Tax Audit: Company Rights and Obligations

Introduction

The tax audit is a step dreaded by many business leaders, but largely manageable when you know your rights and obligations. Governed by the Tax Procedure Code (LPF), it allows the tax administration to verify the accuracy of declarations submitted by companies regarding corporation tax, VAT, business property contribution (CFE) or added value of companies (CVAE). In the face of the growing power of desk-based audits and the generalisation of data mining through the CFVR scheme (Fraud Targeting and Query Valorisation), every company must anticipate and structure its tax documentation. This article details the different forms of audit, the guarantees offered to the taxpayer and the best practices to adopt to secure your tax position.

The Different Forms of Tax Audit

The administration has several tools at its disposal. Desk-based audit, provided for in articles L. 10 et seq. of the LPF, is carried out from the auditor's office, based on declarations and documents already submitted. A full audit of accounts (article L. 13 of the LPF) is carried out in principle on the company's premises and covers all accounting transactions. An examination of accounts (article L. 13 G of the LPF), introduced in 2017, allows remote monitoring of the Accounting Records File (FEC). Finally, a spot audit targets a specific tax or limited period.

Each procedure is subject to strict rules: sending of an audit notice, reasonable preparation time (15 days minimum recommended), maximum duration of three months for SMEs under the simplified scheme (article L. 52 of the LPF).

The Rights of the Audited Taxpayer

The audited company benefits from substantial safeguards. The audit notice must mention the Charter of Rights and Obligations of the Audited Taxpayer, which is binding on the administration. The company director may be assisted by advisers of his or her choice (accountant, tax lawyer), a right whose non-compliance results in the nullity of the procedure.

Oral and adversarial debate is mandatory throughout the on-site audit. At the end of the audit, a proposed amendment (form no. 2120) must be reasoned in law and fact (article L. 57 of the LPF). The company then has 30 days, extendable by a further 30 days on request, to submit its observations.

In the event of persistent disagreement, several remedies are available: referral to the hierarchical superior, the departmental representative, the Departmental Commission for Direct Taxes and Turnover Taxes, then contentious proceedings before the administrative court.

Company Obligations

The company must retain its accounting documents and supporting documents for 6 years (article L. 102 B of the LPF), or even 10 years for social documents. Since 2014, the submission of the Accounting Records File (FEC) in dematerialised format has been compulsory when the audit opens (article L. 47 A of the LPF); a non-compliant FEC is subject to a fine of €5,000 or 10% of the assessments raised.

The obligation to cooperate implies answering requests fairly and squarely, without going beyond the legal scope. Companies with revenues exceeding €400 million must also maintain transfer pricing documentation (article L. 13 AA of the LPF).

Conclusion

Mastering the rules of tax audit means transforming a constraint into a lever for security. Rigorous documentation, compliant FEC and support from experienced advisers can substantially reduce assessments and penalties. Planning ahead also means knowing how to activate spontaneous regularisation schemes or tax rulings to secure sensitive positions upstream.