Tax and fiscal control - comparison of procedures

Service-Tax

Entrepreneurs must take into account the possibility of tax authorities checking the correctness of tax settlements. One of the forms of such verification is tax and fiscal control. You should be aware that these are two different institutions regulated in different legal acts.

Tax and fiscal audit

The rules for conducting tax audits are regulated by the Tax Ordinance. Pursuant to the provisions contained therein, the tax control is carried out by the head of the tax office, the head of the tax office, the commune head, mayor or president of the city and possibly the minister for public finances in the scope of verifying the application of the method of determining the transaction price between related entities, recognized by this authority. The purpose of a tax audit is to check whether the inspected entity complies with the obligations resulting from the provisions of the tax law. Therefore, the scope of tax audit has been defined very broadly and may apply to any tax. However, not only the Tax Ordinance regulates the issues of controlling entrepreneurs. Also, the Act on the freedom of economic activity contains a number of provisions on the principles of carrying out inspections at taxpayers, e.g. a provision specifying the maximum duration of inspections at an entrepreneur. According to Art. 83 of the Act on freedom of economic activity, inspections, including tax and fiscal control at the entrepreneur, in one calendar year may not exceed (subject to certain exceptions):

  • for micro-entrepreneurs - 12 working days;
  • for small entrepreneurs - 18 working days;
  • for medium-sized enterprises - 24 working days;
  • for other entrepreneurs - 48 business days.

Procedure for initiating a tax audit

Tax and fiscal control is initiated only ex officio by the control authority. The tax audit procedure begins with notifying the entrepreneur about the intention to initiate an audit.The inspection shall be initiated not earlier than after 7 days and not later than within 30 days from the date of delivery of the notification about the intention to initiate the inspection. In some situations, however, the authority does not notify the entrepreneur about the intention to initiate an inspection, and the inspection itself begins with the presentation of the authorization to conduct the inspection and the official ID card by the employees of the authority.

The day of initiating the inspection is the day of delivering the personal authorization to carry out the inspection along with the presentation of the official identity card to the inspected person. In the event of inability to initiate an inspection due to the taxpayer's absence, the authority calls to appear at the seat of the inspecting authority within 7 days from the date of delivery of the summons. If the person summoned does not appear on time, the control shall be deemed to have been initiated on the day of expiry of that time limit.

Example 1.

Employees of the tax office came to the entrepreneur on February 1 with a personal authorization to carry out an inspection and an official ID. They did not find the entrepreneurs at the address indicated. Therefore, on February 2, a summons to appear within 7 days was sent. The taxpayer received the summons on February 3. Nevertheless, he did not appear at the office. This means that the inspection was initiated on February 10.

By way of exception, it is also permissible to initiate the inspection after presenting the official identity card to the inspected person. It is possible when control activities are necessary to prevent the commission of a fiscal offense or a fiscal offense or to secure evidence of its perpetration. In such a situation, the authorization to conduct the inspection should be delivered without undue delay, but not later than within 3 days from the date of initiation of the inspection.

Completion of the tax audit

The tax audit is completed on the day the audit report is delivered to the audited entity. The report is drawn up in two identical copies. The controlled entity who does not agree with the findings of the inspection may, within 14 days from the date of its delivery, present objections to the report.

Procedure of initiating a fiscal control

The fiscal control procedure described below was valid only until February 28, 2017. On March 1, 2017, the Fiscal Control Act expired and was replaced by the Act on the National Tax Administration, which regulated a new institution - customs and fiscal control.

In the light of the applicable regulations, fiscal control may be carried out by the director of the fiscal control office, the General Inspector of Fiscal Control or the minister competent for public finance. The purpose of fiscal control is to protect the interests and property rights of the State Treasury and to ensure the effectiveness of the performance of tax obligations and other receivables constituting the income of the state budget or state special purpose funds.

The fiscal control is initiated only ex officio in the form of a decision. The date of initiation of the inspection procedure is the date of delivery of this decision. With regard to the notification of the intention to initiate an inspection, the provisions applicable to tax inspection contained in the Tax Ordinance shall apply. The tax inspection authority may also carry out a tax inspection as part of its fiscal inspection.

Completion of the fiscal control

Tax and fiscal audits result in different procedures. Tax audit may end in two ways. First, in the form of a decision when:

  • the findings relate to taxes, the determination or determination of which is the responsibility of the heads of tax offices, excise duty and the minerals extraction tax;
  • the arrangements concern fees and untaxed state budget receivables, the determination or determination of which is within the competence of the heads of tax offices;
  • in the course of pending audit proceedings, the tax liability has expired.

Second, in the form of an audit result when:

  • the findings relate to irregularities in the management of public funds or funds from the EU and international financial institutions;
  • no irregularities were found;
  • the controlled entity submitted a corrective declaration covering the entirety of irregularities.

As you can see, tax and fiscal control are not identical processes. They are performed by various institutions whose responsibilities are regulated by separate procedures.

Customs and fiscal control

The Act on KAS in section V provides for a new type of control, i.e. customs and fiscal control. Pursuant to Art. 54 of the Act on KAS, the customs and fiscal control is to apply to compliance with the provisions of tax law, customs law, provisions on arranging and running gambling games, foreign exchange law, and tax law provisions relating to the production, movement and consumption of excise goods. Therefore, the control performed so far by the directors of fiscal control offices under the Act on fiscal control and the customs control performed by offices and customs chambers under the Act on the Customs Service will be replaced by the customs and tax control performed by the heads of customs and tax offices.

Customs and fiscal control will be initiated ex officio and conducted on the basis of authorization to carry out a customs and tax control. It will not be preceded by the delivery of a notification of the controlled intention to conduct an inspection. The date of its initiation will be the date of delivery of the authorization to conduct a customs and tax inspection. In the event of suspicion that the provisions are not being complied with and the factual circumstances justify immediate carrying out a customs and tax inspection, it will be initiated on the basis of the presented service identity card. Pursuant to Art. 63 above of the Act, the customs and fiscal control should be completed without undue delay, but not later than within 3 months from the date of its initiation.

After the completion of the control activities performed during the customs and fiscal control, the control result is prepared. Delivery of the control result ends the customs and fiscal control.