What is a tax audit?
A tax audit is a review of a taxpayer’s compliance with tax obligations. It may be carried out by a tax authority, for example to verify whether tax returns, settlements, invoices, accounting records and other documents correctly reflect taxable events. In business practice, the term may also refer to an internal or external review conducted before an official inspection, transaction, restructuring or financial reporting process.
In Poland, a tax audit should be distinguished from related procedures such as checking activities, customs and fiscal control, and tax proceedings. Each of these procedures has a different legal basis, scope and procedural consequences. The correct classification is important because it affects the taxpayer’s rights, the authority’s powers, deadlines, evidentiary rules and available remedies.
The purpose of a tax audit is to determine whether taxes have been calculated, declared and paid correctly. This may include corporate income tax, VAT, withholding tax, personal income tax, real estate tax, excise duties, transfer pricing obligations or tax reporting duties. A tax audit may concern a specific period, a selected transaction, a group of transactions or a broader area of the taxpayer’s activity.
What does a tax audit cover?
A tax audit usually involves the analysis of accounting records, tax returns, contracts, invoices, payment flows, corporate documents and internal procedures. The authority or reviewer may examine whether revenue and costs were recognised correctly, whether VAT was properly deducted, whether transactions with related parties were documented at arm’s length, or whether tax exemptions and reliefs were applied lawfully.
In corporate matters, tax audits often focus on high-risk areas such as management services, licensing fees, financing arrangements, intra-group settlements, real estate transactions, reorganisations, mergers, acquisitions and cross-border payments. In VAT matters, the review may include the existence and substance of transactions, the right to deduct input tax, correct invoicing, application of rates and evidence of intra-Community supplies or exports.
For individuals, a tax audit may relate to undeclared income, sale of real estate, foreign income, inheritance or donations, business activity, tax residency or the use of tax reliefs. The consequences of an adverse finding may include tax arrears, interest, additional liabilities, penalties under fiscal penal law or the need to correct settlements.
A well-prepared tax audit response is not limited to providing documents. It requires legal assessment of the authority’s requests, verification of procedural correctness, preparation of explanations and, where necessary, development of a defence strategy. In many cases, the quality of the taxpayer’s first response affects the later course of the case.
When should you use a tax lawyer in a tax audit?
Legal support may be necessary when the tax authority announces an audit, requests extensive documentation, questions the economic purpose of transactions or challenges tax settlements. Assistance is also important when the case involves significant amounts, complex corporate structures, cross-border elements, transfer pricing, VAT fraud allegations or potential fiscal penal liability.
Entrepreneurs should consider consulting a tax lawyer before submitting explanations, responding to protocols, filing corrections or providing documents that may later be used in tax proceedings. Individuals may need support when the authority asks about sources of funds, foreign accounts, sale of assets, business income or tax residency.
Early consultation with a tax lawyer can help avoid procedural mistakes, incomplete explanations, inconsistent documentation and unnecessary disclosure of information outside the scope of the audit. It can also reduce the risk of disputes, additional tax liabilities, penalties and financial losses. In some cases, prompt legal assessment makes it possible to correct errors before they develop into a formal dispute.
Support in tax audit matters
Legal support in tax audit matters may include both preventive and defensive actions. Before an audit, lawyers may help identify tax risks, review documentation and prepare internal procedures. During an audit, they may represent the taxpayer, communicate with the authority, analyse requests and prepare written submissions. After an audit, they may assist with objections, corrections, appeals or litigation before administrative courts.
Support of a law firm in tax audit matters may include in particular:
- analysis of the scope and legal basis of the tax audit or related procedure,
- review of tax returns, accounting records, contracts, invoices and supporting documents,
- preparation of explanations, objections, statements and procedural applications,
- representation before tax authorities and customs and fiscal authorities,
- assessment of risks related to tax arrears, interest and fiscal penal liability,
- support in VAT, CIT, PIT, withholding tax, real estate tax and transfer pricing matters,
- assistance in post-audit proceedings, appeals and administrative court disputes,
- pre-audit reviews for companies, management boards and investors.
Need assistance with a tax audit? Contact us.
See also
- Tax Law
- Corporate tax
- Transfer pricing
- Financial reporting