The tax system in Germany is basically divided into entrepreneurs and companies on the one side and private (natural) persons on the other side, both sides need to be aware of tax audits. As a company, you basically only send your profit and loss statement and the tax declarations to the tax office every year. As a consequence, the Financial Authorities conduct just rough checks when receiving the declarations, but do tax audits later on. The tax audits usually have a scope of three years. The tax auditor will check all invoices and if he finds a mistake, this will be corrected. The yearly interest rate for additional taxes is 6%. Penalties are only due when a mistake is based on gross carelessness or on purpose. The frequency and the probability of a tax audit depend mainly on the income of the company, the type of industry and the results of former audits. As a private natural person with income other than business income you hand in all invoices every year with your tax declaration. The tax office checks your reports immediately and comes back with questions right away. As a consequence tax audits are less likely.
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