How to respond within 30 days to a proposed tax reassessment? (time limits, penalties under Art. 1729 CGI)

Summary

• Response time limit: 30 days from receipt of the proposal, extended by 30 days upon a request received by the French tax authorities before the end of the initial period (Art. L57 and R*57-1 of the Book of Tax Procedures (LPF)).
• Silence = tacit acceptance: without a response within the time limit, the adjustments are deemed accepted and the burden of proof then lies with you.
• Remedies before the tax is collected: reasoned reply from the tax authorities, hierarchical appeal, the designated senior official (interlocuteur), then the departmental commission within 30 days.
• Penalties: late-payment interest of 0.20% per month (Art. 1727 of the French General Tax Code (CGI)) and surcharges of 10%, 40% or 80% (Art. 1728 and 1729 CGI), which your response can contest.
• Tax lawyer: checks the regularity of the procedure, drafts your observations and represents you at every stage.

What is a proposed tax reassessment and what must it contain?

The proposed tax reassessment (proposition de rectification) is the letter by which the French tax authorities inform you of the adjustments they intend to make following an audit (desk audit, in-depth examination of personal tax situation or accounting audit). It opens the adversarial phase: the tax has not yet been put into collection.

The law requires it to have specific content:

• Reasons: it must enable the taxpayer to make observations or to signify acceptance (Art. L57 LPF). Each adjustment must state the taxes, years, amounts and the legal and factual grounds.
• Notice of the right to be assisted by an adviser: the taxpayer must be informed that they may be assisted by an adviser of their choice, failing which the procedure is null and void (Art. L54 B LPF).
• Source of information: the tax authorities must state the content and source of information obtained from third parties and disclose it on request before the tax is put into collection (Art. L76 B LPF).
• The amount of penalties envisaged and the reasons for them.

In the case of an accounting audit or an in-depth examination of personal tax situation, the charter of rights and obligations of the audited taxpayer (charte des droits et obligations du contribuable vérifié) is given to you with the notice of audit. Its provisions are binding on the tax authorities.

How long do you have to respond and what happens if you remain silent?

You have 30 days from receipt of the proposal. This period is extended by 30 days upon simple request, provided that the request is received by the tax authorities before the initial period expires (Art. L57 LPF). A late request is in principle inadmissible. Make it in writing and keep proof of receipt.

If you do not respond within the time limit, you are deemed to have tacitly accepted the adjustments. You may still file a claim after the tax has been put into collection, but it will then be up to you to prove that the assessment is excessive. Conversely, where you have submitted observations within the time limit, the burden of proof in principle lies with the tax authorities (subject to the exceptions in Art. L192 LPF).

How to build an effective response to the proposed tax reassessment?

1. Analyse each head of adjustment: tax, year, amount, legal basis, penalties. You may accept some points and contest others.
2. Check the procedure: limitation period for reassessment, delivery of the charter, sufficient reasons, notice of the right to be assisted by an adviser, disclosure of documents obtained from third parties.
3. Argue the merits: applicable legislation, enforceable administrative guidelines (BOFiP, tax ruling), characterisation of the facts, calculations.
4. Contest the penalties: the 40% surcharge requires the tax authorities to prove that the failure was deliberate (Art. L195 A LPF).
5. Attach the evidence: contracts, invoices, statements, certificates, with a list of exhibits.
6. Send the response within the time limit: by registered letter with acknowledgement of receipt or via the secure messaging service, and keep a copy.

What happens after your response and what remedies exist before the tax is collected?

• Reply to observations: if the tax authorities reject your observations, even partially, their reply must state reasons (Art. L57 LPF).
• Hierarchical appeal: you may ask to meet the auditor's superior. For a desk audit, this appeal is provided for by Article L54 C LPF.
• Designated senior official (interlocuteur): if the disagreement persists after the hierarchical appeal, the charter provides for referral to a senior official designated by the director (interlocuteur départemental).
• Commissions: the departmental commission for direct taxes and turnover taxes (commission départementale des impôts directs et des taxes sur le chiffre d’affaires) or the departmental conciliation commission (commission départementale de conciliation) may be referred to within 30 days of receipt of the tax authorities' reply (Art. L59 and R*59-1 LPF), for matters within its jurisdiction. It issues an opinion.

What penalties do you face and can they be reduced?

• Late-payment interest: 0.20% per month, i.e. 2.40% per year (Art. 1727 CGI). It compensates the Treasury for its loss and is not a penalty.
• Surcharge of 10% to 80% for late filing or failure to file: 10% in principle, 40% if the return is not filed within 30 days of a formal notice, 80% where an undeclared activity is discovered (Art. 1728 CGI).
• Surcharge for understatement: 40% for a deliberate failure, 80% for fraudulent practices, 40% or 80% for abuse of law (Art. 1729 CGI).
• Regularisation during the audit: if you are acting in good faith and file a supplementary return while paying the tax due, late-payment interest is reduced by 30% (Art. L62 LPF).
• Settlement: the tax authorities may agree to reduce penalties by way of settlement, but never the tax itself (Art. L247 LPF).

If the reassessment is upheld, the tax authorities issue a notice of collection (avis de mise en recouvrement) (Art. L256 LPF). You may then file a prior claim (Art. L190 LPF), together with a request for a stay of payment (Art. L277 LPF). These steps are detailed on our pages tax reassessment and tax litigation.

Why use a tax lawyer?

• Responsiveness: the 30-day time limit is short. The lawyer requests the extension and organises the collection of documents.
• Review of the procedure: the lawyer looks for irregularities that may lead to the discharge of all or part of the assessments.
• Argumentation: the lawyer drafts observations based on legislation, administrative guidelines and evidence, and contests the penalties.
• Representation: the lawyer assists you in the hierarchical appeal, before the designated senior official, the commission and, if necessary, the court.

For an analysis of your proposed tax reassessment, book an appointment.

FAQ

Glossary

• Proposed tax reassessment (proposition de rectification): a reasoned letter by which the tax authorities announce the adjustments envisaged and open the adversarial process.
• Tacit acceptance: the effect of failing to respond within the 30-day time limit (or 60 days in the event of an extension).
• Departmental senior official (interlocuteur départemental): an official designated by the director, approached after the hierarchical appeal.
• AMR: notice of collection (avis de mise en recouvrement), the instrument that makes the tax payable.

Further reading

• Book of Tax Procedures (LPF): Art. L54 B, L54 C, L57, L57 A, L59, L62, L76 B, L192, L195 A, L247, L256, L277 and R*57-1, R*59-1.
• French General Tax Code (CGI): Art. 1727 (late-payment interest), 1728 and 1729 (surcharges).
• BOFiP: BOI-CF-IOR-10-50 (effects of the proposed tax reassessment), BOI-CF-IOR-20-10 (regularisation during the audit), BOI-CF-PGR-30-10 (safeguards), BOI-CF-INF-10-20-20 (surcharges).
• Charter of rights and obligations of the audited taxpayer (DGFiP).
• Related pages: Tax reassessment, Tax litigation, Tax audit: defending yourself.