Tax audits can also be conducted cross-border. The aim of these so-called Joint Audits is to avoid double taxation, but also to avoid double non-taxation.
Companies regularly have cross-border business relationships. With the help of so-called Joint Audits, tax administrations can also engage in cross-border activities during tax audits. Although Germany has concluded numerous double taxation agreements with other countries, there can still be tax conflicts, especially with complex issues. Joint Audits are intended to create greater transparency and ensure legal clarity more quickly, says lawyer Michael Rainer, MTR Legal.
Joint Audits are coordinated bi- and multilateral tax audits that can be carried out upon request. In such an audit, the tax authorities of at least two countries participate to conduct an examination in the field of direct taxes simultaneously or jointly.
The aim is both to avoid double taxation and to prevent double non-taxation. More information transparency is to be created for this purpose. So far, double taxation often occurs when the participating countries subject a fact with foreign relevance, which is insufficiently known, to their respective national taxation. Subsequently, it is difficult for companies to defend themselves against such double taxation. Joint Audits aim to avoid the emergence of such a conflict situation leading to double taxation by having the tax authorities of the participating countries jointly investigate the facts.
A Joint Audit can be initiated by the respective tax authorities of the countries. However, the taxpayer cannot apply for it themselves; they can only actively inform the competent tax administration of their wish for such a procedure.
Through direct information exchange between auditors, the Joint Audit enables a rapid and comprehensive clarification of the facts. This is also intended to establish legal certainty and planning certainty as early as possible. However, the success also significantly depends on the cooperation of the taxpayers and the participating tax authorities. A benefit for the taxpayer is that they no longer have to seek a bilateral solution with the respective tax authorities, but these authorities develop a joint sustainable solution themselves.
A Joint Audit is conceivable in the future for all cross-border issues in the area of direct taxes.
Lawyers experienced in international tax law can provide advice.
