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French Tax Administration and Statute of Limitation : Part 1

Home > French Tax Law | Published 2011-01-25

The Tax Administration must meet certain deadlines when conducting audits.

According to the Book of Tax Procedures (LPF), recovery time expires three years after the tax is due. It should be noted that if unlawful activity is confirmed by the directors, this deadline is extended to six years.

There are also specific procedures that can be pursued to extend the recovery time. This involves errors concerning the nature of the charge or the place of taxation, omissions or inadequacies revealed by a proceeding in court or by a contentious claim, a succession of fraudulent activities (two-year extension) or recourse to international administrative assistance. There is also a specific time allocation for matters involving VAT tax. This list is by no means exhaustive.

In reference to an omission noted by the courts, Article L.170 of the LPF explains that omissions or inadequacies in taxation can be managed by the tax authorities until one year after the decision that closed the proceedings and, at the latest, until ten years after the tax was due.

In the event of litigating claims, where a taxpayer requests the dismissal or reduction of taxes, the Tax Authorities may, according to Articles L.203 and L.204 of the LPF, mandate or seek compensation within the limits of the disputed tax; otherwise considered rebates between recognized shortcomings and omissions of any kind found in the base or calculation of the charge during the requested investigation.

Regarding fraudulent activities, if the Tax Administration discovers that a taxpayer was engaged in such conduct and has filed a complaint against him or her, it may enact controls and developments for two years beyond the ordinary period of limitation. This extension is applicable to the perpetrators of actions, their accomplices, and persons on whose behalf the fraud was committed.

As part of this extension of allotted time, in the event of direction from international administrative assistance, if the administration has conducted an inquiry into a foreign authority they may, under Article L.188 A of the LPF, repair or claim tax deficiencies until a year after the administration's response to the foreign entity; or until five years after the taxes were due.

Concerning property tax, section 257-7 °-1-a paragraph 2 explains that the right of recovery of the tax administration is not valid until three years after the issuance of building permits or start of construction; therefore, the property tax is applied to the sales and contribution of land for construction.

If tax penalties are inflicted which violate the provisions governing audits and tax payments, the limitation period expires immediately and conditions and fees increase in relation to the taxes in question.

Other tax penalties may be incurred up to four years after the offense was committed.

The time prescription is meant to negate all obligations of the taxpayer vis-à-vis the law and tax payments. The mere passage of time signifies the payment of tax. Clearly, if you have not paid your taxes and the recovery time has elapsed, the Tax Administration can still work against you. It may not, in principle, have real consequences. 

Warning: the Tax Administration may still carry out retrospective investigations and inspections of taxes. It depends, in practice, on the type of income earned. Moreover, even after the expiration of the prescribed three years, the tax authorities can always investigate incomes.

Waiving this time allotment is impossible. A taxpayer cannot waive the requirement in advance but still may waive the requirement gained, meaning that the taxpayer may after the expiration of the limitation period pay the amounts due.

This is understandable. If taxpayers could waive the requirement, they could escape de facto tax payment. They could simply say, "I waive the time limitation so that the tax administration cannot control me" and would not pay their taxes. Since there would be additional recovery time, the Administration could no longer act.

This recovery time is done to protect the taxpayer against the actions of the Tax Administration. This is to ensure that the taxpayer is under permanent threat of a tax audit operations for old or very old. Somehow these deadlines validate the status quo. However, these deadlines must allow the tax administration to do its job and making the decisions it deems necessary to carry out.

The amount of time required by the legislation is important and complicates the matter. The intervention of a tax lawyer in all stages of fiscal control is vital to regulate the tax authority's compliance with the imposed procedures and deadlines. The fiscal management of a company or an individual can be entrusted to a tax lawyer who will undoubtedly be invaluable in combatting the Tax Administration.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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