Financial administration control activities in 2024: less widespread, more targeted

We would like to inform you about current trends and information in the area of tax audits, as reported in the published annual report of the Financial Administration for 2024.

The current trend shows that less comprehensive audits are being replaced by targeted interventions in risky areas and sectors of the business environment.

The Financial Administration's annual report for 2024 confirms this change in approach to audits. Compared to the previous year, the number of VAT audits increased, while the number of audits for other taxes decreased. Audits are focusing more on areas with a higher risk of irregularities and are more likely to result in additional tax assessments.

In 2024, a total of 9,757 tax audits were completed, during which the Financial Administration assessed approximately CZK 6 billion in additional taxes. Most of the audits (5,779) were conducted in the area of VAT, where additional taxes amounted to more than CZK 4.2 billion. In the case of corporate income tax, 1,653 audits were completed with additional tax assessments of CZK 1.17 billion, and in the case of personal income tax, 1,463 audits were completed with additional tax assessments of CZK 243 million.

As part of the procedures for removing doubts (POP), 6,937 proceedings were concluded, of which 4,114, or approximately 60%, led to a change in tax liability. The total change exceeded CZK 1 billion, of which CZK 444 million represented an increase in tax liability and another CZK 631 million represented a reduction in excessive deductions.

The focus of audits in 2024 was relatively broad. In the case of VAT, the main areas of focus were chain fraud, verification of deduction claims, unreported taxable transactions, and the completeness of intra-Community transactions.

In the case of corporate income tax, audits focused on unjustified expenses and deductible items, non-inclusion of revenues, and transfer prices.

In the area of personal income tax, in addition to unreported income, errors in tax records, and non-deductible expenses, the eligibility of spouse deductions was also audited. In the area of dependent activities and related insurance contributions, cases of illegal labor supply were a frequent topic.

The Tax Echo project had a significant impact on audit activities. This tool allows the tax administration to notify taxpayers of identified discrepancies and give them the opportunity to voluntarily correct them without initiating a traditional audit. In the first phase of this project, more than 60% of taxpayers responded to the calls, which shows that a large proportion of discrepancies are now resolved without a formal audit.

Audits are increasingly supported by the use of data and analytical tools. The financial administration draws information from its own records and registers, as well as from VAT control reports, financial statements, international information exchange, and communication with banking institutions. Data from internet platforms and other public sources are also used. Thanks to this interconnected data, audits are more targeted and focused on cases that actually pose a risk.

Tax crime remains the most serious form of economic crime. In 2024, the financial administration referred cases of illegal work, tax evasion on imports of goods, and fictitious transactions to criminal prosecution.

In view of the targeted interventions of the financial administration in risk areas, we recommend that selected areas be examined, for example, through a simulated tax audit, in which our specialists are able to identify potential risks and negotiate remedies even before the actual audit procedure begins. Interested in more information? Do not hesitate to contact our tax team.