What is a tax authority's audit?

December 23, 2022

What is a tax authority's audit?

An audit is something that most entrepreneurs fear. Running your own business is already complicated enough, and the last thing you want is for the tax authority to come in and start checking your books. In this article, we will explain what a tax authority's audit entails so that you can prepare yourself for a potential visit from the tax authority.

What is an audit?

In short, an audit is an investigation by the tax authority into the administration and declarations of your business. An audit usually lasts a few days. The neater and smaller your administration is, the quicker the audit will be. The tax authority always announces an audit well in advance, and they also state which part of your administration they will be investigating. This gives you enough time to prepare your administration, if necessary.

Why does the tax authority conduct audits?

As an entrepreneur, you have a lot of freedom and many tax benefits. However, this also means that you are responsible for the accuracy of your administration. It is not intended that you adjust your administration to pay less tax, but you do have the opportunity to do so. Therefore, the tax authority regularly checks the administrations of companies through random samples. Sometimes there may also be a direct reason for investigating a company's administration.

What types of audits are there?

There are two types of audits: a general audit and a partial audit. A general audit is an investigation where the entire administration is examined. A general audit is almost always initiated by a specific reason, such as unusual items in your submitted declarations, a report from a whistleblower, or an investigation by third parties. A partial audit is more common. This involves examining the accuracy of your declarations for value added tax or wage tax. In the case of a value added tax audit, this includes checking the accuracy of your invoices, applying the different VAT rates correctly, and the reconciliation between your value added tax declarations and your annual accounts. In the case of a wage tax audit, everything related to your employees is examined.

Are you required to cooperate with an audit?

The answer is yes. You are required to cooperate. By cooperating, we mean that you allow the inspectors into the building where your business is located, give them access to your administration, and provide explanations when asked. The inspectors also have the right to make copies of your administration. Furthermore, you must be able to show all the administration that you are required to keep under the record-keeping obligation.

Is it justified to be worried about an audit?

It depends on your administration. In general, it is not necessary to worry about an audit. The tax authority will not punish you for every small mistake. As long as your administration is tidy and you are not doing anything suspicious, there is nothing to worry about. Moreover, you also have a number of legal rights that protect you against the tax authority:

  • You can hire an advisor to help you with your interests
  • You can appeal a decision or lodge an objection
  • The inspector must comply with the general principles of proper administration
  • The tax authority must keep your fiscal data confidential

Ultimately, an audit is not that scary. Because an audit is always announced in advance, you have enough time to prepare. If you still have trouble, you can also seek help from an accountant.