Tax Audit: Rights and Obligations of the Business

A tax audit is not a negotiation, but nor is it a one-way procedure. The administration has extensive powers; the company has safeguards, the non-observance of which leads to the nullity of the procedure. Knowing these safeguards before the audit, and not during it, changes the outcome more surely than any argument on the merits.

Three forms of audit, three regimes

The desk audit is carried out from the administration's offices, based on the returns filed. It gives rise to requests for information, clarification or supporting evidence. These requests are not trivial: some open a response deadline whose expiry authorises an ex officio taxation.

The accounting audit takes place at the company's premises and covers the entire accounting records. It is the heaviest form, and the one that offers the taxpayer the most safeguards.

The accounting review is an intermediate form, conducted remotely on the basis of the accounting entries file that the company transmits. It avoids an on-site presence while covering the same elements.

The safeguards before the audit

An accounting audit cannot begin without the prior sending of a notice of audit. This notice states the years subject to the audit, the taxes concerned, and informs the company of its right to be assisted by an advisor of its choice.

Two practical consequences:

• The company must have a reasonable period between receipt of the notice and the first intervention, in order to organise this assistance. An intervention that comes too soon is an irregularity.
• The mention of the right to assistance is substantial. Its omission leads to the nullity of the procedure.

The notice is accompanied by the charter of rights and obligations of the audited taxpayer, some of whose provisions are enforceable against the administration.

The proceedings and the oral exchange

The on-site audit requires an oral and adversarial exchange with the auditor. This is not a mere courtesy formality: its absence is grounds for nullity. In practical terms, the company must have had the opportunity to discuss the points examined before the conclusions are finalised.

The duration of the on-site audit is limited to three months for companies whose turnover does not exceed certain thresholds. This cap protects small structures from an audit that would drag on indefinitely; it is set aside in a few situations, notably in the case of serious accounting irregularities.

The company, for its part, must produce the accounting documents requested and hand over its accounting entries file in dematerialised form. Failure to produce this file, or its non-compliance with the required format, is punishable by a fine and weakens the company's overall position — this is the point where the quality of upstream document processes pays off or costs dearly, as illustrated by the requirement for a reliable audit trail.

The notice of adjustment and the response deadlines

At the end of the audit, the administration notifies either a notice of no adjustment, or a notice of adjustment. This document must be justified: it states the proposed adjustments, their legal basis and their amount, with sufficient precision to allow a meaningful response. Insufficient justification is challengeable in itself.

The company has a period of thirty days to respond, extendable by a further thirty days on simple request. This extension is granted as a matter of right: requesting it is almost always worthwhile, if only to build a well-documented response.

Remaining silent during this period amounts to tacit acceptance of the adjustments. This is the most costly and most frequent mistake, as it is irreversible on the very principle of the adjustment.

Remedies after the response

If the disagreement persists, several levels open up successively, and it is possible to pursue all of them:

• The hierarchical appeal to the auditor's superior.
• Referral to the departmental ombudsman, a higher level.
• Referral to the commission on direct taxes and turnover taxes, competent on questions of fact — its opinion is not binding but carries weight.
• The contentious claim, followed by referral to the competent court.

These remedies are not mutually exclusive and do not suspend the recovery process, unless a request for deferral of payment is made, which may be made conditional on the provision of guarantees.

Penalties: what distinguishes an error from a breach

The final amount depends less on the adjustment itself than on the classification adopted.

The late payment interest applies in all cases: it compensates the Treasury for the cash-flow loss and does not have the character of a penalty. Depending on the conduct established, the following may be added:

• A surcharge in the event of deliberate breach, where the administration establishes intent.
• A significantly heavier surcharge in the event of fraudulent manoeuvres or abuse of rights.
• Specific surcharges in the event of failure to file or late filing of a return.

The line between a good-faith error and a deliberate breach is drawn on concrete factors: whether it is repetitive, the significance of the amounts, and the existence of prior warnings. Rigorous accounting records, in which the depreciation entries and the provisions are individually justified, argue in favour of good faith far more effectively than a mere declaration of intent.

Usage scenarios

Receipt of a notice of audit. Immediately check three things: the years covered, the period before the first intervention, and the mention of the right to assistance. Notify the advisor before the first meeting, not after.

Notice of adjustment received. Systematically request the thirty-day extension, then respond point by point, producing supporting evidence. Silence amounts to acceptance.

Persistent disagreement. Pursue the remedies in order, without skipping any: each level is an opportunity for a fresh review, and the commission on taxes usefully rules on questions of fact.

Frequently asked questions

Can the administration carry out an audit without giving notice? An accounting audit requires a prior notice and a sufficient period. The desk audit, on the other hand, takes place without an on-site visit and is conducted through written requests.

How many years does the audit cover? The ordinary statute-of-limitations period covers the three preceding financial years, with extended periods in certain situations, notably in the case of undisclosed activity.

Can one be assisted? Yes, by an advisor of one's choice. The notice of audit must mention this right, and the omission of this mention leads to the nullity of the procedure.

What is the deadline for responding to a notice of adjustment? Thirty days, extendable by thirty days on simple request. Silence amounts to acceptance of the proposed adjustments.

Does the hierarchical appeal suspend payment? No. Only a request for deferral of payment suspends recovery, and it may be made conditional on the provision of guarantees.

How can the surcharge for deliberate breach be avoided? By demonstrating good faith, which is prepared in advance: complete supporting evidence, well-documented positions, consistency over time. This is a matter of building a file, not of argument.

Key takeaways

Three moments determine the outcome of an audit. The receipt of the notice, where the formal safeguards are checked — sufficient notice period, mention of the right to assistance — the irregularity of which vitiates the entire procedure. The proceedings, which require an effective oral and adversarial exchange. And the thirty-day period after the notice of adjustment, extendable, whose silent expiry amounts to acceptance.

Upstream of these three moments, what provides protection remains the quality of the supporting evidence, a subject developed in our article on corporate taxation. An audit is not won through argument: it is won through a file built before it even begins.