Business Tax Audit: How It Works and How to Prepare

Why Audits Are Increasing at This Time

The tax administration may issue a tax assessment within five years from the end of the year in which the filing deadline expired. For cases concerning the 2020 tax year, this means AADE must have notified the relevant acts by 31 December 2026, which is why these cases are being prioritised. In certain circumstances, such as tax evasion or the presentation of new evidence, a longer limitation period applies.

How a Business Is Selected for Audit

Selection is largely based on electronic data cross-checks. AADE compares the information declared by the business with information from multiple sources:

• Documents transmitted to myDATA
• Income tax, VAT and E9 declarations
• Bank account and payment institution data
• Data from digital platforms, such as short-term rental platforms
• Discrepancies between declared income and wealth or bank-account activity

The Stages of a Tax Audit

A tax audit does not end with a single decision; it passes through successive stages, each with its own deadline:

1. Audit order and notification to the business
2. Request for records and accounting books
3. Provisional tax assessment based on the initial findings
4. Objection period, during which the business may submit its views and evidence
5. Final tax assessment act
6. Right to an administrative appeal before the Dispute Resolution Directorate against the final act

Time is crucial: every right must be exercised within the corresponding time limit, otherwise it is lost.

A Practical Example

Suppose a trading business has transmitted annual revenue through myDATA that is €8,000 higher than the revenue declared in its income tax return. The difference may be caused by a simple accounting discrepancy, such as credit invoices that were not recorded correctly, but an unprepared business risks having the difference treated as undeclared income, with tax and additional charges.

By contrast, a business that keeps an organised archive and documents the credit invoices during the objection period can show that the difference is accounting-related rather than taxable, avoiding the additional tax. The amount is illustrative, but the same reasoning applies to many real cases.

6 Preparation Steps Before an Audit

1. Check that the data transmitted to myDATA agrees with your income tax and VAT returns.
2. Organise supporting documents by year so they can be produced immediately.
3. Document every credit invoice, discount or correction with the corresponding record.
4. Check that all required returns, including VAT, income tax and E9, were filed on time.
5. Record and explain any significant bank transactions that are not immediately evident from your books.
6. Appoint a person or accounting firm in advance as the contact point for any communication with AADE.

What to Do If You Receive an Audit Order

1. Do not ignore or delay any notification because the deadlines are binding.
2. Contact your accountant immediately before providing any information.
3. Request access to the audit file and review it carefully.
4. Submit objections within the prescribed deadline, with evidence for every point you dispute.
5. If a final act is issued, consider an administrative appeal without delay.