Tax Audit: Rights and Obligations of the Business

Introduction

The tax audit constitutes a step dreaded by many business leaders, but largely manageable when one knows their rights and obligations. Governed by the Tax Procedures Code (Code des procédures fiscales - LPF), it enables the tax administration to verify the accuracy of declarations submitted by businesses regarding corporate income tax, VAT, CFE or CVAE. Faced with the growing importance of desktop reviews and the generalization of data mining through the CFVR mechanism (Fraud Targeting and Request Enhancement), every business must anticipate and structure its tax documentation. This article details the various forms of audits, the guarantees offered to taxpayers and best practices to adopt to secure your tax position.

The different forms of tax audit

The tax administration has several tools at its disposal. Desktop review, provided for in articles L. 10 et seq. of the LPF, is conducted from the auditor's office, based on declarations and documents already submitted. Accounting verification (article L. 13 of the LPF) generally takes place on the business premises and covers all accounting transactions. Accounting examination (article L. 13 G of the LPF), introduced in 2017, allows remote review of the Accounting Records File (Fichier des Écritures Comptables - FEC). Finally, targeted review focuses on a specific tax or limited period.

Each procedure follows strict rules: sending of an audit notice, reasonable preparation period (15 days minimum 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 safeguards. The audit notice must include the Charter of Rights and Obligations of the Audited Taxpayer, which is binding on the administration. The business leader may be assisted by a professional advisor of their choice (accountant, tax attorney), a right whose disregard results in the nullity of the procedure.

Oral debate and due process are mandatory throughout the on-site audit. At the conclusion of the audit, a notice of proposed adjustments (form no. 2120) must be reasoned in law and fact (article L. 57 of the LPF). The business then has 30 days, extendable by an additional 30 days upon request, to submit its observations.

In case of persistent disagreement, several remedies exist: appeal to the superior officer, the departmental liaison officer, the Departmental Commission for Direct Taxes and Taxes on Turnover, then contentious proceedings before the administrative court.

The obligations of the business

The business 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, submission of the Accounting Records File (FEC) in dematerialized format is mandatory as soon as the audit is opened (article L. 47 A of the LPF); a non-compliant FEC exposes the business to a fine of €5,000 or 10% of the adjustments assessed.

The obligation to cooperate requires responding honestly to requests, without going beyond the legal scope. Businesses with revenue 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 securing your position. Rigorous documentation, compliant FEC and support from experienced advisors allow you to significantly limit adjustments and penalties. Anticipating also means knowing how to activate voluntary regularization mechanisms or tax rulings to secure sensitive positions beforehand.