Tax audit of individuals

PRIVATE INCOME MAY BE AUDITED ONLY UNDER CERTAIN CONDITIONS

For individuals with private income, a tax audit is lawful only under very limited circumstances, as an example illustrates.

The CEO of a corporation earned a good salary, had modest dividend income, and also received rental income from two properties. He successfully challenged an ordered tax audit in the tax court.

INCOME FROM CAPITAL ASSETS

Under current law, an external audit of private individuals is lawful only if the taxpayer has high income and has not provided verifiable information regarding the use of available funds. The Düsseldorf judges found no grounds for such a presumption in the present case.

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The plaintiff had rented one of the apartments to his mother. Therefore, there was a need to clarify to what extent the rent actually received corresponded to the local market rate. According to the judges, any discrepancy could also have been determined through other investigative measures that would have intruded less on privacy than the on-site audit ordered in this case.