Initially, 10 large business taxpayers will be selected to participate in the new audit pilot program during 2013.
The audit program then will be expanded on a voluntary basis for other taxpayers beginning in 2014.
Tax audits - New focus and procedures
Tax audits in France generally are conducted “retrospectively”— i.e., usually consisting of audits and inspections of tax returns covering the last three fiscal years prior to the audit.
A plan for growth, competitiveness and jobs (announced by the Prime Minister in November 2012) included a proposal to enhance the quality of the taxpayer-tax administration relationship. The proposal focused on a “trust-based” approach.
Pursuant to this government plan, a tax audit pilot will be launched in 2013, with 10 large business taxpayers selected to participate in and test the new program. The audit pilot will be expanded on a voluntary basis as from 2014.
Under the new tax audit procedures, businesses participating in the program will, in exchange for greater accounting transparency, receive expedited review from the tax authorities and clarity and greater tax certainty (in the form an opinion as to whether the tax returns are compliant with the tax law).
Under the new audit procedures, the tax return review process will take from three to nine months to complete, depending on the size of the taxpayer’s business.
The existing tax procedures of the French tax authorities will also remain available to them. Whereas taxpayers that voluntarily participate in the audit program will have to disclose their financial information—including information concerning their management and consolidated accounts— the French tax authorities will not, at this stage, formally make any commitment not to apply their standard audit procedures to the fiscal years or matters covered by the new program.
The government’s proposal was presented 21 January 2013 to MEDEF (a French business confederation). As noted by tax professionals with Fidal,* while the new tax audit program appears to have been well received by large business taxpayers, the French tax audit procedures are still generally viewed as adversarial—a process that, some believe, has been further hardened due to the government’s current financial needs.
It has also been observed that the current approach of some tax inspectors in the field is far from what would be described as an open-minded dialogue; thus, a change in the tax administration’s organizational culture would be necessary to build a truly trust- based relationship.
For more information, contact a tax professional at Fidal Direction Internationale* in Paris:
Béatrice Lunghi, Fidal Tax Partner
+33 (0) 1 55 68 15 21
Vincent Lacombe, Fidal Tax Director
+33 (0) 1 55 68 15 05
* Fidal Direction International is a French law firm that is independent from KPMG and its member firms.