13. Tax Inspections in France

  1. Levels of Tax Control
  2. Tax Penalties & Sanctions
  3. Recovery of Unpaid French Taxes
  4. French Tax Claims
  5. Determination of Tax Status

13.2. Tax Penalties & Sanctions in France

If the tax authority decide you have underpaid your taxes then their response will depend on the gravity of the offence, as they see it. In particular, whether or not they judge it is an error or omission made in good or bad faith.

If it is minor (normally less than 5% of income declared), and if the return was judged to have been made in good faith, then will probably do no more than send a letter asking you to pay the outstanding sum, without penalty.

You would be asked to pay the outstanding sum within 30 days, and that would be the end of the matter.

If the offence is more serious they will open a recovery procedure called a une procédure de redressement.

When this procedure opens you will be sent a letter from the tax authority setting out their demand, to which you have 30 days to respond.

You could be liable to an interest charge of 0.40% per month (4.80% per year) on the underpaid tax.

More seriously, there is also a penalty of either 10%, 40% or 80% of the underpaid tax.

A penalty of 80% is only likely to be demanded where you have failed to pay, despite previous reminders to do so, or in the case of a clear act of bad faith.

In serious cases of manifest and blatant fraud, known flagrance fiscal, the tax authority may act immediately to seize effects and impose very substantial fines.

As a rule, this substantial power 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, as well as a major fine, you are liable for years of imprisonment.

Next: Time Limits for Recovery

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