January 11, 2018
The Tax Protection Manual is a collection of useful information & practical tips for healthy business. In the following we update you on the investigation and control procedures used in tax inspections. Once you know them, you’ll be ready for the tax inspection.

As stated in the last article of the Tax Protection Manual, the conduct of interventions on the ground, the most important part of the tax inspection has 4 approaches, respectively:

legal approach
economic approach
financial approach
accounting approach
In that article we went through the first 3 approaches, and in this article you will find relevant information about the accounting approach:

Class 3 – Inventory and production accounts in progress
Objectives pursued:

Reality and legality of acquisitions;
Determination of the entry value at the entry into management;
How to register primary documents in centralizing documents;
How to record price differences;
How to make trade discounts;
Justification of specific consumptions;
Accounting and operational method of discharge from management;
Making inventory and valuing results.

Nature of the investigation:

– it is verified whether the accounting record of the value of goods of a stock nature is based on a supporting document (especially in the case of purchases from natural persons) i.e. that the documents underlying the registration in the accounts fulfil the status of supporting document;
– verify that the means of transport entered under the heading “Shipment data” have the capacity to transport the quantity entered on the invoice. If not, the existence of notices accompanying the goods will be followed. In case of suspicions about the reality of the acquisition, proceed to:

1. verification of the quality of the supporting document of the supply document. The issuer of the invoice can be a company that no longer exists and there is certainty that the transaction in question has not been recorded in the accounts. Cross-checks will be required at suppliers of goods of a stock nature;
2) verification of the data entered under the heading “expedition data” (persons and means of transport) by requesting information from the police;
3) check the consistency between the value consumptions recorded on the consumer vouchers (corresponding to the quantities and prices entered on them) and the amounts recorded in the expense accounts (601,602,603).
4. verify that stock records have been drawn up for all types of stocks purchased (by types and prices) and the quantities on the purchase invoices correspond to the quantities entered from the stock records. In the case of the purchase of goods and packaging, it shall be verified that notes of receipt and finding of differences have been drawn up for it, their consideration being recorded also in the Daily Management Report, in the case of retail trade;

5) check how to carry out the inventory from the way of recovery of the inventory, respectively the recording of the inventory pluses and minuses found, with the related tax implications. In this respect, the consistency between the quantities representing the final stock of the goods of the nature of stocks in the stock records will be verified with those entered in the analytical balances of stocks (monthly) and those entered in the inventory lists (at the end of the year);

6) check how the depreciations are calculated, i.e. whether they are calculated separately for each item, for a group of similar items, for an entire category of items in stock or for products related to that sector of activity, or whether they are calculated globally for the totality of the company’s stocks.

Investigations carried out on this class of accounts can be extensiveand and deepened to a large extent depending on the complexity and volume of the company’s commercial operations.

Nature of the investigation:

– identification of suppliers who are also customers to analyze purchases with increased price or sales with reduced price, excessive or non-payment of fees by not invoicing fees (patent, technical, commercial, administrative assistance); taking various fees attributable to a foreign entity (unequal distribution of common fees, transfer of the cost of guarantee of marketed goods, unbilled advertising fees), services offered free of charge to a foreign subsidiary;

– check whether the suppliers are operating at the declared head offices or at the points of work; if they have filed declarations with the tax authorities, if they have been declared inactive during the period during which the documents subject to verification were issued;

– if the invoices contain all the elements provided for in Article 319 of the Tax Code;

– if the operations entered on the documents are real (they took place);

– if goods supplied, executed works or services have been registered for which no invoices have been issued; if these are necessary to carry out the object of activity of the verified company- check the monitoring of the evidence of documents with special regime and other delivery documents; cross-checking with clients if there are suspicions about the reality of operations;

– check the age of the clients (prescribing), following the existence of the confirmation of the balance at the time of inventory; causes of non-cashing;

– check the way of extinguishing the advance by the actual invoicing of the delivered products, services/works rendered;

– check on the MFP website whether the entity is registered for VAT purposes and the date of registration. If it is not registered, check that it did not have the obligation to register;

– check suppliers at the Trade Reg. and ANAF databases (especially if they are declared inactive or non-VAT payers);

– verify that the transactions entered in the purchase invoices are intended for use for taxable operations;

– if the entity shows a balance for the VAT account to be refunded, the reason for this situation will be determined. In this respect it is determined what economic operations are carried out by which the deductible VAT is generated higher than the VAT collected.

Investigations carried out on this class of accounts can be extensive and deepened to a large extent depending on the complexity and volume of the company’s commercial operations.

Specific documents to verify:

invoices, notices accompanying goods, purchase slips, tax receipts issued by taxed cash registers, contracts, work situations, insurance contracts and policies, orders, roadmaps, other transport documents, import customs declarations and finding documents issued by customs bodies, bank documents, cash documents, clearing orders and minutes – in the case of compensations, accounting notes underlying its preparation, inventory file, large book register, cash register, bank register, account sheets, verification balances, tax and tax declarations, journal register, inventory register, balance sheet

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