Invitation to explain and voluntary disclosure: differences and deadlines
A comparison of voluntary disclosure and the invitation to explain under the Tax Procedure Law: when each applies, deadlines, penalty consequences and example scenarios.
Both procedures serve the same purpose: to correct a tax error quickly and at lower cost instead of through a long audit and heavy penalties. The difference between them is who noticed the error first.
The difference in one sentence
- Voluntary disclosure: you found the error and the administration does not yet know about it.
- Invitation to explain: the administration has spotted an inconsistency and asks you for an explanation.
Comparison
| Voluntary disclosure (Tax Procedure Law 371) | Invitation to explain (Tax Procedure Law 370) | |
|---|---|---|
| Initiated by | The taxpayer | The tax administration |
| Condition | No denunciation made and no audit started | A preliminary finding by the administration; excluded acts are outside the scope |
| Deadline | Payment (and filing) within 15 days from the petition | Explanation within 30 days from notification |
| Additional amount | Voluntary disclosure surcharge | None if the explanation is sufficient; explanation surcharge if insufficient |
| Tax loss penalty | Not imposed | None if the explanation is sufficient; if insufficient and corrected in time, at 20% |
| Audit | Not carried out (on that matter) | Not carried out if the explanation is accepted |
Scenario 1: A forgotten sales invoice
In September you notice that an invoice issued in June was not included in the VAT return. No letter has come from the administration. In this case you file a corrective return under voluntary disclosure and pay the tax together with the voluntary disclosure surcharge within 15 days. No tax loss penalty is imposed. Sample petition: Voluntary disclosure petition
Scenario 2: An adverse finding about a supplier
The tax administration has found that the invoices issued by a company you bought goods from do not reflect real transactions and has sent you an invitation to explain. The voluntary disclosure route is now closed. If you can show that the goods were actually received, with delivery notes, bank payments, stock and sales records, your explanation may be accepted. If you cannot, the option of a corrective return and payment with the explanation surcharge is considered. Sample reply: Reply to an invitation to explain
Scenario 3: If there is no reply at all
If the invitation to explain is not answered in time, the matter may be referred to audit or assessment and the chance of a penalty reduction is lost. In most cases this is the most expensive option.
Why the conditions of voluntary disclosure matter
Voluntary disclosure is invalid if any of the conditions is not met. The two most common mistakes:
- Not paying within 15 days. Even if the return is filed, without payment the tax is claimed together with the penalty.
- Applying after an audit has started. Once the audit letter has been served, the door to voluntary disclosure is closed.
Practical tips
- At month-end closing, compare the amounts declared with the books; finding errors early keeps the voluntary disclosure route open.
- Monitor the e-notification box regularly; the deadline for an invitation to explain starts with notification, and not opening the box does not stop it.
- Late payment interest and the voluntary disclosure surcharge run at roughly the same rate; to see the amount: Late payment interest
Wider picture: Tax penalties, voluntary disclosure and reductions · Support with the process: Tax audits and invitations to explain
Legal basis: Tax Procedure Law No. 213 arts. 370 and 371; Law No. 6183 art. 51.