Businesses sometimes face situations where, after a tax inspection, the tax authority requests additional tax payments. These tax reassessments can be significant and in some cases may even threaten the financial stability of the company.
However, in practice the truth is often somewhere in the middle – a company may not necessarily have acted incorrectly, and the tax authority’s initial assessment is not always final.
Therefore, it is important to understand why tax reassessments occur and how companies can protect their interests.
Why Companies Receive Tax Reassessments
Tax reassessments most often arise as a result of tax audits or thematic inspections. Tax authorities review company transactions, tax filings, and accounting documentation. If inconsistencies are identified, additional taxes may be calculated.
Common reasons include:
- incomplete information in VAT declarations
- inaccurately documented transactions
- insufficient evidence supporting the economic substance of transactions
- transactions with high-risk business partners
- incomplete documentation in company sale or restructuring transactions
A particularly risky situation may arise during the sale of a company.
If the transaction structure is not clearly documented, for example if the share transfer or asset transfer is not properly structured, the tax authority may interpret the transaction as a transfer of business.
In such situations, there is a risk that the new owner may be held responsible for the previous owner’s tax liabilities.
Common Mistakes in Communication with Tax Authorities
Many companies make mistakes when responding to requests for additional information from the tax authority.
Businesses often provide incomplete explanations or submit documents without sufficient legal justification. Tax authorities may interpret this as an additional risk factor or even as an attempt to conceal information.
As a result, the initial position of the tax authority may become more strict.
At this stage, a professional approach to preparing documents and building a clear legal argument can be crucial.
How to Reduce Tax Risks in a Company
To reduce the risk of tax reassessments, companies should follow several key principles.
First, tax declarations and accounting documentation must be prepared accurately and submitted on time.
Second, companies should carefully document the economic substance of transactions and maintain evidence supporting the actual nature of those transactions.
Third, in the case of company sales or restructuring, it is essential to structure the transaction properly and prepare the appropriate legal documentation.
If a dispute with the tax authority arises, it is important to prepare legally supported explanations and, if necessary, use available legal remedies.
In practice, well-prepared explanations and supporting evidence can significantly influence the tax authority’s initial position.
Can Tax Disputes with the Tax Authority Be Won?
Many entrepreneurs assume that decisions of the tax authority cannot be challenged. However, this is not correct.
Companies have the right to challenge tax authority decisions through administrative procedures and, if necessary, through the courts.
In practice, there are many cases where tax reassessments have been reduced or even fully cancelled after detailed legal argumentation and evidence have been presented.
Therefore, the key is to assess the situation early and prepare a professional defense strategy.
When Legal Assistance Is Necessary in Tax Disputes
If a company receives a decision on additional tax assessment, it is recommended to immediately evaluate:
- whether the tax authority’s interpretation of the transaction is justified
- whether the documents submitted by the company are sufficient
- whether additional evidence can be prepared
- whether the decision should be formally challenged
Early professional involvement often helps significantly reduce financial risks for the company.
Assistance in Tax Disputes
If your company has received a tax reassessment or a request for explanations from the tax authority, it is important to act promptly and professionally.
RR Law & Finance assists companies with:
- analysing tax authority decisions and tax reassessments
- preparing legal explanations and arguments
- representing companies in communication with tax authorities
- representing companies in tax disputes and court proceedings
If you need assistance in a tax dispute or would like to evaluate your situation, contact us:
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