Support during tax audits
Tax audits – also known in technical jargon as „on-site tax audits“ – are the bane of many business owners’ existence, as a great deal can quickly be at stake. In addition to exorbitant back payments and the a great deal of effort, caused by the examination, may also Tax evasion uncovered which are Scope of the examination as well as the relevant criminal consequences entail.
We support you throughout every stage of your tax audit, covering all legal and tax-related matters. We also represent you directly. Particularly in the case of „deadlocked“ audits, our specialists are often able to smooth things over or implement strategies that lead to an amicable outcome for our clients.
Who do the tax authorities audit?
Whilst large corporations are sometimes audited on an ongoing basis, some small and medium-sized enterprises are fortunate enough to go unaudited for decades at a time. Whether and when an audit takes place depends not only on specific circumstances but also, to some extent, on a random selection process.
Even the most honest and conscientious business owner is usually unable to ensure that they fulfil their tax obligations in full and correctly at all times. It is rare for a tax audit to conclude that there are no issues and that no additional tax is due. This applies equally to small and large businesses. On the other hand, there are also cases where the tax audit ultimately results in a tax refund.
How are the exams conducted?
In addition to the taxpayer(s), the external auditor is also obliged to comply with the rules laid down by law. To ensure this and to avoid suffering any unjustified disadvantages during and after a field audit, legal assistance should always be sought at an early stage in order to avoid potential negative legal and financial consequences wherever possible.
There are legal limits to the powers of the external auditor, and the taxpayer is obliged to cooperate. In most cases, this is advisable for the simple reason that, in the event of a lack of or insufficient cooperation, the tax office ultimately has the power to make an estimate, which will almost always be to the taxpayer’s disadvantage.
A field audit is notified to the taxpayer by means of a written audit notice, which sets out the legal basis for the audit, the name of the auditor, the date and place of the audit, the start date of the audit, the audit period (usually three financial years), the scope of the audit (generally the types of tax to be audited) and information on the right to appeal.
The notice of audit is to be served on the taxpayer a reasonable time before the audit begins, provided this does not jeopardise the purpose of the audit. A period of two weeks is regarded as reasonable for small and medium-sized enterprises, and up to four weeks for large enterprises. A later start date requires a valid reason, such as a sudden illness of the taxpayer or their representative, or unavoidable cases of force majeure.
How do you prepare yourself?
The groundwork for ensuring that the external audit runs as smoothly as possible should be laid as early as the preparation stage, by providing the tax adviser with all relevant documents – records, supporting documents and contracts – so that they can be examined in advance, enabling any risks to be identified in good time and appropriate action to be taken.
How is the exam conducted?
During the audit, the auditor will usually ask questions, either in writing or orally, regarding any matters that require clarification. They may request further documentation and discuss their next steps and findings.
Once the tax-related facts have been clarified and assessed from a legal perspective, the auditor draws up findings and notifies the taxpayer of these in writing. The taxpayer is then given the opportunity to comment on them.
The findings, which may have been revised by the auditor, are then discussed in a final meeting with the taxpayer and/or their representative. During this meeting, questions can and should be clarified, positions discussed and the tax implications outlined.
Following the final meeting, the auditor draws up the audit report. On the basis of this report, and possibly after further consultation on any points of dispute, new tax assessment notices are then issued where necessary and permissible. These may then be challenged by means of legal remedies, usually by lodging an objection.