When a tax audit is decided upon, it is based on very strict procedures. The slightest error or omission in this area is regarded as a procedural defect. Certain defects render the procedure null and void and therefore result in the discharge of the reassessments.

For businesses and individuals alike, knowing these key points can make it possible to counter a procedure that does not comply with the law; our tax law firm can of course assist you if needed.

The duration of the tax audit

It is important to know that the maximum duration of a tax audit is 3 months when the audit of accounts (vérification de comptabilité) takes place at the company’s own premises and concerns a small business (turnover not exceeding the limits of the simplified regime under Article 302 septies A of the French General Tax Code (Code général des impôts, CGI)). Exceeding this period may lead to the outright annulment of the procedure. You must therefore pay close attention to the start date of the procedure to ensure that this time limit is strictly observed.

No notice of audit of accounts

This tax audit, reserved for businesses, is governed by rules. To launch this procedure, the tax authorities are required to send a notice. This document specifies the years or accounting items that will be audited. This notification generally gives the company 15 days to prepare. The failure to send this document is therefore logically regarded as a procedural defect and may lead to the outright annulment of the tax audit. The auditor’s arrival on the premises without this notification having been sent is indeed irregular.

An incomplete notice of audit of accounts

In accordance with the Tax Procedure Code (Livre des procédures fiscales, LPF) (Art. L47), this document must contain a certain number of statements. In particular, it is important to state that the accounting documents to be examined in the audit of accounts may be presented in electronic form. Without this statement, a procedural defect may be found. The notice also states the name and contact details of the auditor’s hierarchical superior as well as the possibilities of recourse through the tax commission. Without these statements, the notice of audit will not be compliant.

No information about the possibility of an adviser

In an audit of accounts, the company that is the subject of a tax reassessment proposal (proposition de rectification) must know that it may be assisted by an adviser, such as a tax lawyer. The adviser may be present at every stage to enable it to make the right decisions. Failing to mention this possibility will quickly put an end to the audit of accounts, since the procedure will not have been strictly followed. In any event, such an adviser is important at every stage of the audit of accounts, so it is essential to be informed of this.

Failure to send the documents used to establish the reassessments

The taxpayer may ask the tax authorities to send him or her all the documents used to establish the reassessments. If the authorities do not send these documents in full, the procedure may in principle be annulled. Please note that you must expressly request them, as the documents are not sent automatically.

Insufficient time to find an adviser

The rule is to give the company a reasonable period (at least two clear days according to the Conseil d’État, and often more in practice) to find a tax expert. In order to be assisted, it must indeed be able to benefit from the period provided for by law. Where this is not the case, a procedural defect may be found. A shorter period may indeed prevent it from finding a qualified expert to assist it at all times. This failure is contrary to the procedure, which requires that businesses and individuals be able to obtain sound advice in order to defend themselves or raise objections.

No adversarial debate

The adversarial debate (débat contradictoire) generally follows the conclusions of the audit of accounts. On this occasion, the tax authorities set out their arguments. The company, assisted by its adviser, may also put forward its arguments to counter the proposed reassessments. If this stage is not observed, the amounts sought by way of adjustment cannot be claimed. This procedural defect could put an end to the tax audit itself.

The prohibition on repeating an audit of accounts

If, at the end of the 3-month period, the audit of accounts has not borne fruit, the auditor may not repeat this process. He or she will have to base his or her conclusions on the observations made during that period. Any attempt to repeat the procedure will be regarded as a procedural defect.

No reasoned reassessment proposal

To conclude the tax audit process, the reassessment proposal must be sent to the individual or company concerned. When income tax is adjusted and leads to demands for payment, the tax authorities must give reasons for this decision by providing facts and evidence as well as legal grounds; in their absence, if this is raised by the taxpayer or his or her tax lawyer, this may constitute a procedural defect.

No reply to a hierarchical appeal

In the event of disagreement with the reassessment proposal, the audited person may write to the auditor’s hierarchical superior. The latter, however, is obliged to reply. If he or she does not do so before the notices of collection (avis de mise en recouvrement) are sent, the procedure may be annulled.

Failure to refer the matter to the Commission for Direct Taxes and Turnover Taxes

This recourse is a right available to both individuals and businesses. It makes it possible to obtain an objective opinion, since this commission is made up of both representatives of the tax authorities and representatives of taxpayers. If the tax authorities do not inform the taxpayer of this possibility of referral or if, following the taxpayer’s request for referral, the tax authorities do not refer the matter to the commission, the procedure as a whole is not complied with and the person concerned may have it annulled.

Failure to observe the limitation period

Each type of tax audit has a period during which the tax authorities may carry out audits. If they do not act within this period, they will not be able to revisit the tax concerned afterwards. Consequently, if a request is made after this period, it may simply be refused by the individual or company concerned. The Tax Procedure Code may be invoked on this occasion to point out the procedural defect relating to the expiry of the limitation period (délai de reprise: the period during which the tax authorities are entitled to reassess taxes).

Our tax law firm can assist you.