The Director of the Tax Administration publishes every March a tax inspection plan, pursuant to Article 118 of the Law on Tax Procedure. The Authorities follow an advanced risk analysis system and use an organized database, which applies risk assessment practices and criteria to select which taxpayers should be subject to control.
The annual plan is created by determining the degree of risk evaluated by the risk of all taxpayers. To calculate the degree of risk general criteria, such as the amount of turnover and the size of taxpayers from financial statements, are set. As for assessing the risk probability by segments, the behavior of obligator, the VAT and the financial statements and tax returns filed to determine income/income taxes are taken into consideration. Based on these criteria and identified risks, the active taxpayers gathered yearly are more than 500 thousand legal entities and entrepreneurs with fast growing trends
The Annual Control Plan is focusing on high-risk taxpayers as the percentage of planned controls has been increased from 80% to 90% since 2020. What is more, special attention is paid to taxpayers who have expressed a tax credit for several months. The Authorities' capacity exceeds 2000 tax inspections on an annual basis and the audits are focused on the last 2 to 3 years.
The tax inspection plan, for 2019, was specified to:
- taxpayers whose founders are non-residents, their transactions with related parties, and the application of double taxation agreements;
- taxpayers who make status changes and the impact of the transfer of assets and liabilities on VAT and corporate income tax, and
- taxpayers engaged in the trade of petroleum products and the regularity of calculation and payment of excise duties.
However, the gray economy remains a longstanding problem. Controls of recording turnover through fiscal cash registers, by cross checking risk criteria and other applications, as well as controls based on applications and knowledge related to unregistered activities, are performed as part of the fight against the gray economy. It's worth mentioning that controls of recording turnover through the fiscal cash register are performed mainly on taxpayers with large cash circulation amounts.
In conclusion, enterprises presenting tax credits, entities achieving high annual turnovers, and/or performing significant transactions with related parties along with the ones activated in markets of excise (tobacco, petroleum, etc.) are the main targets of inspectors; thus, cooperation with highly knowledgeable advisors to avoid and/or oppose adverse audit findings is considered necessary.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
