7.2. Penalities and Sanctions

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If the tax authority decide you have underpaid your taxes, then their response will depend on the nature of the offence and its gravity, as they see it.

We can distinguish two offences:

1. 7.2.1. Late Submission of Tax Return
2. 7.2.2. Inaccurate/Incomplete Tax Return

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7.2.1. Late Submission

If you are late in submitting your income tax return, you will be subject to an automatic 10% penalty.

If you are then sent a reminder to submit your tax return, then this penalty increases to 20%, provided you respond with 30 days of the reminder.

If you do not submit the return within 30 days notice then the penalty rises to 40%, and you may be subject to further legal action and a fine.

In all cases you will also be liable to an interest charge of 0.40% per month (4.80% per year) on the underpaid tax.

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7.2.2. Inaccurate/Incomplete Tax Return

If you become aware of the error after you have submitted the return then, provided you spontaneously correct it with the tax authority prior to any formal notice being sent to you, no penalty is payable.

Indeed, even should they write to you, provided it is not a formal notice of non-compliance, no penalty will be imposed provided you rectify the matter within 30 days of the letter.

Should the tax authority sent you a formal notice of non-compliance (a mis en demeure) then their response will depend on how they view the seriousness of the offence.

• If they consider that the error was an oversight made in good faith, then they will impose a 10% penalty, provided you rectify the matter within 30 days.
• If the regard it as a deliberate ommission, then the level of the penalty increases to 40%. This may involve a recovery procedure called a une procédure de redressement.
• If the authorities consider that it was deliberately fraudulent then they will impose a penalty of 80%.
• Where you refuse to co-operate with the tax authority in verification of your tax affairs, then they will impose a penalty of 100%.

In all cases you will also be liable to an interest charge of 0.40% per month (4.80% per year) on the underpaid tax.

If the tax query concerns a small business you run, then the tax authority are required themselves to respond within 60 days. There is no time limit for the taxman to respond in relation to individual taxpayers, although the investigation cannot go on for more than a year.

In cases of manifest and blatant fraud, known flagrance fiscal, the tax authority may act immediately to seize effects and impose a fine of up to €10,000, in addition to the tax penalty.

As a rule, this substantial power, introduced in 2007, is expected to be used only very rarely, and then only against business activities, where there is the risk that the ability of the tax authority to may not be able to recover unpaid taxes if it does not act immediately e.g. liquidation of business.

If the authority conclude that there is a case of serious and deliberate fraud, involving a significant sum of money then, if you are found guilty, you are liable for up to 5 years imprisonment.

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