Fines for skimped paperwork
21.03.2011Company: Amcham
Tax authorities are said to focus on the accounting entities’ duty to disclose financial statements and annual reports during their tax reviews. The duty to disclose accounting data is imposed by many legal regulations, primarily by the Commercial Code and the Accounting Act. The duty to disclose accounts and, for example, also reports on related party transactions is old, well-known and has been underrated for a long time. Yet, many entities do not know of it and quite a lot of companies even disregard it deliberately.
Yes, it is quite disagreeable sometimes if strangers, from the business perspective, look over your "shoulder”. Competitors can compete better with you while trading partners can prepare better. It is easy to be drawn into a feeling that there is more priority and more efficiency in protecting sensitive business data even though it means violating one small formal duty. Moreover, if there’s no penalty for that …
Yet this is the very mistake! There can be a penalty for this. And not just any old penalty. We can skip the rather negligible fines from a Commercial Court in charge of the Commercial Register. Tax authorities supervise the compliance with the duties stipulated by the Accounting Act. And for not disclosing the financial statements, as the Act commands, a tax authority may impose a fine on an accounting entity of up to 3% of the value of its assets. This could be a painful penalty.
Many people could find such a penalty inadequately high. Even tax authorities have found the fines attached to this duty quite harsh. And the Ministry of Finance admits that the nature of the first fines will be rather procedural. Nevertheless, the national budget badly needs to increase income. No matter how, regulations permitting. Considering the number of entities this problem might concern and quite low efforts needed to detect a sinner and enforce a penalty, we could expect that this method will catch the fancy of the tax authorities.
Therefore we recommend checking your Collection of Documents.
