Tax audit

Tax audit is one of the least pleasant activities connected with conducting your own business, however it may happen to each entrepreneur quite frequently.  It is important to know your rights and responsibilities to be duly prepared for the meeting with the tax authorities.

The legal basis for the tax audit is primarily the Tax Ordinance. Other legislations related to the tax control are also included in the Act on freedom of economic activity and the Act on Treasury Control.

In accordance with Article 281 § 2 of the Tax Ordinance the objective of the audit is to verify whether the checked parties comply with obligations arising from the provisions of the tax law by comparing the actual situation with the current legal standards.

Who can carry out an audit

Tax audit is carried out by the tax authorities of the first instance competent for the taxable person i.e. the competent head of the tax office, the head of the customs office, the head of the local authority, the mayor (president of a city), the head of the district, voivodship marshal.

Responsibilities of the audit authority

Before the audit the tax authority is required to notify the controlled partyof the initiation of a tax audit. Cases when the authority is exempt from this obligation are listed exhaustively in Article 282c. § 1 of the Tax Ordinance, they are a.i. controls initiated in the case of non-notified to taxation business activity, the merits of the refund of the tax difference or a refund of input tax within the meaning of the Law on the tax on goods and services or upon request by the authority conducting a pre-trial investigation of an offence or fiscal offence. However, as soon as possible after the initiation of an audit, the controlled must be informed of  the reason for the absence of a notification of intention to start audit.

The inspection may be initiated not earlier than after 7 days and not later than 30 days from the date of delivery of the notification of the intention to start checks referred to above. If the audit is not initiated within 30 days from the delivery of the notification, an audit initiation requires another notification and initiation of an audit earlier than 7 days after the receipt of the notification requires the consent of the controlled party.

Initiation of audit

The tax audit is initiated by the delivery to the controlled or person authorised to represent in terms of tax inspection (tax audit proxy), authorisation to conduct it and presenting the professional identity card. In exceptional circumstances it is possible to initiate an inspection only on presentation of professional identity card , however in this case inspectors are obliged to deliver an authorisation to conduct an inspection within 3 days from its initiation. The controlled party shall appoint a person to represent him in the course of checks during his absence if the person previously did not indicate this person pursuant to Article 281a of the Tax Ordinance, i.e. in the event of a tax audit.

The authorisations of control authority

Employees carrying out audit have a number of authorisations related to verification activities in the property owned by the controlled, i.e. the right of access to premises, the right to inspect or carry out hearings, etc. These powers are listed in detail in Article 286 § 1 of the Tax Ordinance.  It should be noted, however, that they concern only the scope of authorisation to carry out the inspection. The controlled is obliged to provide all necessary explanations relating to the subject of the controls within the deadline set by an office employee, to provide the requested documents and ensure the appropriate conditions for work including, where possible, separate room and place for the storage of documents.

If the controlled person hinders the performance of control, Inspectors shall have the right to seek assistance from the police, the border guard or municipal guard.

Finalisation of the audit  — minutes

Controls should be completed without undue delay but no later than within the deadline specified in the authorisation. It should be noted that with regard to entrepreneurs in accordance with Article 83(1) of the Act on freedom of economic activity, the duration of all checks of the audit authority in one calendar year has been limited and may not exceed:

  • with regard to the micro-enterprises — 12 working days
  • with regard to small businesses — 18 working days
  • with regard to medium-sized enterprises — 24 working days
  • with regard to all other companies — 48 working days.

Inspector records the conduct of the audit in the minutes which concludes the screening process. The minutes contain a description of the findings and legal assessment of the case without however determining the tax liability.

Controlled party, who do not agree with the findings of the minutes may, within 14 days from the date of its delivery, issue reservations or explanations, indicating at the same time the relevant evidence. The audit authority should submit written objections to the minutes of the inspection, which must describe the object of reservations (conclusions with which the controlled party disagrees) and explanations.  All claims should be substantiated by evidence.

VAT controls  - new rules from 2017

The new rules have been in force since 2017. If in VAT settlements you applied e.g. a reduced rate of tax for the product concerned, and tax control at your company demonstrates that it was correctly applied, then any subsequent control, until the amendment of legal interpretation, cannot call into question the previous findings (tax proceedings will not be initiated).  An exception to this rule will be a situation where, among other things, the evidence on the basis of which the relevant facts were established, proved to be false or a control protocol has been drawn up as a result of an offence.

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