A tax inspection might happen to your company at any given time. Companies for tax inspection are selected yearly either on purpose or by a draw. A tax inspection might also be done as the result of an anonymous complaint. Tax inspections are very common during the restructuring of a company.
When a company has been selected for a tax inspection, the inspectors give a time for the inspection and they are to have full access to any data that they request during a scheduled period of time. Tax inspectors usually come in two but at times even three might show up. In addition to the balance sheets and profit-and-loss accounts, the inspectors will ask for access to accounting records and ledger books for the period of inspection. Other material will be inspected on the spot. During inspection, the current financial year as well as the previous two financial years will be the focus.
During the tax inspection, the following things will be inspected: VAT practices of sales and purchases, timeshares, various vehicles and related log books as well as the rightful policies and records of representation expenses. The inspectors will also pay particular attention to whether mileage allowances, daily allowances, phone benefits and potential life insurance payments and other voluntary insurance payments are paid correctly.
Although the actual inspection is made from the company’s accounting records, the entrepreneur must appear in person for the conversations at the beginning and end of the inspection. During these conversations the entrepreneur must answer any questions presented by the inspectors. Although these questions are difficult to predict, the best way to prepare for tax inspection is by ensuring all material is included in bookkeeping with sufficient information and in accordance with the law. Your bookkeeper is your working partner in this and will help you in any way possible to prepare for inspection.
Note: Answer only the questions asked by the inspectors, this will work to your advantage.
After the inspection is complete, the entrepreneur will receive a written inspection report to which can be responded to if need be. Once the defense has been processed, tax penalty charges will be sent with interest for late payment accordingly.