Tax audit
We will fight for you!
It’s a veritable nightmare: In the middle of a tax audit, the auditor surprises you with a finding – and this finding could become really expensive.
By this point at the latest you should seek external support from specialised lawyers and tax consultants to prevent potential losses for your company. We will gladly fight on your behalf – passionately and professionally:
- As external advisors, we have a different perspective than people who are directly involved. This makes it easier for us to find new solutions.
- As lawyers, we are trained to face the tax auditor on a legal level as well.
- Our negotiations are unaffected by any tension. Even if the mood has deteriorated considerably during an ongoing audit, we regularly succeed at dialogue with the auditor in order to prevent a potential deadlock.
- By bringing in a highly specialised tax law firm, you indicate to the tax authorities that you are ready to fight. The mere prospect of a judicial review of the audit findings often leads to a final meeting, where a mutually acceptable solution is reached.
If the situation escalates: appeals and litigation procedures
Although an external advisor significantly increases the chances of reaching an amicable settlement, even the best legal representation does not always manage to reach a mutually acceptable solution during a tax audit. But even in these cases you can benefit from our support. Namely during the subsequent appeals and legal procedures
It is advantageous if the same lawyer who immersed themselves in the facts of the case during the tax audit also oversees the subsequent proceedings. Their knowledge edge is all the more valuable because in legal procedures the representative of the tax authorities is often familiar with the dispute solely on the basis of the documents before the court.
Top ten questions you need answers to
Your company is currently being audited or the date is imminent? Here are the answers to your most important questions.
What is the difference between a Betriebsprüfung (tax audit) and an Außenprüfung (field audit)?
In Germany, Außenprüfung (field audit) has been the legal term for a tax audit since 1977 (Section 193 of the German Tax Code (AO)). For you this means that the tax audit notice will refer to an Außenprüfung (field audit). But don’t let this confuse you, as it refers to the familiar Betriebsprüfung (tax audit).
How long does a tax audit take?
As is so often the case with questions in tax law, the answer is: It depends. Although it is quite common for a tax audit to be completed within a few days, there are also procedures that drag on for months or even years. So please do not expect the audit to be completed in one day. Such good luck is rare.
What audit period should I expect?
Here too, there are several possibilities. The most common scenario is that a tax audit covers the last three financial years of your company. Occasionally, however, auditors go further back in time, for example when a crime is suspected. For this reason, the Düsseldorf Finance Court, for example, declared a tax audit encompassing eleven years as permissible.
In addition, the revenue office can also carry out very selective audits, for example a special VAT audit.
Our suggestion: The authorities have announced a tax audit of a long period of time? Then you should leave nothing to chance. Talk to a trusted lawyer or tax advisor as soon as possible about the possible reasons to ensure you are well prepared for all eventualities.
Who is audited – and how often?
This question depends primarily on the size of your company. One-person businesses or small enterprises might never make the acquaintance of an auditor. On the other hand, you will almost certainly one day experience a complete audit – also known as a follow-up audit pursuant to Section 4 of the German Tax Audit Regulation (Betriebsprüfungsordnung or BpO) – of your company if you meet one of the following three criteria:
- Your company is a large enterprise. For your information: As of 1 January 2019, for example, a business with sales revenues of more than €8.6 million or a taxable profit of more than €335,000 is considered a large enterprise. The same applies to manufacturing companies with sales revenues above a threshold of €5.2 million or a taxable profit of more than €300,000.
- Your company is a group with external sales of at least €25 million per year.
- Your company can be categorised as an internationally associated company.
What is audited?
The tax office can audit certain types of tax or all of them: income tax, corporate tax, value-added tax, gift tax and/or land transfer tax. Important: According to Section 19 of the German Value-Added Tax Act (UStG), small businesses are not safe from a tax audit, even though the probability is lower than for large companies.
Do tax audits always result in arrears payments?
Not always, but often. In 2016 alone, German tax authorities achieved a fiscal surplus of around 14 billion euros through field audits.
How important is the final meeting at the end of an audit?
As an entrepreneur, you are justifiably entitled to a final meeting after your tax audit. This is where all the findings of the auditor are discussed once again, giving you – or your tax consultant or legal counsel – another chance to convince the auditor of your point of view.
In the following three cases, however, the final meeting at the end of the tax audit can be omitted.
- Your examiner has no complaints and you have every reason to celebrate.
- You have waived the meeting – which we strongly advise against.
- An abbreviated field audit takes place in your company that is limited to the most important bases of taxation.
Is it possible to appeal the audit report?
Upon completion of the audit, the auditor will record their findings in an audit report (“Bericht über die Außenprüfung bei …”). This is your very last opportunity to change the auditor’s mind. Do not overlook this opportunity! Ask the auditor for an objection period (Einwendungsfrist) for the audit report.
This is important because the law does not provide for a formal appeal of the audit report. Only when the tax office has amended the tax assessments on the basis of the report are you entitled to take legal action.
Who covers the cost of a tax audit?
Here the law is merciless: You alone bear the financial burden that arises in your company – due to loss of working hours during the tax audit, for example. You also have to cover the expenses for your tax consultant or lawyer from your own funds.
Is it possible to appeal tax assessments after the audit?
You can appeal an amended tax assessment within one month of its notification . Even though you do not need to be represented by a lawyer in your appeal, it is advisable to seek professional assistance now at the latest. Many (costly) lawsuits can be avoided through good argumentation.