Virtual Office and Tax Inspection

How Does a Tax Audit Proceed in a Virtual Office?

A virtual office, as a service that allows businesses to register under a specified address, also involves the possibility of conducting administrative activities and proceedings at that location. One of the most frequently asked questions about virtual offices is how tax audits are conducted.

Initially, the entrepreneur receives a notification about the initiation of an audit concerning their company. This notification, once received by the virtual office, is forwarded to the entrepreneur via their specified email address. At this point, it is essential to consider whether the documentation subject to the audit is available at the virtual office. If the documentation is stored elsewhere, it must be brought to the location or the tax office must be informed about its whereabouts.

There are numerous reasons for a tax audit:

• Submitting a request for a VAT refund,
• The VAT refund amount is higher than usual,
• A refund is requested by a taxpayer reporting losses,
• Reporting significant purchases and expecting a tax refund,
• Reporting high turnover with minimal payments,
• Tax declarations that may not align with the truth,
• A large number of tax corrections,
• Significant amounts in intra-community transactions,
• Discrepancies between tax amounts and turnover.

Tax Audits for Foreign Companies and Foreign Nationals

Virtual offices are often used by foreign companies and foreign nationals. This makes it a convenient way for them to conduct business in Poland. However, it may also influence how they are perceived by tax authorities. For example, if a business owner is a UK citizen, their business operations might face increased scrutiny and control activities in the near future.

The process of a tax audit in a virtual office involves standard on-site activities conducted by the tax office. If the documentation is stored at an accounting office, the tax officials are informed of this fact. In such cases, the subsequent audit is conducted outside the virtual office, at the accounting office's location.

Typical audit activities include:

• Verifying VAT compliance with the declaration,
• Verifying VAT compliance with source documents,
• Checking the formal compliance of source documents,
• Auditing intra-community transactions,
• Ensuring the proper application of tax rates.

What Are the Consequences of Ignoring a Tax Audit?

Ignoring a tax audit may constitute a violation, leading to tax-related inconveniences and the possibility of penalties imposed by the tax office. Tax authorities are now familiar with the concept and practice of virtual offices, so they are not surprised when visiting such facilities.

Changes in Legal Regulations

An increased number of audits may be associated with the official interpretation by the Minister of Finance aimed at reducing tax fraud. This can pose challenges for some entrepreneurs. If the tax office finds irregularities, it may result in the denial of a Tax Identification Number (NIP) or removal from the VAT payer registry.

According to the amendment to the VAT Act, the head of the tax office may refuse to register a taxpayer without notifying them. This can occur if false information is provided in the application, the entity does not exist, or there is no way to contact the entity.

A similar situation may arise regarding the issuance of a Tax Identification Number (NIP). If the head of the tax office determines that the business is operated to mislead potential contractors or clients, they have the right to refuse the issuance of a NIP.