Tax control system as a prerequisite for accompanying controls

The "Accompanying supervision" is out of stock Pilot project "Horizontal Monitoring" originated and represents the Annual Tax Act 2018 Introduced Alternative to ex-post Audits The accompanying control is provided by the permanent Dialogue and the timely Voting between Financial administration and is characterized by a cooperative and transparent organization (e.g., meetings must take place at least four times per calendar year) and is expected to lead to greater cooperation within the organization. Planning and legal certainty Furthermore, it appears advantageous that, within the framework of a so-called Control network then only more a responsible Contact person from the side of Financial authorities should give. One essential prerequisite in addition to exceeding the €40 million in sales revenue in the two preceding economic years preceding the application, there is in the Presence of a tax control system (SKS) in the company. That SKS must be done by the Expert report from a tax advisor or certified public accountant confirmed and is an essential Part of the application on accompanying inspection (details later).

One Tax control system can be done without the prerequisite for participation in the accompanying inspection Advantages bring benefits to the company, as it also from a financial criminal law perspective one Preventive instrument can represent. However, an SKS is usually not isolated It is not introduced, but typically represents a part of a comprehensive internal control system. Consequently, in terms of an interface, Dependence on pre-systems such as accounting not to be underestimated, and in general the Relevance the comprehensive internal operational anchoring of the SKS to be taken into account.

The accompanying control is carried out with 1.1.2019 came into force and is caused by the SKS Examination Regulations In more detail. The regulation includes statements regarding the system of preparing expert opinions, the expert opinion itself (structure, minimum content, etc.), as well as the description/documentation of the SKS. Supplementary materials are provided by a specialist expert opinion from the Chamber of Tax Advisers and Certified Auditors for the preparation of an expert opinion on the SKS.

The Seven Basic Elements of the Tax Control System

1. The control environment;
2. the goals of the SKS;
3. the assessment of the tax-related risks;
4. the control and monitoring measures;
5. the information and communication measures;
6. the sanctions and prevention measures;
7. the measures for monitoring and improvement.

The control environment is defined in a general manner and includes the "demonstrable commitment to Tax honesty"and the goal setting"no abusive design" to be undertaken. It is also important that the tax optimization strategy be put into practice. Operational measures implemented and is also aligned with the company's other goals. Often this is the case Control environment through the Default setting, This is characterized by the awareness of the problem and the behavior of the entrepreneur himself or the top management level.

The Goals and thus the centerpiece of the tax control system consists in the fact that the Basis for calculation for the respective Type of tax is correctly reported and, as a result, the applicable taxes are paid on time and in the correct amount (Motto: "the right taxes at the right time"). In addition, the Risks for significant violations of tax regulations detected in time and prevented In addition to liability risks, financial risks such as Reputation risks for the company and for the individual persons acting on its behalf. Such tax-related risks can, after they have been identified, after their Potential for danger (high, medium, low) are divided into three categories. This is helped by the evaluation based on Probability of entry and the quantitative impact of the risk (in the event of the risk occurring). Furthermore, when assessing the risk, three risk variants Differentiation can be made. For example, a risk can be Mass behavior existing procedures that are routinely handled within the company (e.g., in the area of value-added tax). Similarly, Individual cases present a high risk – either when they have high financial implications for themselves or when the company as a whole has little experience with such matters. After all, it can also the use of IT in the area of taxes present a significant risk (e.g., due to the lack of management of access rights or interface risks).

The SKS Examination Regulations names by way of example Circumstances that can be decisive for the assessment of tax-related risks. These can be found in ongoing business activity of the company lying or, as a matter of fact,. extraordinary factual circumstances These include significant tax changes, restructuring, the introduction of new technologies within the company, as well as the expansion of business activities into new markets or the withdrawal from existing markets. Risks from the ongoing business activity They can, for example, occur in the case of cross-border interest and license payments or also be related to the corresponding reconciliation price documentation.

The Control and monitoring measures As important components of an SKS, they include internal Regulations (e.g., a code of conduct), process descriptions, control definitions, and action instructions. Goals These control and monitoring measures are the Error prevention or the error detection and thus the Minimizing tax-related risks. While the "Information and Communication Measures" element also includes regular training for employees (however, the goal is also to ensure an appropriate level of knowledge and skills), the training activities are not sufficiently detailed. Control awareness to create among the employees), must be included within the framework of the Sanction and prevention measures Consequences for violations of the rules will be established. Depending on the nature of the incident, the company must determine corrective measures, measures to prevent the incident from recurring, and individual consequences for misconduct.

Expert opinion from a WP or StB as a necessary prerequisite

For the Application an obligation to participate in the accompanying inspection must be Expert opinion one to be submitted to an accountant or tax advisor. The purpose and purpose or result of such a Preliminary examination is the proof that an SKS that complies with the legal requirements has been established. Follow-up check and in the event of success, a corresponding assessment must be provided no later than three years later, or in the case of significant changes to the SKS, even earlier.

The initial examination as Due Diligence Review consists of a Design and one Implementation review together. The report after a preliminary examination must include, in addition to a description of the examination procedures carried out, an indication that the Basic elements of the SKS regarding this suitable are, which Successfully fulfilling the tasks and goals of the SKS (for example, to identify the risks of significant violations of tax regulations in a timely manner and prevent such violations of the rules). Similarly, the expert report must confirm that the established internal control system is adequate for the following purposes: three business years It is suitable - of course, on the premise that the framework conditions in the company will not change significantly.

The SKS is appropriate to describe and to document. The scope of the description is regularly determined by the Complexity of processes - moreover, aspects such as the size of the company, the industry, the standardizability of business processes, the degree of internationalization, or the number of management levels are crucial. Description The documents of the SKS are basically the documents Tax Directive, Process documentation and also Risk control matrix to be taken into account. For the Tax Directive It is provided that the basic elements and the objectives of the SKS must be described there and the responsibilities defined. The creation of a Risk control matrix is helpful for documenting the assessed risks and the control and monitoring measures.

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