbal excuse is weak. The explanation should be put in writing, under oath, and submitted to the BIR.
Practical tip: If you cannot produce a document because it was lost, say it legally. Execute an Affidavit of Loss and state the essential facts clearly and truthfully.
The Affidavit of Loss should not be a careless or generic statement. It should be prepared properly, with enough facts to explain why the documents can no longer be produced, without turning the submission into an argument or a confrontation with the BIR.
This is important because taxpayers have a duty to keep and preserve accounting records. Under Section 235 of the NIRC, in relation to Revenue Regulations No. 17-2013, books of accounts and other accounting records must be preserved for the period required by law and must be produced upon demand by the BIR. Thus, an Affidavit of Loss should be truthful, specific, and supported by available facts.
An Affidavit of Loss is not a magic defense. It does not automatically erase the taxpayer’s obligation, and it does not prevent the BIR from evaluating the case. However, it is a proper legal step because it creates a formal record explaining why certain documents can no longer be produced.
This is the point: if you cannot comply fully, explain it legally. Do not turn the matter into a public spectacle. Do not assume that noise, pressure, or confrontation is a substitute for evidence. A taxpayer may disagree with the BIR, question the scope of the SDT, or explain that some documents are no longer available, but these matters should be raised through proper legal channels.
In tax practice, the better response is simple: respond to the SDT, submit what is available, and if documents were lost, execute an Affidavit of Loss with a formal written explanation. When dealing with the BIR, the strongest response is not noise. It is documentation.