This article aims to outline the main features of the time limits for reassessment (délais de reprise). As this subject is highly technical and specific to each situation, it is advisable to consult a tax lawyer if you have any questions.
To carry out a reassessment, the tax authorities must follow the rules laid down in the Tax Procedures Handbook (Livre des procédures fiscales, LPF). This reference book specifies that adjustments (reassessments), reviews and searches for failures or omissions must be carried out within a certain period. This period is called the "time limit for reassessment"; it may under no circumstances be exceeded, failing which the reassessments could be cancelled.
The time limit for reassessment differs depending on the nature of the tax concerned. It is therefore useful to know this information when the tax reassessment begins.
The various time limits provided for by law
In most cases, the time limit for reassessment is three years. Regardless of how far the investigations have progressed, they must stop immediately once the three years have elapsed. In other cases, the calendar year is taken as the reference and the tax reassessment cannot go beyond that period.
Possible extensions
While the time limits set out above are the most common, you should be aware that extensions may be decided in particular situations:
• The extension provision allows the tax authorities to take cognisance of new information or to carry out investigations abroad.
• The provisions allowing the time limit for reassessment to be extended: where the situation reveals undeclared foreign accounts and a failure to file, the time limit for reassessment may be extended to 10 years.
• Registration duties, as well as stamp duties, sales of buildings and businesses, and the land registration tax (taxe de publicité foncière), also have a 3-year time limit for reassessment. However, an extension may be decided where missing information did not allow the file to be fully processed. The tax reassessment then covers 6 years, or even 10 years in the case of undeclared foreign accounts. The same applies to the real estate wealth tax (IFI) / wealth tax (ISF).
The time limit for reassessment for VAT
In this case, the law provides that the tax authorities have a three-year time limit after the period in which the tax became due. They must therefore carry out their tax audit within that period.
Care should be taken, as a tax year does not necessarily correspond to a calendar year. The first year therefore begins from the moment the time limit for reassessment starts running and ends at the end of the calendar year. Two further years are then added.
Corporate income tax and personal income tax
For these two taxes, the limitation period is in principle three years. It runs from the year in respect of which the tax is due. During the following three years, the tax authorities may therefore carry out audits and make a tax reassessment.
If a proposed reassessment is issued during this period, the time limit for reassessment is interrupted. The date of interruption corresponds to the date on which the notification is handed to the taxpayer concerned. Since it is in principle a registered letter with acknowledgement of receipt, this moment is easy to date.
Council tax (taxe d'habitation)
According to the Tax Procedures Handbook, this tax levied by local authorities (abolished since 2023 for main residences, it remains in place in particular for second homes) remains payable during the year following the initial notice. The date of the assessment is therefore taken as the reference for determining the limitation period. If it is claimed in 2018, it can therefore be reassessed until 31 December 2019.
It is important to know that if income-related exemptions have been granted for this council tax, the time limit for reassessment is modified. Where allowances or tax relief are applied, this tax may be reassessed up to three years after the year in which the tax notice was sent. For tax in respect of 2018, the tax reassessment may therefore take place until 31 December 2021.
Property tax (taxe foncière)
The rule for property tax provides that a tax reassessment may take place until the end of the year following the one for which the tax is claimed. While this principle seems clear, you should be aware that a number of nuances exist.
As regards property tax on built properties, the Tax Procedures Handbook makes it clear that the adjustment may be made for errors as well as omissions. In this area, the tax authorities will take into account both incomplete and inaccurate returns. On the basis of the failures observed, the tax reassessment can then be organised.
In the case of a new construction or a change in the nature or use of a property, failure to file a return may lead to an adjustment by the tax authorities. In this situation, the initial three-year time limit for reassessment no longer applies. Instead, the French General Tax Code (Code général des impôts, CGI) states that the applicable limit is the one set out in Article 1508. It depends on the date of the notice of adjustment.
The territorial economic contribution (contribution économique territoriale)
The territorial economic contribution is made up of the business property contribution (cotisation foncière des entreprises, CFE) and the contribution on companies' added value (cotisation sur la valeur ajoutée des entreprises, CVAE). To determine the time limit for reassessment of this contribution, it is therefore necessary to look at the rules for these two components.
As regards the CFE, this right of adjustment extends over a period of three years following the year in which the tax was claimed. You should also be aware that extensions are provided for by law to lengthen this time limit for reassessment depending on the matters identified during the tax reassessment. Tax fraud is one example.
The same time limit has been set for the CVAE, so that adjustments can be made following the standard checks carried out by the tax authorities. This local tax may indeed contain anomalies or failures at the time of filing. The purpose of the tax audit is to seek evidence of the alleged facts. At that precise moment, an adjustment may be made. Likewise, the discovery of fraud may lead to an extension of this time limit for reassessment.
Our tax law firm can assist you.
