What kind of payment obligations can a tax audit result in?

Based on a tax audit, besides the actual tax, a tax increase or surtax may be debited as well as interest, such as late-payment interests. You can read more on the interest rates here.

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Tax increase

A tax increase is a punitive measure in situations such as when a tax return is late or when taxation has not been assessed at all due to not submitting the tax return. A tax increase may also be imposed when some other obligatory report, such as a tax return, its attachments or additional information, has not been submitted.

According to the legislation, tax authorities may exercise discretion in imposing tax increases. The legislation has separate stipulations for situations where a tax increase must be imposed. The Tax Administration has given instructions for tax increases in the Tax Administration’s Single Guidelines for the tax year 2017.

Even if the debiting of taxes that was caused by a tax audit remains definitive, a skilled tax attorney is often able to find facts in the material that make the tax increase more reasonable.

In legal praxis, a question has arisen on whether one can be punished twice for the same offence (Ne bis in idem). A tax increase is a punitive consequence and the most serious tax fraud cases are handled as criminal cases in courts of law. In its decision KHO 2014:145, the Supreme Administrative Court imposed tax increases to A. On the grounds mentioned in KHO’s decision, the tax increases imposed on A in connection with additional taxation were removed as the tax increases were imposed for the same act that A was already convicted for by the Court of Appeal’s non-appealable decision. In this case, it was enough that a tax increase had been imposed, i.e. the Tax Administration had made a decision on the tax increase.

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Not imposing a tax increase

The Tax Administration may also decide not to impose a tax increase, so that it may later decide if it wants to pursue the matter as a criminal case with the police.

The decision on a tax increase may be left undone as the tax decision is made and, instead, it will be made as a separate decision. Not deciding on a tax increase must be announced to the taxpayer by the latest in connection with the tax decision. In practice, this means that the reassessment decision will not have an amount in euros in the tax increase section.

A separate tax increase decision shall be made by the latest by the end of the following calendar year of making the tax decision in question, unless a competent authority has reported the matter as an offence during that time frame or received a notification of a preliminary investigation.

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Surtax

If taxes are paid after the due date, you must pay surtax. A surtax is debited with the additional tax that follows a tax audit.

A surtax is paid on value added tax, employee settlements and transfer tax. The surtax is the reference rate for the half-year period preceding the calendar year as referred to in section 12 of the Interest Act plus an additional seven percentage points.

For assistance, you can use the interest rate and surtax calculator. The calculator can be used to calculate the amount of the surtax.

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