Tax assessment and connection are critical components in ensuring compliance and accurate tax collection. In the context of tax law, these terms involve evaluating the declared profits and determining the due tax amount based on submitted returns. This article delves into the processes and regulations governing tax assessment and connection, highlighting the responsibilities of both taxpayers and the tax authority.
The Basis of Assessment
The tax is assessed based on the profits declared in the taxpayer's return. The return itself is considered a tax assessment and an obligation to pay the due tax by the legal deadline. Consequently, the tax is paid based on this return.
Definition of Tax Assessment
According to Article 89 of the tax law, tax assessment involves determining the due tax amount based on the taxpayer's return. The tax authority has the right to adjust the assessment based on the information and supporting documents provided in the return.
Authority to Adjust Tax Assessment
The tax authority can conduct an estimated tax assessment using any available data if the taxpayer fails to submit their return or provide the necessary supporting documents. If the authority possesses documents proving discrepancies in the return, it must notify the taxpayer and conduct an examination to correct or amend the return and determine the taxable income.
Special Case for Tax Assessment
The head of the tax authority, with the finance minister's approval, can assess the tax before the due date if there is concrete evidence that the taxpayer is planning to evade taxes by transferring assets or taking other actions detrimental to tax collection. In such cases, the tax office must notify the taxpayer by registered mail with acknowledgment of receipt about the tax assessment details using the form specified by the executive regulations of this law.
Examination of Returns
Under the second paragraph of Article 90, if the examination of a sample of returns reveals a lack of supporting data and documents, the taxpayer is assessed based on estimated revenues and expenses to determine the taxable net profit.
Could the Tax Payers File Refund Requests
Taxpayers can request a refund of overpaid amounts within five years from the date the right to refund arises.
Accountability for Simulated Transactions
If a tax is assessed on an individual proven to be acting for another person to gain advantages or evade obligations under the law, both individuals are jointly liable for paying the due tax on the profits.
Tax Avoidance Strategies
Tax assessments disregard any transaction primarily aimed at avoiding tax, whether through disposal or deferral. This applies regardless of whether the transaction is a single deal, agreement, promise, or occurs in stages. The real economic substance of the transaction is considered for tax assessment.
Specific Tax Avoidance Cases Determined by the Law
- If the expected profit before tax deduction is minimal compared to the expected tax benefits of the transaction.
- If the transaction results in significant tax exemptions not reflecting the taxpayer's risks or cash flows due to the transaction.
- If the transaction includes contradictory elements that nullify each other.
- The burden of proof lies with the tax authority to show that the primary purpose of the transaction is tax avoidance, while the taxpayer can provide evidence to the contrary.
A committee, chaired by the head of the tax authority or their representative, is formed by the finance minister's decision to review tax avoidance cases. Taxpayers cannot be notified of tax avoidance cases without the committee's approval.
Additional Rights in Favor of the Taxpayer
Correction of Errors
The tax authority must correct any material or accounting errors either on its initiative or at the taxpayer's request. Material errors involve discrepancies between the result and its reasoning, while accounting errors pertain to numerical transfers or arithmetic operations. All errors specified in Article 124 of the law must be corrected unless the assessment has become final.
Annual Examination of Returns
The tax authority must annually examine taxpayers' returns through a sample determined by the finance minister's decision based on the head of the tax authority's recommendation. This provision does not apply to taxpayers not maintaining regular books and accounts per Article 78 of the Income Tax Law.
No Re-examination Unless New Facts Emerge
Returns previously examined cannot be re-examined unless new substantial facts warrant a re-examination. The tax authority must provide reasons for re-examination based on Article 133 of the law.
Conclusion
Tax assessment and connection are pivotal in the tax collection process, ensuring that taxes are accurately determined and collected based on declared profits. The tax authority plays a crucial role in verifying the accuracy of returns and addressing discrepancies to uphold the integrity of the tax system. Adhering to these regulations ensures fairness and transparency in tax administration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.