Tax audits can also take place cross-border. The aim of these so-called Joint Audits is to avoid double taxation, but also the avoidance of double non-taxation.
Companies regularly have cross-border business relationships. With the help of so-called Joint Audits, tax administrations can also operate cross-border during tax audits. Although Germany has concluded double taxation agreements with numerous countries, tax conflicts can still arise, especially in complex cases. Through Joint Audits, more transparency is to be created and legal clarity to be ensured more quickly, says lawyer Michael Rainer, MTR Legal.
Joint Audits involve coordinated bi- and multilateral tax audits that can be conducted upon request. The tax authorities of at least two countries participate in such an audit to carry out an examination in the field of direct taxes either simultaneously or together.
The goal is both the avoidance of double taxation and the avoidance of double non-taxation. More information transparency should be created for this purpose. Double taxation often occurs when the involved countries subject an insufficiently known case with foreign reference to their respective national taxation. Subsequently, it is difficult for companies to defend themselves against such double taxation. Joint Audits aim to prevent the emergence of such a conflict situation leading to double taxation by having the tax authorities of the involved countries jointly ascertain the facts.
A Joint Audit can be initiated by the respective countries’ tax authorities. However, the taxpayer cannot apply for it themselves; they can only actively inform the responsible tax administration that they wish for such a procedure.
The direct exchange of information between auditors allows the Joint Audit to enable a rapid and comprehensive clarification of the facts. This should also establish legal certainty and planning security as early as possible. However, the success also significantly depends on the cooperation of the taxpayers and the involved tax authorities. The advantage for the taxpayer is that they no longer have to look for a bilateral solution with the respective tax authorities themselves, but rather they develop a joint viable solution.
A Joint Audit is conceivable in the future for all cross-border matters in the area of direct taxes.
Lawyers experienced in international tax law can provide advice.
