Areas of focus for German tax audits in 2021

The Regional Tax Office of Nordrhein-Westfalen has published the audit fields of the financial administration for 2021. It can be assumed that the tax offices of the other federal states will set similar priorities in income tax returns and in audits. This can also affect earlier years.
The following audit fields are of particular interest to corporations:

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1. Corporation tax:

• Holdings of other corporations and associations of individuals (§ 8b KStG - German Corporation Tax Act)

This concerns, in particular, the effectiveness of the contracts concluded (including third-party comparison), profit shifting between companies, questions of corporate tax affiliation.

• Loss deduction for corporations (§ 8c KStG - German Corporation Tax Act)

This concerns the recognising of losses of corporations in the event of a change of shareholders or tax-harmful acquisitions of stock and losses that have not yet been compensated, as well as the treatment of restructuring profits.


2. Value added tax (VAT):

• Adjustment of the input tax deduction (§ 15a UStG - German VAT Act)

It will be assessed whether a correctly corrected invoice is available that entitles to an input tax deduction and when the input tax deduction is to be made. In particular, due to the change in VAT rates in 2020, incorrect invoices can lead to the refusal of input tax deduction: wrong tax rate, wrong performance period, etc .. The regulations of § 14 UStG ("Invoices") must be strictly observed.

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