Polish tax authorities have defined limits during company audits, impacting entrepreneurs’ rights and the scope of inspections.
Tax Audit: What It Is and Its Legal Basis
A tax audit is a fundamental verification procedure outlined in Polish tax law, used to confirm whether taxpayers, payers, collectors, and their legal successors correctly fulfill their tax obligations. Its focus is on the accuracy of tax settlements, not a general assessment of a company’s operations.
Who Conducts Tax Audits?
Tax audits are conducted by first-instance tax authorities, including the head of the tax office, as well as local government officials like mayors or city presidents for local taxes. The specific authority depends on the type of tax and their statutory jurisdiction, with the goal of verifying compliance with tax obligations.
How Does a Tax Audit Proceed? Key Principles
Tax audits are strictly formalized and regulated by the Polish Tax Code. Each stage is directly derived from the law, avoiding discretionary procedures.
Audit Initiated by Authority Only
According to the Tax Code, a tax audit is initiated solely by the tax authority. Taxpayers cannot initiate an audit themselves. Authorities, whether tax offices or local governments, operate within their legal powers, often based on tax risk analysis.
One Matter, One Audit
A significant guarantee for taxpayers is the prohibition of reopening an audit on the same matter that has been definitively decided. Exceptions exist for reopening proceedings, invalidating decisions, administrative court rulings, or overpayment cases.
Notification of Audit – General Rule
Generally, the tax authority must notify the taxpayer of its intent 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 missed.
Audit Without Notification – Exceptions
The law allows for audits to begin without prior notification in situations requiring immediate action, such as preventing tax evasion or securing evidence.
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 Polish Tax Code defines the actions an inspector can take during an audit. These actions are strictly defined and must remain within the scope of the audit authorization.
Each action by the authority must meet three basic conditions: it must be related to the tax law, necessary for the audit, and proportionate to the situation.
Real Audit Powers: Limits on Inspector Access
Inspectors have the right to enter business premises and inspect areas related to business activity. However, this access cannot exceed the scope defined in the authorization.
Inspectors can access tax books, records, and documents related to the audit, create copies, and extract data electronically. However, document requests must be purposeful and linked to the audit’s scope.
Inspectors can gather evidence and analyze financial and operational data, but must demonstrate the relevance of the information to the audit. They can secure evidence, documenting each action with a protocol.
Inspectors can verify the identity of individuals present during the audit if necessary, but cannot conduct routine or mass identification checks. They can request inventory counts of goods, warehouses, or fixed assets, but this is a specific evidentiary tool, not a full inventory.
Inspectors can question the taxpayer, witnesses, and other relevant individuals, but questions must relate to the audit’s subject matter. They can utilize expert opinions in specialized cases, such as valuation or accounting.
Inspectors can request samples of goods and documents for the duration of the audit, providing a receipt. Access to court records, criminal proceedings, classified information, and confidential data is subject to separate regulations.
What an Inspector Cannot Do During a Tax Audit: Boundaries of Authority
An inspector cannot initiate an audit without fulfilling formal requirements. Specifically, they cannot begin an audit “in fact” without proper procedures.
Inspectors cannot exceed the scope of the audit defined in the authorization. They cannot request documents unrelated to the audit, act as law enforcement, arbitrarily secure or copy data, or ignore the taxpayer’s rights.
An audit cannot be concluded without a formal protocol. The most important limit is the principle of legality: the tax authority can only act based on and within the law.
Taxpayer Rights During a Tax Audit
Taxpayers are not passive participants in an audit. The law grants them specific rights to ensure balance between them and the tax authority. Knowing these rights allows taxpayers to limit abuse and actively participate in the audit.
Frequently Asked Questions (FAQ)
The tax authority can conduct an audit when there are grounds based on tax risk analysis or other data in its possession. It operates according to the Tax Code and within its statutory powers.
A tax audit verifies whether the taxpayer correctly fulfills their tax obligations, including analyzing documents, tax books, and verifying settlements.
Audits are conducted by first-instance tax authorities, including tax offices and local government bodies. The responsible authority issues the audit authorization, and designated employees conduct the audit within its scope.
The most common subjects are businesses, particularly those dealing with VAT, CIT, or PIT. Audits can also target taxpayers with unusual or high income.
The cause is usually tax risk analysis, irregularities in declarations, or discrepancies in data submitted to the tax administration. It can also result from routine verification activities or reports from other institutions.
