First Aid in case of Unannounced Tax Audits

The tax authorities have various options for collecting tax information. One of them is particularly useful: an unannounced visit to the (company) premises allows the tax authorities to collect the information at source. Even though this power is subject to conditions, entrepreneurs should prepare themselves for such visits in order to avoid unpleasant surprises.

Avoid surprises

The tax authorities (often the Special Tax Inspectorate) visit your company unexpectedly with a team of inspectors, with or without the police and social inspectorate. They open cabinets and drawers, interrogate staff and copy computer files. A bit taken aback by the situation and the pressure, you or your employee let them do their thing and then wait for the result of the audit.

During such a visit, however, it is important to ensure a thorough follow up of the audit as actively as possible. In that light, good preparation is essential. After all, it is important that you or your employee are familiar with the course of a tax audit, so you can exercise your rights with full knowledge, possibly assisted by a specialized lawyer. This allows the audit to be conducted correctly and serenely.

Registration

Tax officials must have a valid proof of appointment. They are not required to show it spontaneously, but if they do not, you should explicitly ask for it. If the officials do not have a valid proof of appointment, you may refuse them access. Next, ask which company and which period is being audited so the object of the investigation is indisputably established. The tax authorities do not need special authorization to visit company buildings, but they do if they want to visit private dwellings (for example, the manager’s apartment). This requires an authorization from the police court which the tax authorities must be able to present before entering the private area.

Active search right?

The actions of the tax authorities cannot be equated with a criminal search by the public prosecutor’s office, but in practice it feels that way.

During the visit, the tax authorities can check the accounts found on the premises without the permission of the entrepreneur. They may make copies or take the originals with them. Key here is to ensure that the data are effectively related to the audited period.  The tax authorities may also make copies of electronic data such as mailboxes of the entrepreneur and all staff members. In principle, the tax authorities cannot operate the computer, but you can make the copy yourself.

Often substantial disputes arise about the scope of the audit and in particular about the extent of the powers of the tax authorities and the way they exercise them. Tax authorities do not always take into account the remarks of the entrepreneur. It is therefore important that you state all your comments explicitly in the official report about the visit that is drawn up by the tax authorities. For fundamental issues, it may even be appropriate to request the intervention of a bailiff so he can make the necessary determinations (for example, when access to computer files is forced).

After the visit

When the visit is over, you are advised to immediately discuss the audit with your lawyer, so any violations of procedural rules can be established. It is also necessary to draw up a thorough report on the audit that summarizes the course of it. This report must contain all official reports issued by the tax authorities (official report of visit, official report of IT operations, official report of statements, official report of retention, etc.) but also all statements by staff members that were questioned by the tax authorities. At a later stage, this report will serve as a guide for the discussions with the tax authorities and any potential procedures.

Proactivity pays off

An unannounced visit by the tax authorities is something one does not forget easily. You can manage this by proactive screening your organisation, drawing up an internal manual that identifies the internal and external contacts and contains guidelines for all people who (could) come into contact with the tax authorities.

Frank De Langhe – Kim Bronselaer

Published in VOKA – “Ondernemers West-Vlaanderen”, edition 2, February 2018