FR Tax Audit

France — Tax Audit Procedures & Penalties (Contrôle Fiscal) v1.0

Based on work by Romain Simon (@romainsimon), licensed under MIT. Adapted for the OpenAccountants format.

Disclaimer: This skill is for informational purposes only and does not constitute tax advice. All positions must be reviewed and signed off by a qualified expert-comptable or avocat fiscaliste before filing. Get this reviewed at openaccountants.com.

Section 1 — Quick Reference

Quick Reference

Field	Value
Country	France
Authority	Direction Générale des Finances Publiques (DGFiP)
Scope	Vérification de comptabilité of IS/IR entities
Key legislation	Livre des Procédures Fiscales (LPF), CGI
FEC obligation	art. L. 47 A-I LPF

Section 2 — Audit Procedure (Phases)

Audit Procedure Phases (art. L. 47 LPF; art. L. 47 A-I LPF; art. L. 13 LPF; art. L. 57 LPF)

Phase	Legal basis	Description
1. Avis de vérification	art. L. 47 LPF	Minimum 2 business days advance notice
2. FEC examination	art. L. 47 A-I LPF	Mandatory delivery within 15 days
3. On-site verification	art. L. 13 LPF	At registered office
4. Proposition de rectification	art. L. 57 LPF	Formal notification of adjustments
5. Taxpayer response	—	30 days (extendable by 30 days)
6. Inspector's response	—	Confirmation or abandonment of each item
7. Commission départementale	—	In case of persistent disagreement
8. Mise en recouvrement	—	Issuance of amended tax notice

Taxpayer guarantees

Taxpayer guarantees (art. L. 47 LPF; LPF; art. L. 52 LPF)

Right	Source
Oral and adversarial debate	art. L. 47 LPF
Charte du contribuable vérifié	LPF
Hierarchical appeal (interlocuteur départemental)	LPF
Departmental tax commission	LPF
Maximum audit duration: 3 months for SMEs	art. L. 52 LPF

Section 3 — The 8 Verification Axes

Axis 1: FEC Examination (art. L. 47 A-I LPF)

Mandatory checks on the FEC file (art. L. 47 A-I LPF)

Check	Consequence of failure
Format conformity (18 columns, pipe `\	` separator)
Global balance: total debits = total credits	Comptabilité non probante
Per-entry balance: each EcritureNum is balanced	Presumption of concealment
Sequential numbering (no gaps)	Presumption of concealment
Dates within the financial year	Fictitious entries
No negative amounts	Format violation
PieceRef populated for every entry	Missing supporting documents
CompteNum consistent with PCG roots	Irregular accounts

• Non-compliant FEC → comptabilité non probante — Non-compliant FEC → comptabilité non probante: burden of proof shifts to the taxpayer. (art. L. 192 LPF)

Axis 2: Corporate Tax (IS) Control (art. 38–39 CGI)

IS control checkpoints (art. 38–39 CGI)

Checkpoint	Legal basis	Detail
IS add-back (account 695)	art. 39-1-4° CGI	IS is not deductible — verify it is added back
PME reduced rate eligibility	art. 219-I-b CGI	CA < EUR 10M, capital paid up, ≥75% held by individuals
Short year proration	art. 219-I-b CGI	EUR 42,500 × (days / 365)
Non-deductible charges	art. 39 CGI	Fines, luxury expenses, personal expenses
Acte anormal de gestion	Case law (CE)	Charges unrelated to business interest

Axis 3: Charge Deductibility (art. 39-1 CGI)

Four cumulative conditions:

1. Incurred in the interest of the business
2. Reflects normal management
3. Supported by invoices/documentation
4. Results in a decrease of net assets

Systematic examination grid (art. 39-1 CGI)

Account	Typical audit question
604 (Subcontracting, APIs)	Exclusively professional use? Invoices in company name?
6132 (Home office)	Justified proportion? Conforming to BOFiP? Convention exists?
6135 (SaaS / hosting)	100% professional? No personal consumption?
6181 (Documentation)	Link with business activity?
622 (Intermediaries)	Nature and supporting documents?
6231 (Advertising)	Gifts = gratuities? Directories = advertising?
627/6278 (Banking)	Consistent with bank statements?
651 (Domain names)	All related to business activity?
654 (Chargebacks)	Documented irrecoverability?

Axis 4: Shareholder Current Account 455 (art. 39-1-3° and 212 CGI)

High fiscal risk, especially SASU/EURL.

CCA 455 checks (art. 39-1-3° and 212 CGI)

Check	Detail
Pre-incorporation expenses	Assumed within 6 months? Annexed to statuts/PV? Professional character?
Home office	Justified surface proportion? Plan available? Non-deductible: mortgage principal
Interest on current account	No interest = OK. If interest paid: capped at TMPV BCE rate
Currency conversion	BCE rate acceptable; inspector may demand per-transaction rate

Axis 5: Revenue (art. 38-2 CGI)

Revenue checks (art. 38-2 CGI)

Check	Detail
Revenue completeness	Cross-check payment platforms (Stripe, PayPal) vs. accounting
Period cut-off	Revenue booked only for the financial year
Credit balance on 411 (Clients)	Abnormal — advance? Omitted revenue?
Asset disposals	Proper classification (account 775)?
Commissions / ancillary revenue	Nature? Foreign withholding tax?

Axis 6: TVA

If franchise en base (art. 293 B CGI):

Franchise en base checks (art. 293 B CGI)

Check	Detail
Threshold monitoring	Services: EUR 36,800 (tolerance EUR 39,100). Annualise if short year
Invoice mention	"TVA non applicable, art. 293 B du CGI"
Asset disposals	Subject to TVA or exempt?
Intra-EU / extra-EU services	Autoliquidation (art. 283-2 CGI)?

If TVA collected:

TVA collected checks

Check	Detail
CA3/CA12 vs accounting concordance
Deductible TVA documentation
Pro-rata deduction if mixed activity

Axis 7: Fixed Assets and Depreciation (art. 39-1-2° CGI)

Fixed assets checks (art. 39-1-2° CGI)

Check	Detail
Capitalisation threshold	EUR 500 HT (SME tolerance). If franchise TVA: TTC amounts
Depreciation method	Linear 3 years for IT equipment (standard). Pro-rata temporis from date of commissioning
Mixed use	Phone and computer: 100% professional justified? If mixed: only professional portion deductible

Axis 8: International Operations

International operations checks (art. 182 B CGI)

Check	Detail
Transfer pricing	Applicable if foreign subsidiary or intra-group transactions
Withholding tax (art. 182 B CGI)	Payments to foreign providers: 25% withholding? Check applicable tax treaty
DES (Déclaration Européenne de Services)	Required for intra-EU service purchases

Section 4 — Penalty Schedule

Interest on late payment (intérêts de retard — art. 1727 CGI)

Interest parameters (art. 1727 CGI)

Parameter	Value
Monthly rate	0.20%
Annual rate	2.40%
Start date	1st day of month following due date
End date	Last day of month of payment

Surcharges (majorations — art. 1729 CGI)

Surcharge schedule (art. 1729 CGI)

Situation	Rate	Condition
Good faith	0%	Material error, first offence
Insufficient declaration (bonne foi)	10%	art. 1758 A CGI
Deliberate omission (manquement délibéré)	40%	Proven intent to evade
Fraudulent schemes (manoeuvres frauduleuses)	80%	Artifice, false documents
Abuse of law (abus de droit)	80%	Artificial arrangements

Computation example — deliberate omission

Disallowed charges:                      EUR 10,000
Additional IS (at 25%):                  EUR  2,500
Late interest (12 months × 0.20%):       EUR     60
Surcharge (40%):                         EUR  1,000
────────────────────────────────────────────────────
Total assessment:                        EUR  3,560

Section 5 — Risk Assessment Grid

Aggravating factors

Aggravating factors

Factor	Impact
SASU/EURL without auditor	Heightened scrutiny on personal charges
First financial year	Limited history, frequent errors
Revenue in foreign currency	Conversion rate risk
High 455 current account balance	Suspicion of patrimony confusion
Internet/SaaS activity	Territorial allocation difficulties

Mitigating factors

Mitigating factors

Factor	Impact
Small size (CA < EUR 50k)	Lighter verification
Regular bookkeeping	Compliant FEC, balanced entries
First year in good faith	Tolerance for formal errors
No employees	No social risk
Franchise en base TVA	No collected-TVA risk

Section 6 — Common Adjustment Scenarios

Scenario 1: Personal expenses in account 455

Assessment: Reintegration of personal portion. Possible requalification as "disguised remuneration" → social contributions. If significant amounts: acte anormal de gestion.

Scenario 2: Overstated home office

Assessment: Reintegration of excess (declared % − actual %) × charges. Surcharge 10% (good faith) or 40% (if recurring).

Scenario 3: Pre-incorporation expenses without état des actes

Assessment: Full reintegration of pre-incorporation charges. Additional IS on the amount.

Scenario 4: Omitted revenue (credit balance on 411)

Assessment: If inspector considers it undeclared revenue → added to fiscal result + IS + 40% surcharge if intentional.

Scenario 5: Incorrect currency conversion

Assessment: Recalculation of all foreign-currency charges at correct BCE rate. IS on the difference.

Section 7 — Statute of Limitations (Droit de Reprise)

Statute of limitations

Tax	Standard period
IS / IR	3 years (until 31 Dec of the 3rd year following the tax year)
TVA	3 years
IFI	6 years
All taxes (undisclosed activity / fraud)	10 years

• Document retention recommendation — minimum 6 years (recommended: 10 years to cover all scenarios)

Section 8 — Voluntary Regularisation

If the taxpayer corrects before an audit:

• Late interest: 0.20%/month (still applies)
• No surcharge if regularisation is spontaneous and in good faith
• For significant cases (crypto, foreign income, unreported gains): consult an avocat fiscaliste for structured regularisation

Section 9 — Audit Report Format

For each anomaly, the adjustment is formalised as a chef de redressement containing:

1. Tax concerned (IS / TVA / Other)
2. Financial year
3. Legal basis (CGI article / BOFiP reference)
4. Nature of the adjustment
5. Factual finding
6. Legal foundation and case law
7. Amount (base, additional tax, interest, surcharge, total)
8. Risk level (high / medium / low)
9. Corrective recommendation

Section 10 — Conservative Defaults

Conservative defaults

Ambiguity	Default
Charge deductibility doubtful	Flag as potentially non-deductible
Surcharge rate unclear	Assume 10% (good faith)
FEC gap found	Flag as potential concealment
Revenue source unclear	Include in taxable revenue

Section 11 — Key Legal References

Key legal references

Rule	Article
Taxable profit	art. 38-1 CGI
Net asset variation	art. 38-2 CGI
Deductible charges (4 conditions)	art. 39-1 CGI
IS non-deductible	art. 39-1-4° CGI
CCA interest cap	art. 39-1-3° and 212 CGI
IS rates	art. 219-I CGI
PME reduced rate	art. 219-I-b CGI
Franchise en base	art. 293 B CGI
Autoliquidation	art. 283-2 CGI
Late interest	art. 1727 CGI
Surcharges	art. 1729 CGI
Good-faith insufficient declaration	art. 1758 A CGI
FEC obligation	art. L. 47 A-I LPF
Audit notice	art. L. 47 LPF
On-site verification	art. L. 13 LPF
Rectification notice	art. L. 57 LPF
SME audit duration	art. L. 52 LPF
Non-probante burden shift	art. L. 192 LPF
Standard statute of limitations	art. L. 169 LPF
Home office (BOFiP)	BOI-BIC-CHG-40-20-10
Pre-incorporation expenses (BOFiP)	BOI-IS-BASE-30-10

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