A VAT Health Check is a preventive audit procedure aimed at identifying and eliminating a company's tax risks before the Revenue Service discovers them. In Georgia, the statute of limitations for tax purposes is 3 years, meaning an audit can check any period within the last 3 years. Often, accounting errors accumulate over years and become systemic. For example, incorrect declaration of input VAT or misclassification of exempt operations might be discovered years later, leading to catastrophic fines. A VAT "Health Check" is essentially a mock tax audit where independent experts review your documentation using the same methodology employed by the tax authority.
What Does VAT Health Check Service Cover?
Auditors and tax consultants on Legal.ge offer detailed diagnostics, which include:
- Declaration Review: Comparing VAT declarations from past periods (usually the last 3 years) with primary documentation and financial statements.
- Input VAT Validation: Checking the correctness of claimed credits—whether invoices are uploaded, confirmed, and related to economic activity.
- Proportional Rule Check: If the company has mixed operations, checking whether the deduction proportion was calculated and applied correctly.
- Documentation Completeness Control: Reviewing contracts, invoices, and acceptance acts to determine their compliance with Tax Code requirements.
- Risk Mapping: Classifying discovered flaws by risk level and providing recommendations for their correction (e.g., filing an amended declaration).
Common Situations and Scenarios
Diagnostics are particularly relevant in several scenarios. First: the Chief Accountant or CFO is changing. The new management wants to know what "legacy" they are inheriting to avoid liability for old mistakes. Second: the company plans to request a VAT refund. Before sending the request, a check is critical because refund claims often trigger a tax audit. If the audit finds errors, instead of a refund, the company will be fined. Third: company sale or merger. An investor requests Tax Due Diligence to ensure they are not buying a company with hidden tax liabilities.
Georgian Legal Framework
Diagnostics are based on the norms of the Tax Code of Georgia regarding audit and inspection. Article 4 of the Code defines the statute of limitations (3 years). The diagnostic process uses International Standards on Auditing and methodological guidelines of the Revenue Service. It is important that if an error is revealed during diagnostics and the company files an amended declaration before receiving a tax audit notification, it will not be fined (only interest applies), which is the main financial benefit of the health check.
Step-by-Step Service Process
When inviting an expert via Legal.ge, the process begins with granting access to databases (RS.ge, accounting software). In the first stage, remote analysis of data and identification of "Red Flags" takes place. In the second stage, the auditor checks documentation on-site using a sampling method. In the third stage, a confidential report is prepared, detailing each found error, its financial effect (potential fine), and the way to fix it. This allows you to "clean up" your accounting in a calm environment.
Why Choose Legal.ge?
Tax peace of mind is priceless. Legal.ge gives you access to auditors who have experience working in the Revenue Service or "Big Four" audit firms. They know exactly what state auditors look for and where. A diagnostic conducted via Legal.ge guarantees that a tax audit will not be an unpleasant surprise for you.
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