This is an unofficial translation. The official instruction is drafted in Finnish (Verohallinnon ohje verotarkastuksesta, VH/4494/00.01.00/2025) and Swedish (Skatteförvaltningens anvisning om skatterevision, VH/4494/00.01.00/2025).
This guidance describes the tax audit process carried out in accordance with good audit practices. The sequence of the chapters below is designed to match the order of sequence of an actual audit.
This guidance replaces the previous guidance dated 22 January 2018. For the present updated version, the structure and headings were modified and details concerning Finnish legal rules applicable to tax auditing were added. In addition, this version of the guidance also addresses the impact of regulations on data protection.
1 Tax audits: definition and objectives
1.1 General remarks
The tasks of assessing the taxpayers’ taxes and of ensuring that tax rules and statutes are complied with are the responsibility of the Tax Administration (section 2, subsection 1 of the Act on the Tax Administration (Laki Verohallinnosta (503/2010). Tax audits are part of tax control. Tax auditing is an activity conducted by a public authority. The legal provisions governing audits are found in section 14 of the Act on assessment procedure (Laki verotusmenettelystä (1558/1995)), section 24 of the Act on assessment procedure for self-assessed taxes 768/2016 (Laki oma-aloitteisten verojen verotusmenettelystä (768/2016)), section 37 of the Prepayment act (Ennakkoperintälaki (1118/1996)), section 64 of the Car tax act (Autoverolaki (777/2020)), and in the provisions of Decrees related to the above acts.
The Tax Administration conducts tax audits to examine various issues relating to a taxpayer’s taxes. The audits are based on the legal statutes listed above.
In some circumstances, the Tax Administration also conducts audits of another type having the objective data collection for cross-referencing and comparisons. “Comparison data audits” are governed by distinct legal rules (Section 21 of the Act on assessment procedure, section 31 of the Act on assessment procedure of self-assessed taxes). The Tax Administration has issued another guidance on comparison data audits Vertailutietotarkastukset (in Finnish and Swedish).
1.2 Purpose and extent of the tax audit
Audit procedures consist of an investigation of whether correct and sufficient information were provided for the purposes of taxation and fulfilment of the taxpayer’s obligations relating to payments. Audits may concern one or more categories of taxes, tax risks or business transactions. The audit focuses on a period of time relevant to the objectives of the audit. Besides taxes, a tax auditor can additionally review other matters within the Tax Administration’s mandate as referred to by the provisions of section 2, subsection 1 of the Act on Tax Administration.
Tax audits may be ongoing simultaneously with another activity undertaken by other public authorities. An example of such activity is a pre-trial investigation that the police is conducting simultaneously. In these circumstances, as well, the tax auditors perform their work under the powers defined by the tax legislation in force. The auditor’s work focuses on the question whether or not the taxpayer complies with the obligations relating to taxes.
1.3 Taxpayers concerned by a tax audit
In general, audits may be directed toward all natural persons, legal persons, and tax partnerships resident in Finland or other countries, focusing on matters relating to their tax liability and on their status as a taxpayer. A specific area, work site, or place of business can also be audited, in order to identify potential taxpayers or to attain other goals.
2 Obligations to provide and gather information necessary for the tax audit
2.1 Taxpayer’s obligation to provide information
During a tax audit, taxpayers must make available their accounts, records and any other information and documents related to their business, or related to other sources of income, along with any other information and property, as may be needed for the auditors to determine or adjust the taxpayer’s liability to pay taxes, or needed for the processing of an appeal (section 14 of the Act on assessment procedure, section 24 of the Act on assessment procedure for self-assessed taxes, section 64 of the Car tax act). The provisions of Decrees related to the above acts contain detailed rules on the taxpayer’s obligation to present documents (section 3 of the Decree on assessment procedure (Asetus verotusmenettelystä (763/1998)), section 13 of the Decree on assessment procedure for self-assessed taxes, (1355/2016)), section 3 of the Decree on tax audits focusing on car taxes (Asetus autoverotuksen verotarkastuksesta (1036/2020)).
As the overall objective of auditing is to ascertain that tax assessments are correct, the taxpayer is under an extensive obligation to present accounts, records, documentation, etc. All documentation or materials that may have an effect on tax assessment are within the scope of this obligation. The tax auditor will inform the taxpayer during the tax audit as to what materials are necessary to fulfill the scope of the audit.
Accounting books and any other materials subject to disclosure must be presented even if they contain confidential information from the taxpayer's point of view (section 3, subsections 1 and 3 of the Decree on assessment procedure, section 13 of the Decree on assessment procedure for self-assessed taxes, section 3, subsections 1 and 3 of the Decree on tax audits focusing on car taxes).
The presented documentation is studied in order to ascertain the facts that concern the different issues to be cleared up during the tax audit. If the facts needed cannot be satisfactorily examined after the taxpayer has presented the documentation, the tax auditor will proceed to investigate the matter through other methods including interviews with the taxpayer, sending out request letters to obtain additional information, and inquiries to third parties. The facts and information gathered this way will serve as grounds for the decisions to be made in accordance with the legal rules in force.
During a tax audit, the auditors will only ask the taxpayer to furnish them with documentation needed for ascertaining that the assessment of the taxpayer’s taxes is correct. The obligation to present documentation may concern personal data if this is necessary for pursuing the above objective.
The facts in any tax audit can be used for cross-referencing or comparisons for purposes of determining the tax status of other taxpayers, and to examine the tax liabilities of other taxpayers before tax assessments (section 26, subsection 5 of the Act on assessment procedure for self-assessed taxes, section 42 of the Act on assessment procedure for self-assessed taxes, section 70 of the Car tax act).
The Tax Administration will always set out a reasonable deadline for the taxpayer to present the documentation being requested.
Non-compliance with the obligation to present accounts, records, documentation, etc. can be seen as a breach of tax-related obligations, within the meaning of section 26, subsection 2 of the Prepayment act. This may constitute sufficient legal grounds for cancellation of the taxpayer’s registration in the prepayment register.
In the event that no documentation or other materials needed for tax auditing can be made available to the tax auditors, the auditors will conduct the audit based on the information that is available and based on information obtained from third parties. In these circumstances, the Tax Administration may have to assess the taxes by estimation (section 27 of the Act on assessment procedure, section 43 of the Act on assessment procedure of self-assessed taxes, section 75 of the Car tax act). The Tax Administration is in a position to receive assistance from the police when requesting a taxpayer to present documentation for purposes of tax audits (section 93 of the Act on assessment procedure, chapter 9, section 1, subsection 1 of the Police Act (872/2011)).
For more information on the practical aspects of the taxpayer’s obligation discussed above, see section 3.3 Review of the presented records, investigation of tax issues of this instruction.
2.2 Obligations to further establish facts during tax audit
After the taxpayer has fulfilled their obligation to file a tax return, the responsibility of clearing up various tax issues will be shared between the taxpayer and the Tax Administration. Further facts and information are primarily expected from whichever party is in a better position to provide them (section 26, subsection 4, and § 8, subsection 1, Act on assessment procedure for self-assessed taxes, section 65, subsection 1 of the Car tax act).
When a tax audit is ongoing, the taxpayer must assist the audit team in clearing up all the matters covered by the audit. The general approach in this regard is that the taxpayer is always able to provide further information on the taxpayer’s activities to gain or produce income, and on their current financial position.
On the other hand, the Tax Administration carries responsibility for clearing up the taxpayer’s taxation status. Accordingly, the Tax Administration will need to ask the taxpayer to give further information and clarifications necessary for tax assessment and not yet known to the Tax Administration, or obtain them through other methods. If based on taxpayer-provided documentation, etc., the facts and information affecting tax assessment are still unclear, the tax auditors will have to inform the taxpayer of the exact needs for further information considered necessary for resolving the tax issue as required by the legal rules in force. This way, the duty that lies on the taxpayer to provide further information is an extension of the taxpayer’s obligation to present documentation.
The auditors are required to set a reasonable deadline – in view of the nature of the matter – for the taxpayer to fulfil a request for further information, and the auditors can give the taxpayer more time if the taxpayer asks for an extension of time (section 33 of the Administrative Procedure Act (434/2003)).
On the other hand, the legal requirement, which concerns the Tax Administration, to provide further information mainly applies to various facts and details that the Tax Administration has better opportunities than the taxpayer to obtain information on. For example, the opportunities of the Tax Administration to gain access to the different registers maintained by public authorities are better than those of the taxpayer.
The duty to provide further information lies primarily with the taxpayer when the other counterparty, involved in a legal transaction with the taxpayer, does not reside in Finland or is not domiciled here (section 26, subsection 4 of the Act on assessment procedure, section 8 of the Act on assessment procedure for self-assessed taxes, section 65, subsection 1 of the Car tax act).
3 Tax audit procedure
3.1 General remarks
Normally, the tax auditor will notify the taxpayer of the initiation of a tax audit beforehand unless a special reason is invoked for refraining from giving an advance notice (section 14, subsection 2 of the Act on assessment procedure, section 24, subsection 4 of the Act on assessment procedure for self-assessed taxes, section 64, subsection 3 of the Car tax act). In general, the tax auditor will use the telephone or e-mail for notifying the taxpayer. At this time, agreements can be made on matters such as the planned schedule for the audit, the way the taxpayer should deliver the required records, documentation, etc. to the auditors, and the locations where the tax auditors will work. If possible, any preferences communicated by the taxpayer are taken into consideration when decisions are made on when and where to begin the audit.
The tax auditors will first examine the information already collected by the Tax Administration, or available from other sources, before the start of their audit work.
The tax audit concerns the taxpayer’s electronically stored records and materials. In addition to the auditors in charge, the party that asks the taxpayer to deliver records in electronic formats may be an IT tax auditor working for the Tax Administration. The duties of an IT tax auditor are only related to the gathering and processing of data records. When a taxpayer company is audited, it is required to provide its accounting data in a format that permits the establishment of an audit trail, a history of continuous transaction recording in the company’s accounting books.
One way of disclosing records in electronic format to the auditor is to set up a remote online connection with viewing rights. The tax auditors may also ask the company to deliver materials by secure e-mail. As for documentation not stored electronically, an agreement should be made in advance between the company and the auditors on how and where it should be made available or delivered.
Physical locations for tax audit work include the Tax Administration’s premises, the taxpayer company’s premises, or as indicated by the taxpayer, another office or workspace, typically an accounting firm’s premises. If possible, any preferences communicated by the taxpayer are taken into consideration when the Tax Administration selects the audit location. In the event that the auditors are working in the premises of the taxpayer or in the office of an accounting firm, the taxpayer must provide the appropriate facilities, tools and personnel to give assistance to the auditors as needed. It is the taxpayer’s responsibility to deliver all accounting records, books, documentation, etc., which are not electronically stored, to the location where the auditors work (section 4 of the Decree on assessment procedure, section 14 of the Decree on assessment procedure for self-assessed taxes, section 4 of the Decree on tax audits on car taxes).
The auditors will adhere to the Tax Administration's information security guidelines and rules on confidentiality when using or storing the materials delivered.
When a tax audit is ongoing, the Tax Administration can invite a representative of another public authority who is a specialist or expert, to render assistance (section 14, subsection 4 of the Act on assessment procedure, section 24, subsection 6 of the Act on assessment procedure for self-assessed taxes, section 64, subsection 4 of the Car tax act). Typically, assistance is received in situations where the expertise of another authority is required, such as when the precise measurement and marking of a real estate property’s boundary is needed, or when the realistic market value of a company’s stock-in-trade should be determined.
The outcome of a completed tax audit may involve tax adjustments. Whenever the assessment of a taxpayer’s taxes is adjusted, the legal provisions concerning deadlines and other procedures are observed (sections 54 to 60 of the Act on assessment procedure, sections 40 to 51a of the Act on assessment procedure for self-assessed taxes, sections 79 to 86 of the Car tax act). If the error is not particularly extensive, the Tax Administration can refrain from adjusting or reassessing the taxes, or in the reverse case, refrain from making a corrective adjustment in the taxpayer’s favour (section 58 of the Act on assessment procedure, section 50 of the Act on assessment procedure of self-assessed taxes, section 81 of the Car tax act). Fair and equal taxation requires that adjustments should also be made in favour of a taxpayer (section 26, subsection 1, and § 5, subsection 1, Act on assessment procedure for self-assessed taxes, section 65, subsection 1 of the Car tax act).
An audit may reveal facts that make it necessary for the Tax Administration to report a suspected tax offence to the public authority in charge of pre-trial investigations (section 28, subsection 1 of the Act on the Tax Administration), or facts that require immediate precautionary measures to be taken, to preserve assets for covering a tax debt (“Act on how collection of taxes and tax-like charges is safeguarded” — Laki verojen ja maksujen perimisen turvaamisesta (395/1973)). Furthermore, the Tax Administration has the right to report suspected accounting offences to the public authority in charge of pre-trial investigations (section 28, subsection 2 of the Act on Tax Administration). In the context of a tax audit, the auditor can prepare a separate memorandum that addresses the above occurrences before the audit is completed. To make decisions on whether a report concerning a suspected offence should be filed and on representing the Tax Administration at court is the task of other tax officials, not one falling within the tax auditors’ competence.
When the audit is completed, the taxpayer should cancel the audit team’s right of access to the audited company’s accounting system, and the auditors, in turn, will return all the accounting records and other documentation that is on paper back to the company. Likewise, any files, documentation and materials in electronic format will be removed from the Tax Administration’s computer hardware and software when they are no longer needed for conducting the Tax Administration’s task required by law. However, if the taxpayer’s tax assessment is to be adjusted, or if a court of law will later carry out proceedings with regard to a tax offence case, the Tax Administration can keep the records and documentation until such time when the issue is resolved.
3.2 Initial meeting
Whenever possible, a tax audit starts with an initial meeting with the taxpayer or the taxpayer company’s representatives or assistants. In the meeting, the tax audit team will inform the company of the audit plan and objectives (section 2 of the Decree on assessment procedure, section 12 of the Decree on assessment procedure for self-assessed taxes, section 1 of the Decree on tax audits on car taxes). Generally, the team will also learn a few introductory details on the company's business operation or other income-generating operation during the initial meeting, use the opportunity to familiarise itself with the company’s accounting system or records, and with the way the company normally manages its tax affairs.
Typically, the following issues can be addressed at this stage:
- The type, extent and special characteristics of the business operation;
- The identities of any other business enterprises associated or affiliated with the taxpayer company;
- The structure of company ownership and each owner's participation in the day-to-day business;
- The owners' other business affiliations;
- The persons responsible for taxes and accounting;
- The tax-related risks and types of taxes that will be in focus during the audit;
- The chronological periods to be covered;
- The outlook and opportunities for extending the tax audit to the company’s subsidiaries, affiliate entities and other places of business located outside Finland;
Still another typical goal of the initial meeting is to reach agreement on the time frame for the audit, on the premises to be used, and on other plans and preparations. After the initial meeting – or later during the audit – the auditors may visit the company’s offices and other premises to gain further knowledge of the operation of business and to conduct interviews with the employees if necessary.
Dialogue and discussions in the context of the initial meeting and the closing meeting can take place over the telephone or over an online remote connection, etc. when there is no vital need for organising live meetings at the taxpayer company or at the Tax Administration’s premises.
3.3 Review of documentation and investigation of the tax matters at hand
When a tax audit is ongoing, the taxpayer is under a obligation to present its accounting records and other documentation, materials, etc. extensively (for more information, see section 2.1 of this guidance) and the taxpayer is also required to assist the auditors in clearing up and settling the various issues and tax questions covered by the audit (for more information, see section 2.2).
The chronological period for a tax audit procedure may be a single tax year, or a single reportable tax period, or alternatively, a longer period of time. It is possible for the focus of the audit to concern a single category of taxes, or several categories, or alternatively the focus can be restricted to a specific question. In general, a tax audit procedure concerning a definite period and issue should look for answers to the following questions:
- Is there a good match between the information about company business and the records on its accounting books?
- Is there a good match between the tax returns, information returns, and company accounting?
- Are the company’s accounting records and tax returns compliant with both tax rules and accounting rules?
To obtain the answers, the materials or documentation relevant to each tax risk and tax category are examined to an extent deemed necessary in view of the scope of the audit. The materials and documentation referred to above include the company’s annual accounts, the general ledger and the journal, vouchers, records describing company products and business activities, records on production, storage of goods or merchandise, bills of lading, minutes of company meetings, employment contracts, commercial contracts, standing orders, documentation on transfer pricing, correspondence, and internal instructions for the use of the accounting system and comparable other systems.
In the event that the taxpayer is not under a legal obligation to maintain accounting records – in other words, the taxpayer is an individual – the documentation referred to above would consist of the individual’s written notes, contracts, bank statements, invoices, and other documents.
The aim is to settle, already during the audit, all questions identified over the course of the audit as thoroughly as possible. To clear up all the main facts at an early stage of the audit is the interest of both the Tax Administration and the taxpayer. An open dialogue between the parties will facilitate this.
The tax auditors make inquiries of the issues at hand to an extent that is necessary and practical in view of the audit objectives. The auditors may ask the taxpayer to provide information both in speech and in writing. In addition to asking the taxpayer to do so, the auditors may turn to company shareholders, employees, and others. They are also entitled to use photographs and video recordings to gather information. In the event that the auditors make requests to the taxpayer for additional information in writing, and the subject matter is extensive, the auditors will set a reasonable deadline for responding.
The auditors are ready to instruct the taxpayer in matters related to taxes (section 2 of the Decree on assessment procedure, section 12 of the Decree on assessment procedure for self-assessed taxes, section 1 of the Decree on tax audits on car taxes). The instruction and guidance may be given in a spoken form, or alternatively as part of the tax audit report, in writing. In important matters and matters in which there is room for interpretation, the taxpayer may be instructed to submit a request for a preliminary ruling.
3.4 Closing meeting
Whenever possible, after the records, documentation, etc. have been audited, the auditors and the taxpayer or its representatives will hold a closing meeting.
This meeting will focus on the observations made during the audit and on how any issues remaining unfinished should be resolved (section 2 of the Decree on assessment procedure, section 12 of the Decree on assessment procedure for self-assessed taxes, section 1 of the Decree on tax audits on car taxes).
The taxpayer will also be informed of further action and planned time frames. If necessary, the taxpayer is informed of the imposing of taxes, on a tax adjustment, payment arrangement or relief procedure, and of the taxpayer’s right of appeal.
3.5 Tax audit report
After the tax audit is completed, the auditors will draw up a report describing the issues observed during the audit that are likely to affect taxation and outlining the action that should be taken.
The auditors will draw up the report without delay (section 2 of the Decree on assessment procedure, section 12 of the Decree on assessment procedure for self-assessed taxes, section 1 of the Decree on tax audits on car taxes). The auditors will contact the taxpayer to provide information on the planned time frame with regard to the audit report.
The contents of a tax audit report are the following, with account taken of actual circumstances as appropriate:
- The identification information of the taxpayer;
- Within the perspective of the audit observations and necessary action relating to the finished audit work, general information describing the taxpayer’s operation of trade or business;
- Information on audit procedure and scope;
- Information on the accounting books, records and other materials audited;
- Text sections with information on each tax category describing the audit findings relating to them;
- Presentation of the taxpayer-provided additional details and their effects on the conclusions in the tax audit;
- The grounds for the tax adjustment or imposition of taxes that has been decided upon, including grounds for any punitive tax increase;
- Presentation of the guidance given to the taxpayer, and
- The names and positions of the tax auditors who conducted the audit.
The contents of a tax audit report will vary depending on the issue at hand. If needed, there may be documents attached, providing clarification on the issues that were in focus.
3.6 Hearing
After the tax audit report is drawn up, the taxpayer will be given an opportunity to be heard. This will take place before any decisions are made concerning taxation. The taxpayer is always given an opportunity to be heard if plans are made for further action, triggered or motivated by the tax audit report (section 26, subsection 3, and § 7, subsection 1, Act on assessment procedure for self-assessed taxes, section 65, subsection 1 of the Car tax act).
At least two weeks will be given to the taxpayer for a hearing if there is no special reason necessitating a shorter period. For a justified reason, the time limit for giving a response may be extended.
The auditors will send the report to the taxpayer or the taxpayer’s representative, with a request for response. If the taxpayer is declared bankrupt, the auditors will send the report to the administrator of the estate.
If the recipient fails to receive the report, or fails to provide a response, it is not treated as a circumstance that would legally prevent the tax authority from making a decision to impose tax or from making a tax adjustment. After receiving the taxpayer’s response, the tax auditors can make changes to the tax audit report, deemed necessary in view of the response.
For more information on the hearings procedure in taxation, see the Tax Administration’s detailed guidance “General procedural provisions” — Verotuksen yleiset menettelysäännökset (in Finnish and Swedish).
3.7 The tax decision and the taxpayer’s right of appeal
If it is discovered during an audit that some or all of the taxpayer’s income was excluded from an assessment of taxes, or that the taxpayer had declared less tax than what should have been declared, or for some other reason, not enough taxes were paid or too much was refunded, the Tax Administration will adjust the assessment to the taxpayer’s detriment. How reassessment must be performed to a taxpayer’s detriment is defined by the provisions of sections 56 – 56c of the Act on assessment procedure, section 40 and sections 44 to 47 of the Act on assessment procedure for self-assessed taxes, section 40 of the Act on inheritance and gift taxes (378/1940), sections 33 and 33b to 33e of the Act on transfer taxation, and sections 80 to 85 of the Act on car tax.
If it is discovered during an audit that too much tax was assessed, the Tax Administration will adjust the assessment to the taxpayer’s advantage. How reassessment must be performed to such benefit of a taxpayer is subject to the provisions of section 55 of the Act on assessment procedure, section 41 of the Act on assessment procedure for self-assessed taxes, section 41 of the Act on inheritance and gift taxes (378/1940), section 33a of the Act on transfer taxation, section 83a of the Act on excise duties, and section 79 of the Act on car tax.
After the taxpayer has been heard on the issues concerning the audit report, the Tax Administration will make a decision concerning the adjustment, the tax to be levied or the refund to be made. The text of the tax audit report contains the reasons for the Tax Administration’s decision. When a decision concerns reassessment and a part of the decision is constituted by a tax audit report, the Tax Administration will serve it to the taxpayer for information, or to the taxpayer’s representative, or in the case of a company in bankruptcy proceedings, to the administrator. In some circumstances, a punitive tax increase may be imposed in addition to the reassessed tax (Section 32 of the Act on assessment procedure, section 37 of the Act on assessment procedure of self-assessed taxes, and section 92 of the Act on car tax). The taxpayer will also have to pay the late-payment penalty charges. More information on tax adjustments, including deadlines, late-filing consequences and other procedures is available in the Tax Administration’s guidance “Adjusting taxation on the authorities’ initiative” — Verotuksen muuttaminen viranomaisaloitteisesti (in Finnish and Swedish).
After a tax is imposed, it is the taxpayer’s duty to pay it by its due date (section 12 of the Act on tax collection (11/2018)). The taxpayer is under a duty to pay the tax even if an appeal against the assessment decision has been filed (section 67 of the Act on tax collection) unless an injunction order, or interruption of enforcement, is in force, preventing recovery of the owed tax (sections 19 to 18 of the Act on the Enforcement of Taxes and Public Payments (706/2007)). For more information, see the detailed guidance “Suspension of tax recovery proceedings” — Täytäntöönpanon keskeyttäminen (in Finnish and Swedish). Subject to certain conditions, the Tax Administration is in a position to agree on a payment arrangement with the taxpayer (section 41 and section 43 of the Act on tax collection).
An appeal against an adjustment decision and a decision to impose taxes can be submitted to the Assessment Adjustment Board. Instructions for appeal are enclosed with the decision sent to the taxpayer. For more information, see the Tax Administration’s detailed guidance “Appeal procedure applied to the Tax Administration’s decisions” — Muutoksenhaku Verohallinnon päätökseen (in Finnish and Swedish).
After a decision is made relating to a tax audit, and the details of the case are open to legal interpretation, or the economic importance of the case is exceptional, or if for other reasons, the Tax Recipients' Legal Services Unit demands it, the tax auditors are required to inform the Tax Recipients' Legal Services Unit of the decision. This enables the Tax Recipients' Legal Services Unit to make an appeal against the decision if needed (section 24 of the Act on the Tax Administration, section 26 d of the Act on assessment procedure, and section 57 of the Act on assessment procedure for self-assessed taxes). For more information on the forms of co-operation between the Tax Recipients' Legal Services Unit and the Tax Administration’s units in charge of taxation, see the detailed guidance “How the rights of tax recipients are protected” — Veronsaajien oikeudenvalvonta Verohallinnossa (in Finnish and Swedish).
4 How the information-reporting requirement of third parties can be utilised during tax audits
In the context of a tax audit, data can be obtained from parties other than the taxpayer, i.e. third parties. The third-party data expressly collected for purposes of cross-checking (often called “comparison data”) helps the auditors verify the information on the taxpayer’s books, records, tax returns, etc. that the taxpayer had submitted to the Tax Administration. If a taxpayer totally fails to fulfill their obligation to provide documentation or further information, or fulfills the obligation only partially, comparison data may have an important role in the investigation and in the process of resolving an issue.
The Tax Administration is entitled to receive information from third parties under conditions set out by the legal rules in force. While the source of some of the information is the tax returns filed by relevant third parties, other information can be obtained by sending out letters requesting for information, and by conducting comparison data audits (Chapter 3 of the Act on assessment procedure, section 42 of the Act on assessment procedure for self-assessed taxes, chapter 14 of the Act on car tax).
Anyone receiving a request from the Tax Administration to provide information, needed for the assessment of another taxpayer’s taxes, is under a duty to respond to it. It is possible that a request for information concerns an issue for which a legal statute grants the third party the right to refuse to give testimony. However, even in this case, the requested information must be provided if it has a bearing on taxation, its content is related to the financial position of a taxpayer, and if the third party being requested has access to the information (section 19 of the Act on assessment procedure, section 30 of the Act on assessment procedure of self-assessed taxes, section 114 of the Car tax act). The Tax Administration may send out information requests to financial institutions, insurance companies, to the taxpayer’s business partners, and others.
Government authorities and other public bodies may also be requested to provide information in connection with a tax audit. However, it is possible that the information concerns an issue on which, under legal statutes, testimony may not be given because of the public authority’s obligation of confidentiality. Even in this case, the requested information must be provided if it has a bearing on taxation, and its content is related to the financial position of a person. (Section 20 of the Act on assessment procedure, section 30 of the Act on assessment procedure of self-assessed taxes).
Under tax treaties, agreements on administrative assistance, and under EU legislation, data may also be obtained from the tax authorities of other countries.
5 Tax auditors’ other activity relating to tax control
5.1 Requests for information, discussions and co-operation with other public authorities
Tax auditors can engage in other types of activities of tax control in addition to their audit work. For example, they can investigate a tax matter by sending out requests for additional information, and by arranging a meeting to discuss the matter. In these circumstances, the tax auditors’ activity is directed toward a precisely defined issue. Additionally, tax auditors can work together with other authorities to facilitate various types of control action including action that concerns a distinct sector of business activity. When this type of action is ongoing, taxpayers are under a duty to furnish the Tax Administration with any supplementary information and clarifications and present any documents or vouchers that may be required for assessing the taxpayer’s taxes (section 11 of the Act on assessment procedure, section 21 of the Act on assessment procedure of self-assessed taxes, and section 60 of the Car tax act).
The procedures described by this instruction are also adhered to, as appropriate, when tax auditors engage in other tax control activities as referred to above. If a tax issue cannot be cleared up by sending the taxpayer a request for additional information, or by contacting the taxpayer to discuss the issue, the Tax Administration may conduct a tax audit in order to examine the issue.
5.2 Tax audits focusing on the taxpayer’s obligations to report information, audits conducted for obtaining data for comparisons
The Tax Administration is entitled to examine all documents that may contain information falling under third parties’ general or special information-reporting requirements, which information is necessary for fulfilling the duty of a third party to send reports, the duty to act with caution, and other duties. (section 23, subsection 1 of the Act on assessment procedure).
When an audit is conducted under the provisions of section 23 of the Act on assessment procedure, it is the auditors’ objective to ascertain that the third party has fulfilled the duties related to the party’s general and special obligations to report information. These audits monitor compliance with, among other things, the reporting obligations related to construction (section 15, subsections 15 b – 15 d of the Act on assessment procedure) and the obligations associated with international exchange of information (section 17, subsections 17 a – 17 g of the Act on assessment procedure). However, audits of this type are conducted also in other situations, as referred to in chapter 3 of the Act on assessment procedure. Tax audits are conducted with a scope that matches the audit objective. After completion, the tax auditor will give a report on the audit.
As for audits conducted under section 23 of the Act on assessment procedure, the procedures outlined in this guidance are adhered to as appropriate.
The Tax Administration may additionally conduct comparison data audits, as referred to in section 21 of the Act on assessment procedure, to obtain data for comparisons or cross-referencing. With regard to this category of audits, the Tax Administration has issued the instruction “Comparison data audits” — Vertailutietotarkastukset (available in Finnish and Swedish).
6 Tax auditors’ responsibilities
Tax audit is conducted by the Tax Administration’s employee who is an official appointed for this duty through a work order. Tax auditors show the taxpayer their Tax Administration’s staff ID card to provide proof of their powers to carry out the audit.
Tax auditors are not allowed to participate in an audit project if a conflict of interest would arise. A conflict of interest arises, for example, when a tax auditor is family related to the taxpayer being audited. (in reference to sections 27 to 30 of the Administrative Act.)
Auditors are bound by confidentiality that concerns all the documentation processed during the audit (section 4 of the Act on Public Disclosure and Confidentiality of Tax Information, and section 23 of the Act on the Openness of Government Activities). It is in the Tax Administration’s jurisdiction to only disclose confidential documents and details to the parties concerned or additionally, to other parties authorised by law (sections 11 and 26 of the Act on the Openness of Government Activities).
When an audit is ongoing, special attention is given to circumstances that may involve documentation not publicly disclosed, affecting financial instruments and markets, the disclosure and utilisation of which is prohibited because of its nature – inside information. When these circumstances arise, the Tax Administration’s general instruction “Processing of inside information” — Sisäpiiritietojen käsittelyohje will be adhered to (available in Finnish and Swedish).
Tax auditors operate under the responsibility of a state official for the legality of their actions. They carry responsibility for ensuring that the audit is carried out carefully and appropriately (Chapter 4 of the Act on Public Officials in Central Government (750/1994), section 118, subsection 1 of the Constitution of Finland (731/1999)). The tax auditor is also responsible for ensuring that the information contained in the tax audit report and any ensuing tax adjustment or decision to impose tax will present a true and fair view, based on the facts discovered during the audit. The tax auditors must base their proposals and conclusions on careful examination of all relevant matters.
7 The processing of personal data during an audit
All processing of personal data by the Tax Administration is carried out in accordance with the provisions of the General Data Protection Regulation (EU) 2016/67 (GDPR) and Finland’s national legislation providing additional detailed rules (the Data Protection Act (1050/2018)). The Tax Administration also follows the guidelines emanating from the statutes governing the protection of privacy and fundamental rights.
All action taken during a tax audit is subjected to the rules of the GDPR on the processing of personal data and of the national legislation concerning protection of citizens’ private life, the processing of documents, and the processing of data. In accordance with the legal statutes above, personal data is only processed as needed, and only to the extent necessary, for the purpose of examining the tax-related issue.
During a tax audit, personal data can be obtained primarily from the taxpayer (for more information, see section 2 above). The taxpayer is requested to only present information needed for conducting the assessment of the taxpayer’s taxes. Only the personal data needed for the assessment of taxes will be requested. The Tax Administration will evaluate the question of what the necessary information is, and the content of the information to be processed will be determined by reference to the tax rules relating to the issue. It is the Tax Administration’s responsibility to ensure that the data will be adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed.
During an audit, personal data is additionally obtainable from third parties, not only the taxpayer (see section 4 above). In the event that a third party provides personal data, the principles outlined above will be adhered to as appropriate.
The documentation obtained for a tax audit will only be stored for a limited time. The documentation and personal data will be stored for as long as the Tax Administration’s statutory duty requires. After the audit is completed, the documentation is destroyed or – if expressly agreed with the taxpayer – returned to the taxpayer.
The Tax Administration processes all documentation obtained over the course of audits in a manner that ensures adequate protection of personal data. Only the Tax Administration’s officials who are personally authorised for it are allowed to process documentation obtained for purposes of a tax audit.
However, without regard to the legal provisions on protection of personal data and document confidentiality, it is within the Tax Administration’s jurisdiction to process information received and compiled for a distinct tax issue, also for the purpose of performing other tasks as referred to in section 2 of the Act on Tax Administration (section 10 of the Act on the Public Disclosure and Confidentiality of Tax Information).
For more information on how the Tax Administration handles the information related to a tax audit and originating from third parties, on information security and confidentiality, see Data security and the processing of personal data by the Tax Administration.