The taxpayer has various legal remedies at different stages of a tax audit. The taxpayer’s most important remedies during a tax audit are the right to be heard, the right to receive information, the right to use an assistant and the right of appeal.
The taxpayer must be notified in advance of the time and place of the tax audit, unless there is a special reason for a different procedure. (Act on Assessment Procedure 14 §). This gives the company the opportunity to prepare and ensures that the necessary materials are available. The authority may depart from this advance notice only in exceptional cases.
During the tax audit the taxpayer must, as far as possible, be informed of the audit and any further measures and any matters arising during the audit must be clarified (Decree on Assessment Procedure 2 §).
At the request of the Tax Administration, the taxpayer must produce for inspection in Finland their bookkeeping, notes and all material and property related to their business or other income generating activity, as well as any other material that may be necessary for their taxation or for handling an appeal concerning their taxation (Act on Assessment Procedure 14 §). However, the tax auditor may not request just any material, it must be necessary for carrying out the tax audit.
During a tax audit, the obligation to clarify matters is shared between the taxpayer and the tax auditor. The taxpayer must participate in clarifying matters relating to the audit to the extent possible. A reasonable amount of time must be given for providing clarification, which may also be extended at the taxpayer’s request. It is the Tax Administration’s obligation to show, for example, that certain income is missing from the sales recorded in the bookkeeping.
A closing discussion is held at the end of the tax audit, where the auditors present their findings and any matters that may still require further clarification from the company. The taxpayer should be given the opportunity to prepare for this discussion by receiving a summary of the findings and planned tax measures in advance. Actively participating and presenting own position with justification during the audit can significantly affect its outcome.
After the tax audit report is completed, the taxpayer is given the opportunity to be heard before the tax decision is made. The taxpayer is always heard if the audit report proposes measures. When hearing the taxpayer, they must be told which matters in particular they should provide explanations for. In practice, the taxpayer is asked to respond within a set deadline to the matters raised in the audit report.
Good tax audit practice must be followed at every stage of the audit. Good tax audit practice includes the audit proceeding according to established stages, the taxpayer being heard during the audit and a tax audit report being prepared. The audit must also be carried out so that it causes as little disruption as possible to the taxpayer and their business.
The taxpayer has the right to use a legal assistant during a tax audit. Tax legislation is complex and open to interpretation, and it is therefore advisable to involve an outside assistant in the process, who can help identify the necessary materials and assist with preparation.
Another legal remedy available to the taxpayer after the audit is the right of appeal. A tax decision is always first challenged through a request for adjustment handled by the Board of Adjustment. If the taxpayer is not satisfied with the adjustment decision they, can further appeal to the Administrative Court. From the Administrative Court’s decision, the taxpayer can appeal to the Supreme Administrative Court if it grants leave to appeal.
Even though tax authorities have extensive supervisory powers, the taxpayer also has strong legal remedies at every stage of the audit and afterward. The earlier any uncertainties are resolved, the more smoothly the audit proceeds.
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