What is a tax audit and what does it check?
A tax audit is a check by specific tax authorities that an entity pays the relevant tributes, correctly applies deductions (e.g. VAT), has no tax arrears to the state, etc.
The legal basis in this case is primarily: Law of August 29, 1997. Tax Ordinance, more specifically, Section 6 – Tax Control – Tax Ordinance and the Law of March 6, 2018. Business Law, mainly Chapter 5 – Restrictions on business control.
According to Art. 281 §2 of the Tax Ordinance: “The purpose of a tax audit is to check whether the auditees are fulfilling their obligations under the tax law.”
Such a check does not always involve suspicions, for example, against the entrepreneur – it is also about sealing the entire tax system and catching possible problems.
Taxpayers, payers and collectors, as well as their legal successors, may be subject to control. It most often affects entrepreneurs.
Who conducts the tax audit?
The initiation of a tax audit is done ex officio. Who is carrying it out? They are always the tax authorities of first instance, most often:
- chief tax officer – taxes: PIT, VAT, CIT, PCC, inheritance and donation;
- head of customs – excise;
- mayor, mayor, mayor of the city, district governor, provincial marshal – local fees, taxes: transportation, forestry, real estate.
So which specific tax authority will conduct the audit in your case depends on the type of fees and taxes to be checked.
If you appeal the decision, the appellate authorities (e.g., the director of the tax administration chamber, the local government appeals college) are also entitled to review.
A tax audit can only be performed by a person authorized by the tax authority. The model for such authorization is contained in a regulation of the Finance Minister. Art. 283 of the Tax Ordinance indicates exactly what the authorization should contain. Key elements include:
- the number of the inspector’s official ID card and his name;
- indication of the legal basis;
- signature of the person granting the authorization;
- name of the issuing authority;
- The date of the inspection and the expected date of completion of the inspection;
- scope of the tax audit.
Important!
According to Art. 283 §5 of the Tax Ordinance: “The scope of the audit may not exceed that indicated in the authorization.” This means that checkers can only inspect what is described in the document.
Is the company’s tax audit announced?
As a rule, the tax authorities notify the auditee of their intention to initiate a tax audit. In practice, this means that before the official knocks on your door, you will receive the appropriate notice.
You will find in it, among other things. information about what authority will audit you and the scope of conducting a tax audit. Carefully read the document and familiarize yourself with it to prepare accordingly.
The inspection should take place from 7 to 30 days from the date of service of the notice. If 30 days pass and no one shows up – it is necessary to send a new notice. And can the official inspect everything beforehand? Yes, but it requires the consent or request of the controlled party.
Important!
It is worth taking the time elapsing from the receipt of the notice of intent to initiate an inspection to put the documents in order, rather than agreeing to speed up the procedure. Haste is not a good advisor in this case.
Conducting a tax audit without notice – exceptions
Initiation of a tax audit without prior notice is possible in certain cases. Among the most common are situations where:
- control activities are necessary to prevent the commission of a fiscal crime or fiscal offense;
- The control relates to undeclared economic activity;
- there are doubts about the refund or overpayment of VAT;
- The audit concerns revenues that come from undisclosed sources;
- inspection activities are to check the recording of turnover using a fiscal cash register.
Remember!
If the tax authority wants to conduct a tax audit unannounced, it must give reasons in writing. If it fails to do so, you have the right to file an objection. The exact rules can be found in the Entrepreneurs’ Law (formerly the Law on Freedom of Economic Activity).
What are the responsibilities of the controlled entity?
The most important responsibilities of the controlled company include:
- Providing access to offices or premises, for example;
- Provide access to any documents related to the scope of the audit;
- Showing the property that is the subject of the inspection and allowing the taking of, for example, photographic documentation;
- Providing relevant explanations.
What are the rights of the controlled entity?
If you are a controlled entity, you have quite a few rights to keep in mind. This will ensure that you are adequately prepared for an audit and will spot, for example, technical errors by the tax authorities if necessary.
If you are facing a tax audit, you have, among other things. right to:
- Participate in inspection activities;
- select a proxy;
- Ask to see your official ID card;
- submit explanations and objections;
- file objections to specific inspection activities if they violate the law, primarily related to the freedom of doing business.
These are not all rights and obligations – so remember to familiarize yourself with the relevant legislation before the inspection.
What documents does the tax audit check?
As an entrepreneur, you are required to keep all tax documents for up to 5 years after the end of the year in which the due date passes. What specific documents will be the basis for audit activities? It all depends on what rules you settle on and what the scope of control is in your case. The main items to be checked are:
- cash register reports;
- Invoices issued to customers;
- tax returns (e.g., JPK_V7);
- employment records;
- Receipts and invoices documenting purchases;
- Printouts from the income and expense ledger;
- vehicle mileage records.
It is also necessary to show the registration documents of the company.
How long does a tax audit take and where does it take place?
Inspection activities are carried out at the premises of the inspected person (this can be, for example, the apartment where the business is registered) and wherever the company’s records are kept (i.e., for example, at the accounting office). As a rule, such an inspection takes place during business hours, i.e. when the office is open, for example.
How long a tax audit takes, in turn, depends on the size of the company in question. These limits are set forth in Art. 55 Business Laws. The duration of inspections at an entrepreneur in a calendar year can be up to a maximum:
- 12 working days – microenterprise;
- 18 working days – small enterprise;
- 24 working days – medium enterprise;
- 48 working days – other companies.
There are several exceptions to this rule, the most important of which is: “carrying out an inspection is necessary to prevent the commission of a crime or misdemeanor, to prevent the commission of a fiscal crime or misdemeanor, or to secure evidence of its commission.”
Included in the inspection time are those activities that are performed at the controlled party’s premises or other place with access to documents. Thus, it is only about those situations when the official is directly, for example, at the business premises (the preparation of the protocol, etc., is not included).
Even if the time described in the law has already passed, you may therefore still have to wait for the completion of the tax audit. The audit authorization includes the expected completion date, and theoretically all activities should end within that time. However, the inspecting authority, for specific reasons, may extend the deadline or temporarily suspend its activities.
What does a tax audit protocol look like?
Completion of a tax audit is when the taxpayer receives the tax audit report. What is it? This is a document issued by the controlling authority.
According to Art. 290 of the Tax Ordinance includes, among other things. data of the inspectors, determination of the scope of the inspection and the place and time when it was carried out, description of the findings of fact and legal assessment made, as well as instructions on the right to, among other things. To file a correction to the declaration or reservations.
After receiving the tax audit report, you have 14 days to submit explanations or objections. The tax authority takes another 14 days to process the application.
Tax audit vs. tax investigation – what are the differences?
The tax procedure is described in the Tax Ordinance in Section 4. Unlike an audit , it can be initiated not only ex officio, but also at the request of the taxpayer.
Its main purpose is to determine the tax assessment – that is, the amount the taxpayer should pay. Most often, tax proceedings follow a tax audit. Why? If the audit reveals irregularities, the parties seek to determine what amount of tribute is appropriate.
Although tax audits are feared by entrepreneurs, the most important things are to properly prepare documentation and know your rights and obligations. This will greatly improve your situation and pass the inspection without unnecessary nerves.
Sources:
https://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=wdu19971370926
https://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20180000646
