Annual Reports: What Are the Most Common Tax Risks During Preparation?

In practice, company managers very often overlook the fact that every business faces tax risks during the preparation of their annual report—risks the entrepreneur might not even consider. Therefore, we encourage you to address these issues in a timely manner and delve into the details to ensure you are prepared before a State Revenue Service (VID) audit.

These include the following:

• Quite often, we encounter situations where a relatively simple step is omitted during the preparation of the annual report: tax balances in the accounting records at the end of the reporting year are not reconciled with the SRS (VID) balance history. This leads to discrepancies that affect financial data;
• Issues arise in transfer pricing documentation when a company conducts transactions with related parties but lacks evidence that these transactions were carried out at market prices. It is important to remember that if the annual value of transactions with foreign related parties exceeds €250,000, the company must maintain transfer pricing documentation. If this value exceeds €5,000,000, the documentation must be submitted to the SRS (VID);
• Incorrect application of the VAT proportion or separate VAT accounting must also be mentioned as significant tax risks. Companies often do not realize they are performing VAT-exempt transactions, which results in the loss of the right to fully deduct input tax;
• In practice, we often see companies receiving interest-bearing loans but failing to calculate, or incorrectly calculating, the increased interest payments to be included in the CIT base at the end of the year;
• A significant tax risk is the failure to withhold CIT from management and consulting services;

The company manager is responsible for the maintenance of accounting records.

If you require daily support for full-cycle financial accounting and have overlooked these or other accounting-related matters due to a busy schedule, and this is important to you in the long term, feel free to contact us right here on our website!

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