The proposed tax reassessment (proposition de rectification, formerly known as notification de redressement) is the document by which the French tax authorities, at the end of an audit, notify the taxpayer of the adjustments they intend to make to the taxpayer’s returns. This document is central to the audit procedure: it sets the scope of the proposed adjustments, commits the authorities to their position and opens a response period for the taxpayer. The quality of the response given within this period largely determines the rest of the procedure.
Further reading: an accounting records review (examen de comptabilité) (in French).
How long do you have to respond to a proposed tax reassessment?
The taxpayer has thirty days to respond to the proposed tax reassessment (Article R*57-1 of the French Tax Procedure Code (Livre des procédures fiscales) (in French)). Failure to respond within this period amounts to tacit acceptance of the proposed adjustments. If more time is needed, the taxpayer can obtain a thirty-day extension, provided the request reaches the tax authorities before the initial period expires (Article L. 57 of the Tax Procedure Code (in French)).
Analysing the proposed reassessment
Before drafting the response, the proposal must be analysed carefully. For each proposed adjustment, you need to understand the legal basis relied on by the tax authorities, the facts they found, the calculation of the additional tax proposed and any surcharges and penalties applied. This analysis identifies which adjustments can be challenged and which should be accepted.
Building your response
The response to a proposed tax reassessment must be structured, precise and reasoned. For each adjustment challenged, it must set out the legal and factual arguments against the tax authorities’ position, rely on the supporting documents available and, where useful, cite the statutory provisions or favourable administrative guidance.
The response can also accept some adjustments and challenge others. You do not need to challenge everything in order to challenge something. A response focused on the adjustments that are genuinely unjustified is generally more effective than a blanket challenge to the whole audit.
What happens after you respond?
Once the taxpayer’s response is received, the tax authorities must give reasons for any rejection of the taxpayer’s observations. They are required to respond within sixty days only for the small businesses covered by Article L. 57 A of the Tax Procedure Code; failing that, those businesses’ observations are deemed accepted. The authorities may accept the taxpayer’s arguments and drop all or part of the adjustments, or maintain their position. If they maintain it, several routes remain open: a hierarchical appeal to the auditor’s superior, referral to the competent advisory committees for certain types of dispute, then, once the tax has been formally assessed for collection (mise en recouvrement), a prior claim (réclamation préalable) to the tax authorities and, if it is rejected, proceedings before the Administrative Court (tribunal administratif) or, for registration duties, the Judicial Court (tribunal judiciaire) (Article L. 199 of the Tax Procedure Code).
Surcharges and penalties
Adjustments may carry a surcharge of 40% for deliberate failure or 80% for fraudulent manoeuvres (Article 1729 of the French Tax Code (Code général des impôts) (in French)). These surcharges can also be challenged in the response to the proposed tax reassessment: the burden of proving bad faith and fraudulent manoeuvres lies with the tax authorities (Article L. 195 A of the Tax Procedure Code).
For assistance in responding to a proposed tax reassessment, see our dedicated tax audit lawyer page and our tax lawyer page.
