What happens in a tax audit?

A tax audit will generally start with an initial meeting between the taxpayer and their representatives and assistants. The meeting conversation will go through the objectives and different phases of the audit. The auditors will try to get a big picture of the taxpayer’s business operations, bookkeeping and taxation.

At the meeting conversation, at least the following matters will be clarified: the places of business, stocks, ownership, number of employees, the company’s bookkeeping system and the vastness of the audit material.

Unclear taxation and other questions will be clarified during the audit through discussions and, if necessary, the taxpayer will receive written requests for clarification.

A tax audit report is the central document of an audit

A tax audit report is the auditors’ report of the completed audit and the matters that were noted to affect taxation as well as a suggestion for measures that should be taken due to these matters. A tax audit that was performed according to good tax auditing practice will result in a tax audit report unless there are well-founded reasons not to compile one.

The auditors will compile a tax audit report of their audit that the taxpayer can give their written reply to. The reply period is generally two weeks. In many cases, this period may be extended by requesting an extension from the tax authorities. The extension may also be granted over the phone with the tax authorities’ permission. It is recommended to ask for an extension in writing, for example by email.

There are always two auditors involved in a tax audit. The auditors’ supervisor approves the tax audit report. The approval means auditing the tax audit report in an audit-led manner. This means making sure that the report is carefully compiled and that the suggestions are well-founded based on taxation practices.

Tax audit practices were changed in 2014

The tax audit hearing procedure changed in October 2014. Now, there are no initial and final tax audit reports; they have been replaced by one tax audit report. The taxpayer is heard for the first time once the tax audit report is completed and, for the second time, as the debiting and taxation decisions are made. The taxpayer should be active in clearing out matters so that the tax audit report that includes only one hearing does not contain any erroneous information or flawed conclusions. The change in the hearing procedure highlights the importance of a tax attorney’s expert assistance.