Every businessman sooner or later faces regulatory authorities, in particular, the tax service. However, cooperation with fiscal authorities does not always take place in a friendly manner. Disputes arise, ending with the receipt of a tax notice-decision and, as a result, litigation. Some of these decisions are not always legal and many entrepreneurs appeal against them. However, the judicial system does not always provide equal opportunities to all participants in the process. Often the arguments presented by representatives of the tax service are perceived by the court as more convincing. As a result, a businessman has to prove that the tax office is wrong, which is not an easy task. The opposite side is often represented by professional lawyers, which makes the dispute with the tax office even more difficult. Appealing a tax audit act can take a lot of time and effort, which is why an experienced tax lawyer can be indispensable in such cases.
Types of tax audits
There are three types of tax audits in Ukraine: desk, documentary and actual. Each type of audit has its own characteristics and purpose. Also, inspections can be scheduled or unscheduled, on-site or off-site.
- Desk tax audits
It is carried out on the basis of previously submitted declarations and reports of taxpayers. The purpose of such audits is to identify errors and omissions in the submitted reports. Typically, desk audits are scheduled, but may be unscheduled. During a desk audit, the tax inspector checks the correctness of the calculation of taxes, the correctness of filling out the documents and the availability of the necessary documents.
- Documentary tax audits
Conducted in order to verify the authenticity and reliability of documents provided by the taxpayer. Often such audits are carried out on the basis of the results of desk checks, if any errors or omissions were found during the latter. Usually, documentary audits are carried out at the location of the taxpayer, but in some cases it can be onsite.
- Actual tax audits
These audits are the most complex and time-consuming. It is carried out in order to verify the actual transactions performed by the taxpayer. During actual inspections, tax inspectors check the availability and authenticity of primary documents related to transactions, as well as analyze cash transactions, warehouse balances and other transactions. Usually actual audits are carried out on site.
In addition, audits can be scheduled or unscheduled:
- Scheduled audits are carried out in accordance with the work plan of the tax authorities, while unscheduled inspections are carried out at the request of the taxpayer or if there are suspicions of violations in the taxpayer’s activities.
- Unscheduled audits may be carried out throughout the tax period, while scheduled audits are usually carried out at certain times.
On-site and non-on-site audits are another type of classification of tax audits:
- On-site audits are carried out at the taxpayer’s place of business, in his office or production facility. In this case, tax inspectors have the right to check the availability of the necessary documentation, make copies of them, request information from the taxpayer’s counterparties, and also check the availability and condition of the equipment. At the same time, an on-site audit can take a long time and be accompanied by significant financial costs for the taxpayer.
- Non-on-site inspections, in turn, are carried out at the offices of the tax authorities and are more loyal than on-site audits. As part of a non-on-site audit, tax inspectors check the availability and correctness of paperwork, as well as the status of financial statements. However, if violations are revealed during the audit, the tax authority may move to more stringent measures.
Tax audits are an integral part of the tax system and can be carried out at any time. This allows the state to control the fulfillment of tax obligations of taxpayers and prevent violations of the law. At the same time, tax audits can become a burden for businesses and lead to additional costs for legal services and preparation of documents.
It is important to note that tax inspectors must follow certain rules and procedures when conducting inspections. For example, they must notify the taxpayer of the start of the audit, provide full information about the rights and obligations of the parties, and familiarize themselves with the taxpayer’s documentation and equipment only in the presence of and his representative. If violations are detected, tax inspectors must draw up a protocol on violation, which indicates the facts of violation of the law and the requirements for eliminating these violations.
Grounds for conducting tax audits
The grounds for conducting tax audits may vary, but in most cases it is associated with suspicion of concealment of income or violation of tax laws. Let us consider in more detail the grounds for conducting tax audits.
One of the grounds for conducting tax audits is the verification of personal income tax returns. Such a check is carried out in case of suspicion of concealment of income or incorrect completion of the declaration. As part of such an audit, the tax authorities may request additional documents and information, as well as conduct an on-site audit.
Another reason is to check corporate income tax returns. As part of such an audit, the tax authorities check the correctness of filling out the declaration and the correctness of the calculation of the tax base. If, as a result of the audit, violations are revealed, the taxpayer will be obliged to pay the necessary taxes, and a fine may also be imposed.
Also, the basis is the filing of a tax return with errors or a delay in filing it. In this case, the tax authorities check the correctness of the calculation of taxes and fees.
In addition, tax authorities may conduct audits based on information obtained from open sources, as well as as a result of cooperation with other tax and law enforcement authorities. In case of detection of violations of the tax legislation, the taxpayer will be obliged to pay taxes and possibly a fine will be imposed.
It is also worth noting that tax audits can be carried out at the initiative of the taxpayer himself. In this case, the taxpayer may request a tax audit to confirm the correctness of their declarations and tax calculations.
Another reason for conducting audits is risk analysis. The tax authorities may analyze the activities of an organization or individual for the risks of violations of tax laws. In case of detection of risks of violations, the tax authorities may conduct an audit to make sure that the calculations of taxes and fees are correct.
Tax audits may be carried out in connection with the appeal of the tax authorities to the taxpayer with a request to provide additional documents and information about their activities. Such an appeal may be associated, for example, with the need to verify the correctness of the calculation of VAT or property tax.
Conducting special operations to combat violations of tax laws is also the reason for the audit. Such operations are carried out as part of the cooperation of tax authorities with law enforcement agencies and can be aimed at identifying organizations and individuals that hide income and do not pay taxes.
Finally, tax audits can be carried out in case of changes in legislation that may affect the activities of organizations and individuals. In this case, the tax authorities may conduct an audit to make sure that businessmen correctly apply the new rules and do not violate tax laws.
Tax decisions that can be challenged
In Ukraine, the tax authorities have the right to make decisions on issues that may be challenged by taxpayers in the relevant authorities. The decisions of the tax authorities may concern both the assessment of taxes and fees, as well as tax incentives, sanctions and fines. Examples of tax decisions that can be challenged:
- Decision on the calculation of taxes and fees
- Decisions regarding tax incentives
- Decisions on the imposition of tax sanctions and penalties
It is important to note that in order to challenge tax decisions, you must have evidence of your position. For example, these can be documents, testimonies, expert opinions, etc. Without evidence, the taxpayer will not be able to change the tax decision.
It is also worth noting that challenging tax decisions may be associated with certain risks and costs:
- First, the taxpayer may be faced with a lengthy process for reviewing a complaint against a tax decision, which can drag on for several years.
- Second, legal costs can be significant and may include attorneys’ and experts’ fees, as well as government fees.
However, despite the risks and costs, challenging tax decisions can be justified if the entrepreneur is confident in the correctness of his position and has the appropriate evidence. Do not forget that challenging tax decisions is legal and quite common in Ukraine. Entrepreneurs have the right to appeal the decisions of the tax authorities in the judiciary and protect their rights and interests. At the same time, it is also important to seek the help of qualified tax lawyers in order to protect your interests as much as possible.
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The procedure for appealing the results of a tax audit
In Ukraine, the tax authorities have the right to conduct audits for compliance with tax laws on the part of a businessman. The results of such inspections may be appealed by taxpayers to the relevant authorities. Let us consider in more detail how the results of a tax audit are appealed and what methods of appeal exist.
The first step in appealing a tax audit act is to obtain a copy of the tax decision. This is necessary in order to understand exactly what violations were identified as a result of the audit and what sanctions were imposed. You can get a copy of the tax decision within 10 days from the date of its adoption.
After receiving a copy of the tax decision, the entrepreneur has the right to appeal it to the relevant authorities. An appeal against the results of a tax audit can be carried out in several ways: administrative, judicial or through an interdepartmental complaint.
The administrative procedure for appealing the results of a tax audit involves filing a complaint against the decision of the tax authority with the tax inspectorate that conducted the audit. The tax inspectorate must consider the complaint within 30 days and make a decision on its satisfaction or rejection.
The judicial procedure for appealing the results of a tax audit involves filing a claim with an administrative court. The court must consider the case and make a decision on its satisfaction or rejection.
The third way is through an interdepartmental complaint. In this case, the taxpayer may apply to a higher tax authority or other state authority with a complaint about the actions or inaction of the tax authority that conducted the audit.
It should be borne in mind that appealing against the decision of a tax audit can take quite a long time and require significant costs for lawyer services and examination of documents. Therefore, before appealing the results of a tax audit, it is necessary to weigh all possible risks and assess the prospects for resolving this issue.
The procedure for appealing the results of a tax audit is an important mechanism for protecting the rights and interests of a businessman. Appeal to the court or a higher tax authority can help to change the result of the audit and avoid illegal actions of the tax authority. However, in order to successfully appeal the results of a tax audit, it is necessary to have qualified lawyers and experts able to provide evidence of their position and protect the interests of the taxpayer.
The list of documents required to appeal the act of tax audit
Appealing tax audits is one of the ways to protect the rights of taxpayers in Ukraine. At the same time, it is important to know what documents you need to provide in order to effectively appeal the results of the audit.
- Checking act. This document is the basis for the appeal, as it contains information about violations that have been identified by the tax authorities. The act must be submitted in full, with all attachments and additional materials.
- Tax return. This document contains information about the income and expenses of the taxpayer, as well as the amount of taxes and fees paid. When appealing against a tax audit act, the taxpayer must submit a tax return for the period that was audited by the tax authority.
- Charter of the enterprise. This document contains information about the legal status of the taxpayer, as well as about its goals and objectives.
- Accounting documents. In particular, these can be cash orders, invoices, waybills, etc. These documents contain information about the financial transactions of the taxpayer, which can be used to refute the accusations made by the tax authorities.
- Documents confirming the activities of the taxpayer. These can be contracts with contractors, acts of work performed or services rendered, licenses, etc. These documents can confirm the legitimacy of the taxpayer’s activities and refute possible accusations from the tax authorities.
- When challenging a tax audit act in court, the taxpayer must submit an application and attach to it all the necessary documents that can confirm his position.
In general, the list of documents required to appeal a tax audit report may vary depending on the specific situation. But in any case, the taxpayer must provide evidence of his position and refute the rationale of the tax inspectorate. The more convincing the documents provided, the higher the likelihood of a successful appeal against the tax audit act.
It is important to note that when appealing a tax audit act, deadlines must be observed. In Ukraine, the deadline for filing a complaint against a tax audit act is 10 days from the date of receipt of the act, and for applying to the court – 2 months from the date the taxpayer receives a decision from the tax inspectorate on a complaint against a tax audit act.
Professional legal assistance from Lawrange is the key to successful dispute resolution
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One of the main areas of Lawrange activity is tax law. The company provides a wide range of legal services related to taxation, including advice on tax law, assistance in the tax audit procedure and appealing the results of tax audits in courts. The company’s lawyers have extensive experience in the field of taxation and are always ready to assist in resolving any tax issues.
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Conclusions
Appealing a tax audit is an important tool for protecting the rights of taxpayers. In order to effectively appeal the results of a tax audit, it is necessary to be well aware of the legal rules and procedures.
There are many factors to consider in the appeal process, including the correct preparation of documents, familiarization with the law, cooperation with qualified lawyers, and proper filing of the complaint.
In Ukraine, there are several ways to appeal the results of a tax audit, including filing a complaint against the head of the tax inspectorate, filing a complaint with a higher tax authority, applying to an administrative court, etc.
A successful appeal requires proper legal support, and Lawrange can be a good choice for those who need professional help. The lawyers of the company have extensive experience in dealing with various tax issues and are ready to provide individual assistance to each client.
The general recommendation when appealing the results of a tax audit is timeliness and professionalism. Not only the success of the appeal depends on this, but also the preservation of the business and minimization of risks.
FAQ
What is the risk of a tax audit?
A tax audit can result in fines, additional tax payments, as well as the annulment of tax deductions and a decrease in company income. In case of detection of tax violations, the inspection body may bring the company’s management to criminal liability. Therefore, it is important not to ignore the tax audit and be prepared to conduct it, as well as to have competent lawyers on your side when appealing it.
Is it possible to cancel the act of tax audit?
Yes, it is possible to appeal against the tax audit act and cancel it in case of violations of the rules for conducting the audit or errors in the calculation of tax liabilities. However, for this it is necessary to follow a certain procedure and have a sufficient amount of evidence. It is important to seek the help of qualified lawyers, which can provide legal support and protection of the interests of the taxpayer in this case. In the appeal process, it is necessary to take into account all the nuances and requirements of the law in order to ensure a successful and legal outcome of the case.
Is it possible not to answer tax questions during an audit?
When conducting a tax audit, the tax inspector has the right to ask questions to representatives of the organization and demand the provision of necessary documents and information. However, a representative of the organization has the right to refuse to answer questions if they contradict the law or may lead to the disclosure of trade secrets.
If the tax inspector insists on receiving an answer to a question that may reveal a trade secret, a representative of the organization may send a written request asking for a guarantee of maintaining the confidentiality of information.
