The remote examination of accounts is a form of tax audit of businesses carried out remotely, from the tax authorities’ offices, on the basis of the accounting files sent by the business. Introduced in 2017 (Article L13 G of the French Tax Procedure Code), it concerns businesses that keep computerised accounts.
This article explains in plain terms what it involves, how it unfolds, what safeguards the business has and what the law provides if the files are not handed over. Depending on what is at stake, a lawyer’s assistance may be useful from receipt of the notice of examination; see also the page French tax audit – how to defend yourself with a lawyer.
In brief
- The remote examination of accounts is an in-depth audit carried out remotely, without the official visiting the business.
- It begins with a notice of examination; the business then hands over, in principle within 15 days, its accounting entries file (FEC).
- The tax authorities in principle have six months from receipt of the FEC to send a proposed reassessment or inform the business that there will be no reassessment.
- The business has safeguards: the audited taxpayer’s charter, assistance from an adviser, an adversarial procedure, hierarchical appeals and commissions.
- Failure to hand over the FEC on time is in principle penalised by a €5,000 fine or a 10% surcharge, and the tax authorities may then start an on-site audit.
Contents
What is the remote examination of accounts?
The remote examination of accounts allows the tax authorities to audit a business’s accounts without going to its premises: the official works from the accounting entries file (FEC), which brings together all the entries of the financial year in a standardised format. It thus differs from the business tax audit, carried out in principle on site, and from the desk audit, which concerns the tax returns on the basis of the information held by the tax authorities.
It is an in-depth audit: it may lead to the same adjustments as an on-site business tax audit, for the taxes and period stated in the notice. The various forms of audit are presented in the article what are the forms of tax audit?.
Which businesses may be concerned?
All businesses that keep computerised accounts may in principle be subject to a remote examination of accounts: sole traders, small and medium-sized enterprises or groups. The tax authorities may in particular use it where certain items in the returns call for a more in-depth analysis, for example following a desk audit.
How the procedure unfolds
The notice of examination of accounts
The procedure begins with a notice of examination of accounts, in principle sent by registered letter with acknowledgement of receipt. It states the taxes and period audited, explains how to send the files and points out the right to be assisted by an adviser of one’s choice; it also states that the charter of the rights and obligations of the audited taxpayer can be consulted online and provided on request.
Handing over the accounting entries file
The business in principle sends its FEC within 15 days of receiving the notice, in electronic form in accordance with the standards laid down by law. This period is short: preparing the file in advance may avoid difficulties.
The remote analysis
The official analyses the entries and compares them with the returns. They may send requests for explanations or supporting documents; the business may put forward its observations throughout the procedure, which is adversarial.
The conclusion
The tax authorities in principle have six months from receipt of the FEC to send a proposed tax reassessment or inform the business that there will be no reassessment. The proposed reassessment then in principle opens a 30-day period, extendable on request, to reply; see the article I have received a proposed tax reassessment: what should I do?.
The business’s safeguards
Although it is carried out remotely, the examination of accounts is surrounded by safeguards comparable to those of an on-site audit. The business may in particular:
- rely on the charter of the rights and obligations of the audited taxpayer, which is binding on the tax authorities;
- be assisted by an adviser of its choice, for example a lawyer, throughout the procedure;
- submit its observations and obtain a reasoned response from the tax authorities;
- turn to the official’s superior, then to the designated contact, in the event of disagreement;
- depending on the issues in dispute, request referral to the departmental commission for direct taxes and turnover taxes;
- ask, under certain conditions, to correct certain errors in the course of the audit (Article L62 of the LPF), late-payment interest then being reduced by 30%.
Practical difficulties
In practice, the procedure raises several difficulties:
- the dialogue with the official takes place remotely, which may make it harder to explain certain transactions;
- the quality of the FEC is decisive: unlike an on-site audit, the official does not consult the accounts at the business’s premises if the file is incomplete or difficult to use;
- the 15-day period to hand over the file leaves little time to prepare it.
The tax authorities provide businesses with a free tool, Test Compta Demat, which makes it possible to check the format of the file. Being able to read and understand the FEC also makes dialogue with the official easier.
Penalties for failing to hand over the FEC
Failure to hand over the FEC on time, or handing over a non-compliant file, is in principle penalised by a €5,000 fine or, if higher and where there is a reassessment, by a 10% surcharge on the tax reassessed (Article 1729 D of the CGI). The tax authorities may then start an on-site business tax audit. Reacting quickly, ideally with a lawyer’s help, may therefore be useful from receipt of the notice.
Remote examination of accounts and on-site business tax audit
| Remote examination of accounts | On-site business tax audit | |
|---|---|---|
| Place | Remotely, at the tax authorities’ offices | In principle at the business’s premises |
| Material | Accounting entries file (FEC) | Accounts and documents consulted on site |
| Length | In principle at most six months from receipt of the FEC to conclude | In principle at most three months on site for small businesses |
| Safeguards | Prior notice, charter, assistance from an adviser, adversarial procedure | Prior notice, charter, assistance from an adviser, oral and adversarial debate |
FAQ
Is the remote examination of accounts a less serious audit than an on-site audit?
No: it is an in-depth audit, which may lead to the same adjustments. It differs mainly in being carried out remotely, on the basis of the accounting entries file.
What happens if the FEC is not handed over within 15 days?
A €5,000 fine or, if higher, a 10% surcharge on the tax reassessed is in principle incurred, and the tax authorities may start an on-site business tax audit.
How long does a remote examination of accounts last?
The tax authorities in principle have six months from receipt of the FEC to send a proposed reassessment or inform the business that there will be no reassessment.
Can the business challenge the adjustments?
Yes: it may submit its observations within 30 days of the proposed reassessment, then, depending on the case, turn to the superior, the designated contact or a commission, and finally file a claim. The choice of arguments deserves to be examined with a lawyer.
