What are the tax consequences for the organization of not exercising due diligence in the opinion of the tax authority in relation to its customers? Check how to maintain proper security enhancements with due diligence in the article below.
Maintain Proper Security Enhancements with the Due Diligence
In order to maximize the effectiveness of proper security enhancements, some countries provide legal consequences in their legal systems in case of non-compliance with the law. For the purposes of appealing tax notices-decisions, a business must first understand whether a bona fide taxpayer is liable for possible illegal actions of counterparties and what are the limits of such liability. Thus, the efforts of the taxpayer, first of all, should be aimed at demonstrating to the court the real movement of assets, including with the help of proper primary documents.
Due diligence requires governments or commercial organizations to make efforts to identify and address exploitation in their supply chains. To check the counterparty, you need to study information about him in open sources. After that, you need to request documents from the counterparty itself and check whether he conducts actual activities. These checks will show what risks will arise if you conclude an agreement with a new counterparty.
Measures indicating due diligence and caution when choosing a counterparty are:
- obtaining a copy of the certificate of registration of the counterparty with the tax authority;
- verification of the fact of entering information about the counterparty;
- obtaining a power of attorney or other document authorizing a particular person to sign documents on behalf of the counterparty;
- use of official sources of information characterizing the activities of the counterparty.
How to Automate Due Diligence with the Virtual Data Room?
Even the most responsible company, which operates strictly according to the law and regularly pays taxes, may face claims from the tax office if it contacts an unscrupulous counterparty. But all the same, during inspections, inspectors can find a one-day thing in your supply chains; no one is immune from such a risk. But you can perform all the actions that will show the tax that you are a conscientious taxpayer. Most VDR services for due diligence provide some level of security, but the problem is that data can still be leaked. If you want to legally download and share files without being on one of these lists, a VDR is the only way to go.
If you act due diligence with the virtual data room provider, such cooperation can result in a denial of deductions, the abolition of benefits, additional taxes, fines, penalties, etc. This is how the state fights against illegal tax schemes. Even if the company really did not know that the counterparty was suspicious of the tax authorities, this does not affect the court’s decision. Ignorance is no excuse.
In the virtual data room that can be found at https://virtuele-dataroom.nl/due-diligence/, each data operation or user action is recorded in a special log file. Logs help track causes of errors, mistakes, and malicious activity and reduce the impact of human factors. The virtual data room for due diligence enables the industry to use new visualization technologies such as virtual or augmented reality. Working with a digital twin, the company’s personnel can visualize the company’s technological processes and assets in real-time right at the workplace.
