Tax Audit in France
Tax legislation in France, and worldwide, becomes more and more complex and taxpayers have to meet high disclosing and compliance standards.
Tax Audit in France
Tax legislation in France, and worldwide, becomes more and more complex and taxpayers have to meet high disclosing and compliance standards.
Tax legislation in France, and worldwide, becomes more and more complex and taxpayers have to meet high disclosing and compliance standards.
In addition, the French tax authorities has extended powers, resources, dedicated & specialized teams and various possibilities to get detailed information on taxpayers.
Therefore, tax audit is becoming a major concern for companies and individuals but also for services providers, such as accountants and advisors, through the professional liability risk and complicity risk in tax fraud.
Tax audit process and pre-litigation phase could last between 14 to 24 months. Then, the litigation phase before courts starts.
Companies are almost all the time looking for a settlement out of court.
To do so, it is important to know well as from the beginning of the tax audit process, the strengths and weakness of the case and prepare as soon as possible the discussion and negotiation phase with the tax authorities.
In the presence of a strong case, fight hard and if you have a weak case, settle quickly by negotiating mainly on interest for late payment and penalties.
Our advice to prevent tax reassessment is that each tax decision, option or optimization must be well analyzed and immediately documented so that proper justification could be rapidly provided to the tax authorities in case of tax audit. Anticipation is essential.
Your clients should also regularly/annually update specific documentation for tax justification purposes
Our advice in case of tax audit : always keep good communication with tax inspectors and limit answers strictly to questions asked.
Recapitulative schedule on French tax audit (could be duplicated on a country-by-country basis for the next tax clubs)
| RECAPITULATIVE SCHEDULE ON FRENCH TAX AUDIT | |||
| Standard rules | Exception | Comments | |
| Duration of tax inspection | No specific timing | Limitation to 3 months for small companies | Tax inspection can last several months in case of international assistance and exchanges with foreign tax authorities |
| Duration of tax audit | No spectific timingas the tax authorities has no specific delay to answer taxpayers | Up to the end of the perligation phase with tax authorities, tax audits in France can last up to circa 2 years | |
| Duration of tax litigation before courts | Delays depend upon the complexity of the case and the jurisdictions | 1st instance: 1 to 2 years 2nd instance: 2 to 4 additional years 3rd instance: 3 to 5 additional years |
|
| Statue of limitation rules | 3 years + current FY | Extended statute of limitation (i) 6 years + current FY and (ii) 10 years + current FY, for instance in case of tax fraud, absence of filing of tax forms and/or international assistance | |
| Interest for late payment | 0,2% per month, i.e., 2,4% per year | Possible reduction of 50% in case of regularization during tax audit | |
| Tax penalties | 10% | 40% in case of gross negligence / bad faith. 80% in case of tax fraud and/or abuse of law | |
| Criminal proceedings | Automatic if tax reassessment >€ 100k and penalties of 80% applied | Possible upon decision of tax authorities if tax reassessment > 100k and penalties of 40% applied + reiteration during of tax reassessment during the period still oppened to tax audit | These thresholds could be rapidly reached and tax authorities use this threat to force taxpayer to settle the case before litigation |
Alexis Degagny
ULYSSE BDA - France
