A tax audit by the revenue office need not be a cause for concern. With proper preparation, you can master the audit confidently and avoid costly back payments.
Tax Audit: No Reason to Panic
A tax audit is part of everyday business life. Statistically, every medium-sized enterprise in Germany is audited every ten to fifteen years, with large businesses audited considerably more frequently. The decisive factor is not whether an audit will come, but how well you are prepared for it.
The announcement of a tax audit pursuant to § 196 AO is generally made in writing with reasonable advance notice. Use this time wisely to organise your records and eliminate typical sources of error.
The Ten Most Important Preparation Steps
1. Read the Audit Order Carefully
The audit order contains the audit period, the types of tax to be audited, and the name of the auditor. Ensure that all details are correct. An incorrect audit period can render the entire audit contestable.
2. Compile Complete Accounting Records
Organise all receipts, bank statements, invoices, and contracts chronologically. The principles of proper bookkeeping (GoBD) require seamless documentation. Missing receipts are one of the most frequent points of criticism in tax audits.
3. Review Cash Management
Proper cash management is a perennial issue in tax audits. Check your cash books for completeness and plausibility. Since the introduction of the Cash Register Security Ordinance, tightened requirements apply to electronic cash register systems.
4. Document Transfer Pricing
For business relationships with related parties or affiliated companies, transfer prices must comply with the arm's length principle pursuant to § 1 AStG. Clean documentation protects against substantial estimated assessments.
5. Clarify Private Use of Business Assets
The private use of business vehicles, telephones, or property is a classic area of audit focus. Logbooks should be maintained without gaps and in a timely manner. Alternative flat-rate methods under the 1 per cent rule pursuant to § 6 Abs. 1 Nr. 4 EStG must be correctly applied.
6. Check Entertainment Receipts
Entertainment expenses pursuant to § 4 Abs. 5 Nr. 2 EStG are only 70 per cent deductible and are subject to strict formal requirements. Every receipt must contain the date, participants, occasion, and amount of the expenses.
7. Verify Provisions and Depreciation
Check whether your provisions meet the requirements of commercial and tax law. Depreciation must follow the official depreciation tables. Special depreciation under § 7g EStG requires separate documentation of the prerequisites.
8. Perform a VAT Reconciliation
Reconcile the VAT advance returns with the annual return and the accounting records. Discrepancies are immediately noticed during the audit and lead to queries.
9. Have Employment Contracts and Payroll Records Ready
During payroll tax audits, employment contracts, salary statements, and social security notifications are checked. Mini-job regulations and the correct payment of flat-rate tax pursuant to § 40a EStG deserve particular attention.
10. Involve Your Tax Adviser Early
Inform your tax adviser immediately upon receipt of the audit order. Together, you can identify potential weaknesses and develop a strategy for the audit. The tax adviser can also serve as the point of contact for the auditor.
Conduct During the Audit
Cooperate with the auditor without making premature concessions. Answer questions factually and precisely. Speculation or assumptions have no place in a tax audit. If in doubt, ask for time to consider and consult with your adviser.
Conclusion
Systematic preparation is the key to a successful tax audit. Those who keep their records in order and are familiar with common audit focus areas can face the audit with confidence. At compleneo, we support you in preparing for and accompanying your tax audit — so that you can focus on your core business.
