The Tax Agency, in its tax collection work, has various tax procedures to verify and audit the economic activity of taxpayers within the tax administration itself, where it finds its regulatory motivation in articles 117 and 123, among others, of the General Tax Law (hereinafter, LGT).
One of these procedures is the limited verification procedure, a tool that allows the tax administration to review certain aspects of the tax return without carrying out a full audit. In this article, we will explore what the limited verification procedure consists of, how it works and its importance in the field of taxation and tax compliance.
What is the limited audit procedure?
The limited verification is an audit procedure that the Tax Agency regulates in article 136 et seq. of the LGT. This procedure is carried out to verify the correctness of certain aspects of a taxpayer’s tax return without the need to review the taxpayer’s entire tax situation. Unlike a full inspection, which involves an exhaustive analysis of all tax aspects of a person or company, the limited verification focuses on specific and concrete issues.
This procedure is used when the tax administration detects indications of tax irregularities or non-compliance in one or more items of the tax return. Instead of initiating a full inspection, which can be costly and time-consuming, the limited audit focuses on resolving the identified doubts or irregularities.
How does the limited audit procedure work?
The limited audit procedure starts with a notice to the taxpayer informing him that a review of certain aspects of his tax return will be carried out. This notice usually details the items or concepts that will be subject to review. For his part, the taxpayer must cooperate with the Tax Administration by providing the information and documentation requested within the deadline established for this purpose.
During the limited verification process, the Tax Agency reviews the documentation provided by the taxpayer and carries out the necessary checks to verify the correctness of the items being investigated. This process may include the review of invoices, contracts, financial statements and any other relevant documents that provide reliable information about the liquidation of a certain tax.
Once the review is completed, the Tax Agency issues a report with the results of the limited audit. If tax irregularities or non-compliance have been identified, the taxpayer will be notified and given the opportunity to make representations and correct the discrepancies.
Importance of the Limited Audit.
The limited audit plays a fundamental role in the tax system, as it allows the Tax Agency to verify the correctness of tax returns without having to carry out full inspections on all taxpayers. This streamlines the audit process and allows the tax administration to focus on the cases with the highest risk of non-compliance.
In addition, the limited audit promotes transparency and voluntary compliance with tax obligations. Taxpayers who know that the tax administration can review certain aspects of their tax returns are more likely to file accurate returns and comply with their tax obligations.
On the other hand, the limited audit also protects taxpayers’ rights, as it avoids intrusive and costly inspections when they are not necessary to the specific case. This helps to maintain a balance between tax control and the protection of taxpayers’ privacy and rights.
In conclusion, the limited verification procedure of the Tax Agency is an essential tool to verify the correctness of taxpayers’ tax returns. It allows a targeted review of specific aspects, streamlining the audit process and encouraging voluntary compliance with tax compliance. At the same time, it protects taxpayers’ rights by avoiding costly and/or unnecessary inspections. In short, the limited audit is an effective mechanism to guarantee the integrity of the tax system.