Tax Audit – How to Prepare?

A tax audit is a review carried out by the Estonian Tax and Customs Board to verify that a company's accounting documents correspond to the submitted tax declarations. A tax audit may be planned or come as a surprise, and a company should always be prepared for one. The best way to prepare for a tax audit is to maintain proper day-to-day bookkeeping. This means documenting all business transactions with source documents, systematically retaining contracts and invoices, ensuring that tax declarations match accounting records, and keeping documents for the period required by law (at least 7 years). During a tax audit, the authorities primarily review VAT declarations and the underlying invoices, payroll records and TSD declarations, the distinction between business and non-business expenses, and the correct recording of representation costs and other fringe benefits. If a tax audit identifies errors or deficiencies, the company must pay the outstanding taxes plus interest, and a fine may also be imposed. It is therefore worth investing in professional accounting services — a good accountant keeps your books in order and helps you successfully navigate a tax audit.