A reassessment proposal (proposition de rectification) is the letter in which the French tax authorities set out the adjustments they intend to make, the reasons for them and their financial consequences: it announces a possible tax reassessment. It may, for example, concern foreign-source income or accounts held abroad.
It generally follows a desk audit, a business tax audit or an in-depth review of the taxpayer’s personal tax situation. It is not a final decision: the taxpayer may accept it, submit observations or, depending on the case, use various avenues of appeal. As every situation is different, a lawyer’s analysis generally makes it possible to determine the most appropriate response.
In brief
- The taxpayer in principle has thirty days to reply, a period extended by thirty days on simple request made before it expires.
- Failing to reply within the period in principle amounts to tacit acceptance of the adjustments.
- The taxpayer’s observations in principle call for a reasoned reply from the tax authorities.
- Avenues of appeal exist: hierarchical superior, departmental contact person, departmental commission, request for waiver of penalties.
- The regularity of the proposal itself (reasons given, mandatory statements) deserves to be examined.
Contents
Checking the regularity of the proposal
Before examining the merits, it is generally useful to check, ideally with a lawyer, that the proposal complies with the rules laid down in the Tax Procedure Code (Livre des procédures fiscales, LPF). In particular, it must:
- be reasoned, in fact and in law, so as to enable the taxpayer to submit observations: it states the facts found and the rules applied, the legal provisions being in principle cited; case law need not be (article L57 of the LPF);
- state the nature and amount of the proposed adjustments, the additional tax and, where applicable, the penalties, the application of which must itself be reasoned;
- state, on pain of nullity, that the taxpayer has the right to be assisted by an adviser of his or her choice (article L54 B of the LPF);
- state the period within which the taxpayer may reply.
The absence of one of these statements may, depending on the circumstances, render the procedure irregular. The main procedural defects are presented in the article on procedural defects in tax audits.
How to reply to a reassessment proposal?
The taxpayer in principle has thirty days from receipt of the proposal to reply. This period is extended by thirty days if the taxpayer requests it before it expires (article L57 of the LPF). This time can be used to gather the information needed for the reply.
During this period, it is also possible to ask to meet the auditor to discuss the disputed points. Depending on the case, good arguments may lead the tax authorities to drop all or part of the adjustments.
Three situations may then arise.
First situation: accepting the adjustments
Where the error or omission is established, it may, depending on the case and after analysis with a lawyer, be preferable to accept all or part of the adjustments rather than prolong a disagreement with no serious prospect. A request for a waiver of penalties may then, in some cases, be submitted.
After acceptance, the tax authorities collect the additional tax, which is the subject of a tax notice or a notice of collection (avis de mise en recouvrement).
Second situation: no reply within the period
Failing to reply within thirty days (sixty days if extended) in principle amounts to tacit acceptance of the adjustments. The tax authorities may then collect the tax and penalties. A claim remains possible after collection, but the burden of proof then in principle lies with the taxpayer, who must show that the assessment is excessive.
Third situation: sending observations
The taxpayer is entitled to challenge all or part of the adjustments by submitting written observations. He or she may be assisted by an adviser of his or her choice, for example a lawyer, who helps gather evidence and identify the relevant legal rules and case law.
The tax authorities must reply to the taxpayer’s observations, giving reasons where they reject them, in principle in a document entitled “reply to the taxpayer’s observations”. In the business tax audit of certain small and medium-sized enterprises, they have sixty days to reply; failing that, the observations are deemed to be accepted (article L57 A of the LPF).
Avenues of appeal
Other avenues exist in the event of persistent disagreement. Depending on the case, and with the help of a lawyer, they may make it possible to put one’s arguments forward again, or even obtain the abandonment of all or part of the adjustments.
The hierarchical appeal
The taxpayer may ask to meet the auditor’s hierarchical superior. The procedure for this appeal is in principle set out in the reassessment proposal and in the Charter of the rights and obligations of the audited taxpayer. This appeal opens a new dialogue, without guaranteeing that the reassessment will be dropped: it is above all a new opportunity to argue one’s case.
Referral to the departmental contact person
If disagreements remain after the hierarchical appeal, the taxpayer may approach the departmental contact person (interlocuteur départemental), designated by the tax directorate. He or she takes a fresh look at the file and may, where appropriate, help to unblock it.
Referral to the departmental commission
For certain disagreements, mainly on questions of fact, the taxpayer may request referral to the departmental commission for direct taxes and turnover taxes (or, for certain valuation issues, to the departmental conciliation commission). The tax is in principle only collected after the commission has given its opinion.
Made up of representatives of the tax authorities and of taxpayers, the commission hears the taxpayer, who may be represented by his or her lawyer, and then gives an opinion which the tax authorities are not bound to follow. It only has jurisdiction in certain areas.
The request for waiver of penalties
A request for a waiver (remise gracieuse) does not challenge the merits of the adjustments: it seeks a waiver or reduction of penalties (surcharges, fines). It is sent to the tax office that established the assessment, which is free to decide.
Where the proposed waiver exceeds €200,000, the decision is taken by the minister responsible for the budget, after consulting the committee on tax, customs and exchange disputes (comité du contentieux fiscal, douanier et des changes).
As every case is different, the firm can assist you in replying to the reassessment proposal and in pursuing these avenues of appeal.
What I see in my cases
The weaknesses of the reassessment proposals I examine mainly lie in procedural errors, particularly when the procedure drags on. I therefore first check the regularity of the procedure and the limitation period, then the merits. Amicable remedies (hierarchical superior, departmental contact person, commissions) are very useful, but everything depends on how things are presented.
As regards surcharges, good faith is assessed in the light of factors specific to each situation, such as, where assets are held abroad, the ties with the country concerned, the origin of the funds or constructive cooperation with the tax authorities. And almost every time, I attempt a negotiation: there is rarely anything to lose.
FAQ
What is the deadline for replying to a reassessment proposal?
In principle thirty days from receipt. This period is extended by thirty days where the taxpayer requests it before it expires (article L57 of the LPF).
What happens if there is no reply?
Failing to reply within the period in principle amounts to tacit acceptance of the adjustments. A claim remains possible after collection, but the burden of proof then in principle lies with the taxpayer, who must show that the assessment is excessive.
Does accepting the proposal rule out any later challenge?
Not necessarily: a claim generally remains possible within the statutory time limits, but the taxpayer must then show that the assessment is excessive. Whether to accept or challenge is therefore assessed case by case, ideally with a lawyer.
