The business tax audit (vérification de comptabilité) is the most in-depth form of tax audit of businesses. The auditor checks the returns filed against the business’s accounts and documents, in principle at its premises. He or she may also exercise the right of disclosure with third parties with which the business deals.
The procedure follows precise stages, governed by the Tax Procedure Code (Livre des procédures fiscales, LPF) and the Charter of the rights and obligations of the audited taxpayer. Where the stakes are high, the assistance of a lawyer is generally useful at each of them.
In brief
- The audit begins with an audit notice, which mentions the right to be assisted by an adviser.
- It in principle takes place at the business’s premises and may not exceed three months for small businesses, subject to exceptions.
- It ends with a reassessment proposal or a notice of no adjustment.
- The business in principle has thirty days, extendable by thirty days on request, to submit its observations.
- Avenues of appeal exist before and after collection: hierarchical superior, departmental contact person, commission, claim, court.
Contents
1. Preparing the audit
Before starting the audit, the auditor gathers the information held by the tax authorities: the business’s tax returns, information obtained from third parties under the right of disclosure, data received from other administrations, including foreign ones. He or she can then compare this information with the accounts presented; unexplained discrepancies may lead to adjustments.
2. The audit notice
Before the first on-site visit, the tax authorities must send or hand the business an audit notice (avis de vérification). This document specifies the years or period being audited and states, on pain of nullity, the right to be assisted by an adviser of one’s choice (article L47 of the LPF). The Charter of the rights and obligations of the audited taxpayer is provided or made available before the audit begins.
The business must have sufficient time between receipt of the notice and the first visit to gather documents and choose an adviser. The law does not set this period; the Conseil d’État has accepted that two clear days could be sufficient, but in practice it is often longer. The choice of adviser is free; the business may also defend itself alone, but the assistance of a tax professional, in particular a lawyer, is generally invaluable.
3. The first on-site visit
The first meeting generally has two objectives for the auditor:
- obtaining a copy of the accounting entries files (“FEC”), where the accounts are kept using computerised systems;
- gathering general information about the business: activity, shareholders, subsidiaries, suppliers, customers, locations in France and abroad, organisation.
The audit in principle takes place at the business’s premises. At the business’s express request, it may be held at the chartered accountant’s office or at the tax authorities’ premises. A tour of the premises generally takes place at the start of the audit.
4. Conduct of the audit
The auditor examines the accounts on the merits and on the form: entries, supporting documents, legal documents, accounting procedures, stocks. He or she looks in particular for:
- omissions or errors in returns, made in good or bad faith;
- under-declarations or failures to declare VAT;
- abnormal management decisions (actes anormaux de gestion);
- for businesses belonging to an international group, the terms of transactions with related companies established abroad (transfer pricing).
For small businesses, the on-site audit may in principle not exceed three months (article L52 of the LPF). Throughout the audit, the business must be able to engage in an oral and adversarial debate with the auditor. Original documents may in principle only be taken away at the business’s written request. Failure to observe these safeguards may, depending on the case, constitute a procedural defect.
5. The closing meeting
At the end of the on-site work, the auditor generally presents his or her conclusions at a closing meeting with the business’s representative, who may be accompanied by an adviser. This is an opportunity to provide additional explanations or supporting documents before the reassessment proposal is sent.
6. The reassessment proposal or the notice of no adjustment
Where no adjustment is envisaged, the tax authorities inform the business by a notice of no adjustment. The points expressly approved may, under certain conditions, be relied on against the tax authorities later.
Otherwise, the tax authorities send a reassessment proposal, reasoned in fact and in law, which states the nature and amount of the proposed adjustments and reminds the business of the right to be assisted by an adviser.
7. The business’s reply
On receipt of the proposal, the business in principle has thirty days to reply, a period extended by thirty days on simple request made before it expires. It may accept all or part of the adjustments, or challenge them by submitting written observations supported by evidence. Failing to reply within the period in principle amounts to tacit acceptance. The details are set out in the article on replying to a reassessment proposal.
8. The tax authorities’ reply and avenues of appeal
The tax authorities reply to the business’s observations, giving reasons where they reject them; for certain small and medium-sized enterprises, they have sixty days to do so. In the event of persistent disagreement, the business may in particular:
- request a meeting with the auditor’s hierarchical superior, then with the departmental contact person (interlocuteur départemental);
- for questions within its jurisdiction, mainly questions of fact, request referral to the departmental commission for direct taxes and turnover taxes (or to the national commission for the largest businesses), chaired by a judge and made up of representatives of the tax authorities and of taxpayers.
9. Collection
The tax is then collected. Even if it is disputed, it must in principle be paid, unless a claim is accompanied by a request for a stay of payment (guarantees may then be required). In the absence of payment, the tax authorities may take enforcement measures, for example an administrative garnishment of bank accounts (saisie administrative à tiers détenteur).
10. Appeal to the court
After its claim has been rejected, the business may, depending on the case and after analysis with its lawyer, bring the matter before the administrative court. The judgment may be appealed before the administrative court of appeal, then challenged on points of law before the Conseil d’État. The court may order full or partial discharge of the tax, in particular where a procedural defect is established. For an overview, see the page on tax audits.
FAQ
How long does a business tax audit last?
For small businesses (turnover not exceeding the limits of the simplified tax regime), the on-site audit may in principle not exceed three months, on pain of nullity of the assessment, subject to exceptions provided for by law. For other businesses, the law does not set a maximum duration.
Where does the business tax audit take place?
In principle at the business’s premises. At the business’s express request, it may take place at the chartered accountant’s office or at the tax authorities’ premises. The remote examination of accounts, on the other hand, is carried out at a distance, on the basis of the accounting entries files.
Can the business be assisted?
In principle, yes: the audit notice must state, on pain of nullity, the right to be assisted by an adviser of one’s choice. The business freely chooses this adviser, for example a lawyer, and must have sufficient time to do so before the first visit.
