A 28 July 2013 decree defines the appropriate IT format for the “file of accounting entries” and lists the required information that the file must contain.
Reminder - New rules for IT tax audits
Beginning 1 January 2014, the submission of accounting records using a prescribed computerized format will be mandatory for all businesses that use IT systems to maintain their accounts and that are subject to tax audit.
French tax auditors will use the file to sort and classify data, and to make all necessary calculations so that the “file of accounting entries” matches information reported on the tax return.
These new rules apply “retroactively”—in other words, the rules apply to non-barred fiscal years for which an audit notice can be issued after 1 January 2014 (i.e., for FYs 2011, 2012 and 2013 and even for earlier years if the company previously had losses available for carryforward).
A taxpayer’s failure to submit the “file of accounting entries” on the second visit of the tax inspector may result in a civil penalty equal to 5% of the value of the reported or reassessed turnover (as the case may be) for each fiscal year audited.
Technical characteristics of the “file of accounting entries”
The “file of accounting entries” takes the form of a single file encompassing all accounting data and entries, as traced in all accounting ledgers for any given fiscal year and classified in chronological order of validation.
The “file of accounting entries” must contain exactly 18 to 22 fields (as defined in the July 2013 decree) as well as all entries before centralization.
These new technical requirements apply to the “file of accounting entries” generated as from FY 2013 only.
Considering these technical requirements and the financial risks associated with a deficient “file of accounting entries,” prudent companies would not wait until they receive a tax audit notice, but will proactively generate and test the file before the end of FY 2013—and then will subsequently generate and test the file at the end of each following financial year.
Companies that maintain their books and records under U.S. GAAP, IFRS, or any other non-French GAAP system need to be aware that the French tax authorities recently confirmed that the “file of accounting entries” must be kept according to French GAAP. Thus, every accounting entry—not only the entries after centralization—must be registered according to French GAAP rules.
Administrative guidelines expected
The French tax administration is expected to provide additional clarifications on these new audit rules in coming weeks.
For more information, contact a tax professional with Fidal Internationale* in Paris:
+ 33 1 55 68 15 21
+ 33 1 55 68 14 47
+ 33 1 55 68 16 19
*Fidal is a French law firm that is independent from KPMG and its member firms.