Responding to a tax authority request

What is happening

The tax office is asking for documents on dealings with a particular supplier, either as part of that supplier's audit or outside any audit at all. It is unclear whether it is entitled to do so, how much to disclose and what this means for the company itself.

A request for explanations has arrived on a VAT return: a mismatch with counterparties' data or a 'gap' in the chain. The accountant is ready to reply that everything is correct, but the tax office needs explanations backed by documents, not reassurance.

The request was noticed late: no acknowledgement of receipt was sent, the reply deadline has almost run out and there is a risk of the bank account being frozen. The procedural side needs to be put right quickly without making mistakes in the reply itself.

What the law says

• Documents requested during an audit are due within 10 working days of receipt of the request (Article 93 of the Tax Code); where that is impossible, the tax office is notified in writing of the reasons and the date for production.
• For a request for documents or information about a counterparty or a specific transaction (Article 93.1 of the Tax Code) the period is generally shorter: five working days.
• Explanations in a desk audit are due within five working days (Article 88 of the Tax Code), and documents supporting the figures in the return may be attached.
• Receipt of a request sent through the electronic channel must be confirmed by an acknowledgement; if this is not sent in time, the tax office may suspend transactions on the company's accounts (Article 76 of the Tax Code).
• As a rule, the tax office may not request again documents that have already been provided to it; the reply need only state when and under which cover letter they were supplied (Article 93 of the Tax Code).
• Failure to provide documents and information on time attracts fines under the Tax Code. The amounts are usually modest, but avoiding a reply almost always heightens the tax office's interest in the company.

What we do

• We analyse the request: its legal basis, the tax control measure involved, the period, the list of documents and whether they are properly described.
• We work out what the company is obliged to provide, what has already been supplied, and where the request goes beyond the tax office's powers.
• We gather and check the documents: completeness, consistency of primary documents with the ledgers and returns, and no contradictions with earlier replies.
• We draft explanations on the discrepancies and disputed transactions: short, to the point, with references to the documents attached.
• We prepare a cover letter with a schedule of documents and, where necessary, a notice extending the deadline or a reasoned refusal on particular items.
• Where the request concerns an audit of a counterparty, we assess what risks follow for the company itself and prepare for the tax office's next steps.

What we will need from you

• The request itself and the acknowledgement of receipt, if it has been sent.
• The return, or details of the period, to which the request relates.
• Documents on the transactions referred to: the contract, primary documents, correspondence, payments.
• Details of what has already been given to the tax office on these matters, and when.
• Contact details for the employees who handled the transaction or prepared the returns.