TYPES OF TAX AUDITS
Without a doubt, August 2023 became a turning point for almost all businesses due to the partial lifting of the moratorium on tax audits. But does this really mean that all tax audits are returning? And what should you keep in mind to be prepared?
We have prepared a series of publications on this topic especially for you.
Types of Tax Audits
Let’s start with understanding what types of audits exist.
1. Desk Audit
A desk audit is conducted at the premises of the tax authority solely on the basis of data indicated in the taxpayer’s tax returns and data from:
– the electronic VAT administration system;
– the Unified Register of Excise Invoices;
– the fuel and ethyl alcohol electronic administration system;
– the cash register (POS) data system (СОД РРО).
A desk audit is carried out by tax officials without any special decision from the head of the authority and without issuing an audit notice. The taxpayer’s consent or presence during such an audit is not required.
All tax reporting is subject to desk audit automatically.
2. Documentary Audit
The purpose of a documentary audit is to verify:
– timeliness, accuracy, and completeness of calculating and paying taxes and fees established by the Tax Code;
– compliance with currency and other legislation controlled by tax authorities;
– compliance with labor legislation regarding employment contracts and documentation of labor relations.
A documentary audit is conducted on the basis of:
– tax returns;
– financial, statistical, and other reporting;
– tax and accounting registers;
– primary documents used for accounting and tax purposes;
documents and tax information obtained by the tax authority, including results of audits of other taxpayers.
There are two types of documentary audits:
2.1. Scheduled Documentary Audit
Conducted according to an annual audit plan.
Taxpayers included in this plan are selected based on risk criteria related to possible non-payment of taxes, violation of legislation, etc.
To conduct a scheduled audit:
– the head of the tax authority issues a written order;
– the taxpayer must receive a copy of the order and written notice no later than 10 calendar days before the start of the audit (either personally against signature or by registered mail).
2.2. Unscheduled Documentary Audit
This audit is not included in the audit plan and is initiated only if at least one of the circumstances listed in Article 78.1 of the Tax Code occurs.
As with scheduled audits:
– the head of the tax authority issues a written order;
– the taxpayer must receive a copy of the order before the audit begins.
It is important to note that law enforcement officers are prohibited from participating in scheduled or unscheduled on-site audits of taxpayers unless the audit is related to an ongoing criminal case or operational investigative activities.
3. On-Site (Actual) Audit
Conducted at the location where the taxpayer conducts business or where property or business assets are located.
This audit aims to verify compliance with legislation concerning:
– cash circulation and payment transactions;
– cash register operations;
– availability of licenses, permits, certificates (including excise goods);
– labor legislation and proper documentation of employment relationships.
An on-site audit:
– is conducted without prior notice to the taxpayer;
– may be conducted if specific circumstances listed in Article 80.2 of the Tax Code are present;
– is carried out by at least two tax officials in the presence of a representative of the business or the person performing payment transactions.
In our next publication, we will explain which types of audits are not subject to the moratorium.
06.09.2023
Tax Audits in 2023
