The duration and scope of a tax audit

An entrepreneur will often find the tax audit an unpleasant experience. During the audit, the entrepreneur is unsure of the results of the audit. According to the regulations, the tax audit report shall be compiled without delay.

A tax audit report shall be compiled within a reasonable time after hearing the taxpayer and the necessary additional clarifications, taking into consideration the number of issues and the quality of the case. However, ‘a reasonable time’ has not been defined by law or the Tax Administration’s good tax auditing practice. It should be safe to assume that a reasonable time is not several years.

The tax authorities must inform the taxpayer if the completion of the tax audit report is delayed significantly due to the gathering of additional information or some other reason not dependent on the taxpayer.

According to section 21 of the Finnish constitution

“Everyone has the right to have his or her case dealt with appropriately and without undue delay by a legally competent court of law or other authority as well as to have a decision pertaining to his or her rights or obligations reviewed by a court of law or other independent organ for the administration of justice.

Provisions concerning the publicity of proceedings, the right to be heard, the right to receive a reasoned decision and the right of appeal as well as the other guarantees of a fair trial and good governance shall be laid down by an Act.”

Tax audit methods

A full audit means auditing all tax categories, including, for example, matters related to business tax, value added tax and tax prepayment.

A partial audit means auditing just some tax category or auditing specific years or accounting periods. A partial tax audit may audit only the correctness of value added taxation. 

In a comparison data audit, the tax audit is carried out to collect the necessary comparison data. Even data that has come up during a tax audit may be used as comparison data. In practice, a comparison data audit means that the tax authorities are looking for information that might help audit someone else.

An entrepreneur’s taxation in relation to a company’s taxation

It is a good idea to see an entrepreneur’s and company’s taxation as a single unit. Depending on the business form, they affect each other to some degree. Based on the tax audit, both your personal and business taxation may be affected. In practice, in most owner-led companies, taxation applies to both the company’s and company owner’s taxation.