A French Law Firm and a Tax Auditor to assist you
Our French and US Tax lawyers assist our clients in tax audits and during the criminal proceedings that follow this step.
Our experience in managing tax audit shows us that the tax audit can be financially and psychologically devastating when we failed to anticipate the possibility and defense strategies. This unfortunate situation is even more common than the taxpayer-corporation or individual often feels-and rightly so, ill-equipped to face the stack and the complexity of tax legislation in constant motion.
This frustration is all the more now that the taxpayer is not always adjusted to turn. Simply look at the diversity of Directions dependent of the Ministry of Economy and Finance.
In these circumstances, the use of an experienced tax lawyer often proves to be the most appropriate choice to protect its interests. The tax will represent both a counselor and a vital interlocutor for the controlled taxpayer. Why deprive ourselves of this professional tax even though this option is scheduled and organized strictly by the law ... under pain of nullity of the procedure of control!
As a prelude to any tax audit, it should be noted that the first job of government is in control over parts. These are all works in which the service is reviewing overall critical statements. As such, the administration may ask the taxpayer any information or clarification on declarations made.
It can also use its right of communication: the possibility for tax authorities to obtain third party information concerning the taxpayer. The banks and credit agencies that are the largest providers of information to the IRS.
The union of these elements allows the administration to verify the accuracy of taxpayers' returns.
It was after this documentary audit the administration decides whether to trigger a more cumbersome procedure. The administration has the opportunity to cast his sights on a company, we speak of compatibility check or individual taxpayer, this is called a review of personal tax situation (ESFP).
1. CHECKING THE ACCOUNTS
- Start of control
This type of control, characterized by a critical examination of accounting records, begins by receiving a verification notice. If this document must indicate what are the years audited, no text that obliges the administration to be included on the notice what are the taxes on which the auditor intends to make its investigations.
The Court considers that a period of two consecutive working days must elapse between the minimum receipt of the notice and the commencement of operations. This period is granted to allow the taxpayer to prepare his defense and then, if desired, to have the assistance of counsel of his choice. Mention is also made in the audit opinion. At the same time, the administration must send the taxpayer the charter of rights and obligations of the taxpayer checked.
Compliance with these measures shall be punishable on pain of nullity of the proceedings.
- Guarantees offered to the controlled taxpayer
For the sake of oral and contradictory debate, the auditor must move in the company checked at least twice. The requirement for on site enforcement operations corollary to the principle that prohibits, without exception, to the auditor to carry out the accounting records of the company verified.
We must also mention the principle enunciated by the art. L 51 LPF: "When the accounting audit for a period determined in respect of a tax or charge is complete ... the administration can not conduct a new audit of those records against the same taxes or charges and for the same period.
- The duration of the verification procedure
The duration of the verification can not be longer than three months for companies with net sales does not exceed 763,000 euros for industrial and commercial enterprises whose main business is to sell goods and 230,000 euros for providers services or persons not engaged in commercial activity. In other cases, the control procedure is not limited in time.
- The closing of the control
The date of the last intervention on the spot, which ends the procedure for checking accounts. This date is often printed on the notification of adjustments.
- The procedural irregularity
The irregularity of the procedure involves the discharge of charges flowing from it. This rule is general when the administration has followed the adversarial process.
In the case of a statutory procedure for imposing the nullity of the proceedings, and therefore taxation hereunder, shall be subject to the discovery of the non-declaration of taxes in dispute over the irregular procedure.
Example of procedural irregularity: the administration fails to provide the taxpayer controlled the Charter of Rights and Obligations of audited taxpayers, or non-observance of rules on the carriage of documents by the auditor.
2. THE EXAMINATION OF THE PERSONAL TAX SITUATION (ESFP)
As part of this review, the administration verifies the consistency between declared income and asset situation, cash position, the elements of lifestyle.
- Start of control
As a verification of accounting, the administration is obliged to inform the taxpayer by sending an audit opinion stating, under pain of nullity of the proceedings, that the taxpayer has the option to have the assistance of a counsel of his choice.
- The duration of control
Even if the procedure is in principle limited to one year (Article L.12 of the LPF), the administration is not required to notify the taxpayer in the audit opinion.
- The sequence of control
Most of the time, the ESFP takes place in the local tax administration.
The administration sent a request of justifications to the taxpayer, which means it has gathered evidence to establish that the taxpayer may have more income than he reported.
The discovery of bank loans out of proportion to the revenues reported often encourages the administration to implement the application procedure for justification of resources. In practice, the finding of credits twice as large for a given year than the annual income reported that serves as a criterion (rule of "double" confirmed by the EC in 1990).
Whenever the Authority finds resources in excess of declared income, the taxpayer must prove:
- Either non-taxable part of the resources,
- Or that the money found only transited through its accounts and that the expenditure
been exposed as an agent or nominee of others.
Fault of the taxpayer to justify the non-taxable resource identified by the administration, the corresponding amounts will be treated as unreported income and taxed automatically.
- The closing of the control
The ESFP is considered completed on the date of notification to the taxpayer of the consequences of control.
- The procedural irregularity.
The irregularity of the ESFP leads in principle the discharge of additional taxes that result. The choice of procedure is done by the administration.
Reorganization proceedings adversarial.
When the administration triggers a tax audit, it must follow a procedure. The most common is the reorganization contradictory. The monitoring of this procedure requires compliance by directors of various procedural safeguards, most of which have already been cited (delivery of the audited taxpayer's charter, oral and contradictory debate within the company premises, the rationale for the administration of the implementation of a demand for justification, etc.)..
It is initiated by a notification addressed to the taxpayer relief to be justified to allow taxpayers to submit comments. It must also state under penalty of nullity, the ability to have the assistance of counsel of his choice.
The taxpayer then has 30 days to make comments that the administration is not obliged to accept. In this case, the taxpayer then has the power to seize the provincial board of direct taxes and taxes on sales, or the conciliation board, if the tax recovered under the jurisdiction of one or other of these formations.
Only after this final step that the service tax may be assessed the reassessments. This act makes the taxpayer liable for tax.
The procedure of automatic taxation
In case of failure by the taxpayer of its tax reporting obligations, the administration may use a procedure for imposing office. Then the taxpayer to prove that he sent his statement.
This procedure is also applicable in case of no response to a request for justification.
Nevertheless, it should be noted that prior to trigger this procedure penalizes the taxpayer, the administration is mostly required to send a formal notice to the taxpayer in order to regularize his situation within 30 days.
The use of this procedure reduces the procedural safeguards available to the taxpayer, as has already been stated, any procedural irregularity will not affect if it has not helped discover the breach reporting requirements of the taxpayer. Similarly, the taxpayer may be deprived of the right to comment within 30 days of notification of recovery.
Under this procedure, the administration made an assessment as accurate as possible tax bases without opening a dialogue between the parties concerned.
In all cases, the taxpayer must allow the auditor restated, provide the documents requested, if necessary lead a review meeting before the end of the control.
More than ever, the role of a tax lawyer is crucial to both assist and advise a controlled taxpayer, but to also adopt an effective strategy if the procedure had to engage in litigation stage.
Fight against fatalism... And to do so, you need the assistance of a French Law Firm in Paris.
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