Tax audits of enterprises defined as “large enterprises” under the German procedural rules account for the largest part of the additional tax revenue (71 %). This figure has prompted Deloitte to conduct an online survey of large enterprises (i.e. enterprises deriving revenues in excess of 10 million Euro and/or with more than 250 employees), which seeks background information on the additional tax revenue assessed. Representatives from 733 companies participated in the survey.
One group of questions, which focused on identifying the years under audit, revealed that audits concerning income taxes (including transfer pricing) and VAT were currently mainly being conducted for the years 2005 to 2009, whereas wage tax audits were mainly conducted for the years 2008 to 2010. Thus, while wage tax audits are performed in a relatively timely manner, audits concerning the other types of taxes are conducted, on average, five years after the period to which they relate. This delay represents a major burden particularly for taxpayers that have reorganized their group structure or have implemented new IT architecture for their financial reporting/bookkeeping in the interim.
The most common issues regarding general income taxes related to the acceptance of provision expenses, the valuation of fixed assets and constructive dividends. In relation to transfer pricing, companies with nonresident parent companies were most frequently confronted with concerns regarding non-compliant or missing documentation of dealings with related parties. In relation to trade tax, the trade tax addbacks (according to which a portion of certain types of expenses is nondeductible) appear to be the main area of concern. Company events and benefits in kind (identification and taxation) constitute the main issues raised in wage tax audits. In the area of VAT, the main reasons for additional tax payments are incorrect allocations of input VAT, and the lack of supporting evidence in the books of accounts and vouchers for EU and third country supplies.
Source: Deloitte Germany