In a notice dated April 5, 1996, the French High Court gave the following precisions concerning the law applicable to tax penalties:
a) The principle according to which the new criminal law must, whenever it repeals an accusation or pronounces penalties less severe than the previous law, apply to offenses committed before its entry into force and which did not give rise to sentences executed in processing force of law is extended to the increase of duties for bad faith provided by article 1729-1 of the French General Tax Code.
b) Should a dispute linked to the penalties be introduced to the tax judge, the latter has the sole capacity to automatically examine whether the new repressive law which is less severe should be applied. In order to determine the law applicable to the penalty disputed in front of him, the tax judge must, as having full capacity in the litigation, start at the date when he gives a verdict.
c) In order to determine whether the provisions of article 1729-1 of the French General Tax Code in their wording resulting from the law no.87-502 dated July 8, 1987 provide a less severe penalty than that provided by the law in force before the intervention of this law, only the increase rate provided by the new text in case of lack of good faith should be taken into account, except for late payment interests. In order to draw the comparison required by the principle of application of the new criminal law which is less severe, only the part of the increase which, according to the rules previously applicable, was characterized as a penalty, should be taken into account. Accordingly, the part corresponding to the interests which, in any case, were maintained when the judge had to pronounce the discharge of the penalties, should be deducted. Therefore, the judge should only apply the new rate of 40% if it appears in the file that the comparison makes its less severe characteristic stand out.
d) When the new repressive law which is less severe is to be applied, the tax judge himself must substitute the penalties resulting from the application of this law to the increases set up by the Tax Administration. After exercising his full control over the qualification of the taxpayer behaviour retained by the Tax Administration, the judge must apply the increase rate provided in this case by the law without the possibility to adjust it to take into account the seriousness of the misdemeanour committed by the taxpayer.
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