Tax audits often begin with the review of specific tax positions. In many cases, however, they develop into broader questions concerning the structure of a company or ownership arrangement.
Typical areas include:
- shareholding structures
- internal service arrangements
- financing structures
- corporate governance arrangements
In such situations, the focus is no longer limited to individual tax issues but increasingly concerns the legal assessment of the underlying structure.
For companies and shareholders, this can create considerable uncertainty. Tax authorities attempt to determine whether the structure has a legitimate economic rationale or whether adjustments are required.
An additional legal analysis can help explain the structure, its background and its legal framework in a coherent and transparent manner.
In many cases, the issues raised during a tax audit do not concern individual transactions alone but rather the underlying legal and organisational structure of a business. Corporate arrangements that were originally designed primarily from a tax perspective may come under closer scrutiny once the authorities analyse how the structure functions in practice.
This is particularly relevant where several companies, shareholders or cross-border elements are involved. A structured legal review can help clarify whether the existing arrangements correspond with corporate law requirements and whether the legal documentation adequately reflects the economic reality of the structure.
More information on the interaction between legal and tax perspectives can be found under Cooperation with Tax Advisers.
Tax audits often involve structures with international elements. See “Cross-Border Matters Require Coordinated Legal and Tax Perspectives.”
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Author: Sabine Unkelbach-Tomczak is a German attorney (Rechtsanwältin) and certified specialist lawyer for tax law. Her advisory work focuses on legal issues at the intersection of tax law, corporate law and cross-border matters.
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