The tax audit - companies are exposed to these liability risks

Tax audits are generally not welcomed by entrepreneurs, as they can often be a nerve-wracking experience.
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Tax audit image source: Berthold Brodersen via pixabay

Above all, legal aspects and Possible liability risks play a major role here. Companies should definitely be aware of the liability risks to which they are exposed during a tax audit.

The accusation of tax evasion

During a tax audit, the company's financial records and submitted tax returns are reviewed. Such an audit is carried out to ensure that taxes are correctly calculated and paid to the relevant tax office. Accordingly, one of the biggest liability risks during a tax audit is the discovery of Tax evasion on the part of the auditor.

It is essential that the tax returns submitted are correct and complete. In the event that unreported income or incorrect calculations have occurred, you will be quickly the accusation of tax evasion in the room. It is irrelevant whether the income was forgotten or deliberately omitted from the tax return, as the reason for the omission cannot usually be proven. Any form of tax evasion can have serious consequences for a company. Tax evasion can lead not only to a considerable fine, but also to damage to the image of the company concerned.

What are the consequences of providing false information?

Become as part of the tax audit If incorrect information is discovered, this also represents a considerable liability risk. In addition to deliberate misstatements, incorrect bookkeeping entries also occur time and again. Such false statements are not a trivial offense and are seriously prosecuted by the tax authorities. In addition to financial penalties, there is also the threat of legal consequences for those responsible. It is therefore advisable to ensure that no incorrect entries are made in the bookkeeping. Regular checks are absolutely essential.

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Data security and compliance

During a tax audit, not only the financial situation of the company is analyzed and the information provided in the tax return is checked for accuracy. The company's data security is also subject to a review. A breach of applicable data protection regulations can result in fines and a loss of trust from customers and business partners. After all, they want their sensitive data to be stored securely. Accordingly, it is important to ensure that appropriate data protection measures are taken to protect personal and business information from access by third parties. Many companies need to improve their processes in this area, as every third company has not implemented the Data Protection Regulation seven years after it came into force.

Personal liability for managers

Errors discovered in accounting represent a major financial risk for the company in question. However, it is not only the company itself that is liable, but in some circumstances also the company's managers personally. The reason for this is that managers have a great responsibility with regard to tax compliance and the financial integrity of the company. Accordingly, during a tax audit, not only the bookkeeping is subject to a review, but also the role of managers in relation to tax matters. If the company is found to be involved in tax evasion, executives may be personally liable. This is particularly the case if it can be proven that they were actively involved in the planning or implementation of tax evasion practices.

Important compliance measures

It is possible to reduce liability risks to a minimum during a tax audit. This requires that tax regulations within the company as well as Accounting standards are strictly adhered to. By installing internal control mechanisms, companies can ensure that all financial transactions are recorded correctly. Legal problems can be avoided in many cases by taking a proactive approach.

Professional support from legal advisors

As the tax situation in Germany is complex, it is worth seeking professional legal advice. A lawyer who is well versed in tax law can help companies prepare for a tax audit. A competent lawyer can also provide support in responding to such audits and minimizing legal risks. This increases the likelihood that no high penalties will be imposed after the tax audit has been completed.

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