Polish tax authorities’ inspection powers are defined by law, and businesses have rights to protect themselves during an audit.
What is a Tax Audit and What is its Legal Basis?
A tax audit is a verification procedure outlined in the Polish Tax Code, used to check if taxpayers, payers, collectors, and their legal successors properly fulfill their obligations under tax law. It focuses on the correctness of tax settlements, not a general assessment of the company’s operations.
According to Article 281 Section 1 of the Tax Code, tax audits are conducted by tax authorities of the first instance, including the head of the tax office, and, for local taxes, by the voivode, mayor, or city president. The audit’s purpose is to verify compliance with tax obligations, varying based on the type of tax and legal jurisdiction.
How Does a Tax Audit Proceed? Key Principles
Tax audits are strictly formalized and regulated by the Tax Code. Each stage is directly derived from the law, avoiding discretionary procedures.
Audit Initiated Only by Authorities
According to Article 282 of the Tax Code, a tax audit is initiated solely by the tax authorities. Taxpayers cannot initiate an audit themselves. Authorities, such as tax offices or local government bodies, conduct audits based on statutory powers, often through tax risk analysis.
One Matter – One Audit
A significant guarantee for taxpayers is the prohibition of re-initiating an audit on the same matter concluded with a final decision. Exceptions exist for reopening proceedings, invalidating decisions, overturning decisions by an administrative court, or cases involving overpayments.
Notification of Audit – General Rule
Generally, the tax authority must notify the taxpayer of its intention to initiate an audit. This notification serves an informational and organizational purpose, specifying details of the planned audit.
An audit cannot begin earlier than 7 days or later than 30 days after the notification is delivered. A new notification is required if this timeframe is exceeded.
Audit Without Notification – Exceptions
The law allows for audits to begin without prior notification in situations requiring immediate action by the authority, such as cases involving imminent tax evasion or threats to state revenue.
Authorization to Audit
Every audit must formally begin with a named authorization document, specifying details like the scope, timeframe, and authorized inspectors.
A lack of proper authorization renders the audit ineffective.
What Can an Inspector Do During a Tax Audit and Where Are the Limits?
Article 286 of the Tax Code defines the actions an inspector can take during an audit. These actions are strictly defined and limited to the scope of the audit authorization.
Each action by the authority must meet three basic conditions: it must be related to the audit’s purpose, be necessary, and be proportionate to the matter being investigated.
Inspector’s Powers and Limits in a Company
Inspectors have the right to enter business premises, buildings, and rooms related to business activity, and to conduct inspections necessary for the audit.
They can access tax books, records, and documents related to the audit, create copies, extracts, and download data electronically. They can also collect evidence, secure documents, identify individuals present, conduct inventories, question individuals, and seek expert opinions.
Limits to Inspector’s Powers
Inspectors cannot exceed the scope of the audit defined in the authorization. They cannot demand documents unrelated to the audit, act as law enforcement, arbitrarily secure or copy data, ignore the rights of the entrepreneur, or conclude the audit without a protocol.
What an Inspector Cannot Do During a Tax Audit? Boundaries of Authority
An inspector cannot begin an audit without fulfilling formal requirements. They cannot exceed the audit’s scope, demand irrelevant documents, act like law enforcement, arbitrarily secure data, ignore the entrepreneur’s rights, or conclude the audit without a protocol.
Key Principle – Legality of Authority Action
The most important limit is the principle of legality: the tax authority can only act on the basis of and within the limits of the law. This means they can never act outside of it.
Taxpayer’s Rights During a Tax Audit
A tax audit does not mean losing control over your company. Taxpayers are not passive participants and have specific rights to ensure balance between them and the tax authority. Knowing these rights allows businesses to limit abuse, actively participate in the audit, and respond to actions exceeding its scope.
Summary
A tax audit may seem stressful, but it doesn’t mean arbitrary action by the inspector. The law clearly defines the limits the authority cannot exceed. It’s a procedure where both sides operate within legal boundaries.
FAQ – Frequently Asked Questions
The tax office can conduct an audit when there are grounds resulting from tax risk analysis or other data in the authority’s possession. It generally acts based on the provisions of the Tax Code and within its statutory powers.
A tax audit involves verifying whether the taxpayer properly fulfills their obligations under tax law, including analyzing documents, tax books, and verifying settlements.
Tax audits are conducted by tax authorities of the first instance, including tax offices and local government bodies. They act based on the Tax Code.
The tax authority issuing the audit authorization is responsible for conducting the audit. Designated employees of the authority, acting within the scope of the authorization, perform the audit.
Businesses operating, especially those settling VAT, CIT, or PIT, are most often audited. Audits can also concern taxpayers with unusual or high income.
Tax risk analysis, irregularities in declarations, or discrepancies in data submitted to the tax administration are common causes for a tax audit.
