Tax Audit: Rights and Obligations of the Business

Introduction

The tax audit constitutes a stage feared by many managers, but largely manageable when one knows his rights and obligations. Governed by the Tax Procedures Code (LPF), it allows the tax administration to verify the accuracy of declarations submitted by businesses regarding corporate income tax, VAT, CFE or CVAE. Faced with the increasing importance of desk-based audits and the generalization of data mining through the CFVR device (Fraud Targeting and Query Valorisation), every business 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 tax 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. Accounting verification (article L. 13 of the LPF) generally takes place in the company's premises and covers all accounting transactions. Accounting examination (article L. 13 G of the LPF), introduced in 2017, allows remote control of the Accounting Records File (FEC). Finally, the limited scope audit targets a specific tax or limited period.

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

The rights of the audited taxpayer

The audited business benefits from substantial guarantees. The notice of audit must mention the Charter of Rights and Obligations of the Audited Taxpayer, which is binding on the administration. The manager may be assisted by a professional adviser of his choice (chartered 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 conclusion of the audit, a notice of proposed adjustment (form no. 2120) must be reasoned in law and in fact (article L. 57 of the LPF). The business then has 30 days, extendable by a further 30 days upon request, to submit its observations.

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

The obligations of the business

The business must retain its accounting records and supporting documents for 6 years (article L. 102 B of the LPF), or even 10 years for social security documents. Since 2014, the submission of the Accounting Records File (FEC) in dematerialised format is mandatory upon opening of the audit (article L. 47 A of the LPF); a non-compliant FEC is subject to a fine of 5,000 € or 10% of the amounts adjusted.

The obligation of cooperation means responding truthfully to requests, without going beyond the legal scope. Businesses with turnover exceeding 400 M€ 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 securing your position. Rigorous documentation, compliant FEC and support from an experienced adviser make it possible to significantly limit additional assessments and penalties. Anticipation also means knowing how to activate voluntary regularisation schemes or advance rulings to secure sensitive positions upstream.