Tax audit - Audit - Individuals

This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.  

 The new Taxpayer's Charter "Charte du Contribuable" is now available on the web site of the French Tax Authorities Charte du contribuable. The Charter explains the rights and obligations governing the relationship between the taxpayers and the French tax authorities e.g. presumption of good faith of the taxpayers, access to clear ruling or tax audit limited to 3 months for small enterprises and 9 months for medium enterprises.

When auditing individuals, the French tax authorities use mainly two types of tax audits.

The tax audit carried without inspecting the bank accounts of the taxpayer are used for all individuals subject to tax. The tax officer checks the consistency of each tax return, cross checks the global consistency of all the tax returns filed by the same person and last compares the information provided by the tax returns with the data collected from other sources.

Such audits are carried out at the tax office. The auditor contacts the taxpayer or his adviser only if he discovers irregularities or potential ground for assessment. If the taxpayer cannot convince the tax officer that his filing position is correct, the tax authorities make an adjustment and/or propose the full investigation of taxpayer individual position called "ESFP".

The full audit of the taxpayer individual position "ESFP" balances the income and assets known from the tax returns with the expenditures of the taxpayer and the changes in his private assets and real estate. The taxpayer is generally requested to provide all his French and foreign bank records. If the individual does not produce his bank records, the auditor has the right to request them directly from the banks.

An ESFP cannot last more than one year. However, this time limit could be extended if the taxpayer fails to produce his bank records. Moreover, this time limit is extended to two years if, in the course of the audit, the auditor finds evidence of an undisclosed business activity.

The house search and seizure allows the French tax authorities to request the competent jurisdiction to authorize a house search and the seizure of documents if there is evidence of fraudulent activities. The presence of a police officer is required during the entire the house search.