Tax audit: rights and obligations of the company

A tax audit is not a negotiation, but nor is it a one-way procedure. The tax authorities have broad powers; the company has safeguards whose breach results in the nullity of the procedure. Knowing these safeguards before the audit, not during it, changes the outcome more reliably than any argument on the merits.

Three forms of audit, three regimes

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

The accounting audit takes place on the company's premises and covers the entire accounting records. This is the heaviest form, and the one offering the taxpayer the most safeguards.

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

Safeguards before the audit

An accounting audit cannot begin without prior sending of a notice of audit. This notice specifies the years subject to review, 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 arrange this assistance. An intervention that follows too quickly is an irregularity.
• The mention of the right to assistance is material. Its omission results in the nullity of the procedure.

The notice is accompanied by the charter of rights and obligations of the audited taxpayer, certain provisions of which are enforceable against the tax authorities.

The proceedings and the oral exchange

An on-site audit requires an oral, 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 finalized.

The duration of an 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 event of serious accounting irregularities.

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

The proposed adjustment and response deadlines

At the end of the audit, the tax authorities notify either a notice of no adjustment, or a proposed adjustment. This document must be reasoned: it states the adjustments envisaged, their legal basis and their amount, with sufficient precision to allow a meaningful response. Insufficient reasoning is challengeable in itself.

The company has a period of thirty days to respond, extendable by a further thirty days upon simple request. This extension is granted as 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 regarding the very principle of the adjustment.

Remedies after the response

If disagreement persists, several levels open up successively, and it is possible to go through 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 tax collection process, except upon request for a payment deferral, which may be made conditional on the provision of guarantees.

Penalties: what distinguishes an error from a failure

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

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

• A surcharge in the event of deliberate failure, where the tax authorities establish intent.
• A significantly heavier surcharge in the event of fraudulent maneuvers or abuse of rights.
• Specific surcharges in the event of failure to file or late filing.

The line between a good-faith error and a deliberate failure hinges on concrete factors: whether it is repeated, the amounts involved, and the existence of prior warnings. Rigorous accounting, in which depreciation and provisions are individually justified, argues in favor of good faith far more effectively than a statement of intent.

Use cases

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

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

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

Frequently asked questions

Can the tax authorities audit without warning? An accounting audit requires prior notice and a sufficient time period. The desk audit, on the other hand, takes place without any on-site intervention and proceeds through written requests.

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

Can you be assisted? Yes, by an advisor of your choice. The audit notice must mention this right, and omitting this mention results in the nullity of the procedure.

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

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

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

Key takeaways

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

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