The Irish tax authorities will typically select returns for audit based on a screening process of examining a taxpayer’s return and supporting documentation for any irregularities or areas of concern, as well as reviewing their tax compliance history. Note, however, that audit targets may also be selected based on certain trade or profession groups for broad examination, and in some cases just random selection, though not often.
There are two types of audits—the desk audit and the field audit.
For items requiring clarification, the Irish tax authorities will typically perform an enquiry, and not a full audit. Enquiries are typically done over the phone or in writing. Voluntary disclosures are allowed during an enquiry.
If a field audit is initiated, a notice letter is sent to the taxpayer, indicating the scope of the audit, the periods covered, and the date and time of the audit. Generally, 21 days notice is given. If the taxpayer needs more time to prepare, a request for a 60-day extension may be allowed.
A typical audit is performed at the taxpayer’s business premises, and will involve the following steps:
- The auditor will explain the purpose of the audit and indicated the approximate length of time needed on the premises
- The auditor will provide the taxpayer the opportunity to disclose any inaccuracies in the tax return - such voluntary disclosure generally results in reduced penalties
- The auditor will then examine the books and records to verify that the figures have been correctly calculated and that the tax return is correct
If the tax returns are found to be mostly correct, the auditor will inform the taxpayer. If adjustments are required, the auditor will quantify the adjustments and the additional tax and discuss the details of how the additional tax arises. After the audit, the taxpayer will also receive explanation in writing.
A final interview will be performed to reach agreement for the final settlement, and once agreed the amount is paid to the auditor.
In instances of suspected serious offenses, an investigation will be initiated with a view for criminal prosecution. When conducting an investigation the Irish tax authorities have broad information gathering powers. The types of actions the tax authorities can take in an investigation include, but not limited to, the following:
- Demand access to a company's underlying records and documents and have the power of entry into any premises in order to examine and, if necessary, remove them
- Require third parties, including financial institutions, to provide information or documents relevant to determining the taxpayer's liability
- Obtain access to the books and records of financial institutions which may be relevant to the tax liabilities of an enterprise or group
- Seek further information from a relevant persons identified by a financial institution
- Freeze assets of a taxpayer held by a financial institution
- Require a financial institution to supply documents and information held by a non-resident entity over which it has control
- Compel any person to make available documents or information which might be relevant to the investigation
The statute of limitations for audit and additional assessments is four years after the relevant year of assessment. There is no limit in cases of criminal acts.