Every so often, the Ghana Revenue Authority (GRA) may conduct an audit of a taxpayer. And the typical reaction when a taxpayer gets notice of an audit is anxiety, and sometimes fear.
That is perfectly understandable.
However, the best way to combat this is preparation. Start by arranging your affairs on an ongoing basis, so that you are compliant with the tax laws. Prepared or not, you need to remain calm, and approach the audit rationally.
This blog provides guidance on how to deal with an audit so that you achieve a favourable outcome.
What is a Tax Audit?
A tax audit is an evaluation of an organization’s tax returns and underlying records by the GRA. The primary purpose of a tax audit is to give the GRA reasonable assurance that the tax returns are accurate and complete and that the correct amount of taxes has been declared and paid.
It involves ascertaining the accuracy of the returns filed by examining:
- The tax returns.
- The financial statements and the books of account.
- The supporting documentation.
How do you come out of the audit with the best outcome?
1. Know your rights:
You must know your rights and obligations as a taxpayer. The Revenue Administration Act, 2016, Act 915 provides information about your rights.
2. Inform your tax advisor:
Inform your tax consultant immediately upon receiving an audit notification so you will jointly agree venue, date and time for the audit. The tax advisor will advise you on how to organize and prepare your documents. He may also identify risk areas and help to prepare possible responses.
3. Request and communicate a suitable date:
Request a date and time that will be suitable, allowing you time to organize your records before the audit begins.
4. Organize all records:
Keep proper records of all business transactions and documents (such as published accounts, trial balances, purchase and sales records, tax returns, GRA receipts, payroll reports, bank statements, fixed asset register, etc.)
5. Be Brief:
Provide brief, precise and honest explanations to whatever questions that you are asked. You can also consult your tax advisor if you do not have an answer.
6. Queries and disagreements:
Enquire about any disallowances or variations the tax auditor makes that you disagree with. With the help of your tax advisor and accountants, prepare your response for the tax auditor.
7. Interim and final tax audit reports:
Make sure you obtain copies of any interim reports and the final tax audit report. With the help of your advisors, respond in writing to aspects of the report you disagree with and provide further documentation and evidence if necessary.
8. Object to tax report:
Object in writing to GRA, if you disagree with the tax assessment determined by the auditor
You can attempt to negotiate on the amount of taxes determined and the terms of payment. The GRA will consider different factors in deciding whether to negotiate.
We strongly recommend, if you are not a tax expert, that you consult with your tax advisor and seek his help in any negotiations you wish to conduct with the GRA.
10. Keep your tax advisor in the loop:
Be sure to keep your tax advisor in the loop always.
The best time to prepare for a tax audit is every working day. Make sure you understand and comply with the law and always maintain good, organized documentation. If you follow the points outlined above when you are selected for a tax audit, you will improve your prospects of coming out with the best possible result for you and your business.