TRD tended not to issue a tax summons asking for a formal tax audit of taxpayers’ accounting and tax records but would instead perform an operational review after an invitation letter wherein the taxpayer is requested to submit the documents and answer specific questions. By not using a summons for tax audits, the tax authority expected to be able to close cases faster by asking the taxpayers to voluntarily amend the tax return and pay additional tax and surcharges without a penalty. However, this process sometimes prolonged the review time longer than expected, especially in cases where a conclusion could be reached between the taxpayer and the tax authority, resulting in extensive negotiations. In this regard, there seems to be a number of outstanding cases under the invitation letters.   Effective from the last week of December 2015, many taxpayers who have outstanding cases with the tax authorities have received summonses for formal tax audits from the TRD if there had previously been disagreement with the tax authorities about voluntarily amending their tax returns. The TRD also advised that a special team has been established in each local tax office area to conduct tax audits under tax summonses. This strategy was initiated in December 2015.   It is also anticipated that in the year ahead, the TRD will be more aggressive in its tax audits, especially in cases of tax refund requests.

If a taxpayer has received a tax summons first they must prepare for a field audit by the tax authority which will normally cover all types of taxes.  There may be additional costs in the forms of a penalty assessment up to 100% of the additional corporate income tax payable, which is not imposed if additional corporate income tax is settled under voluntarily filing of an amended tax return through the operational review under the invitation letter. This is a key difference between an audit under a summons and a tax review under an invitation letter, the former of which results in additional costs from a formal tax audit.  Lastly, an appeal against the notice of tax assessment can be made by filing a tax appeal with the Appeal Committee. Failing a successful resolution at this level, the taxpayer may appeal to the Tax Court. In this regard, if the taxpayer anticipates a disagreement during the tax audit, the taxpayer should prepare supporting evidence for when the case is brought to the appeal committee and the court.