Answer ... In the event of a tax audit, failure to comply with the filing obligations triggers a fine of €5,000 per audited year or a 10% penalty based on the tax reassessments at the end of the tax audit, if higher. Moreover, the French Tax Administration may consider either that there was opposition to submitting the tax return or that the books are not compliant with French accounting standards. In either case the books will be rejected and the French Tax Administration may reassess the corporate entity’s profits and turnover itself. In such case, a 100% penalty will be added to the tax reassessment. The corporate entity will then bear the burden of proving that the tax reassessment is incorrect.
Corporate entities that do not comply with the obligation to issue an invoice are liable to a tax penalty of 50% of the amount of the transaction (which may be reduced to 5% in certain circumstances). Any omission or inaccuracy found in invoices required for the purposes of value added tax (VAT) deductions give rise to the application of a fine of €15 (without exceeding 25% of the invoiced amount for each invoice or document).
Late filings of returns (corporate tax, VAT, transfer tax) will trigger:
- a 10% penalty on the tax due;
- a 40% penalty in the event of non-compliance 30 days after receipt of the filing request; and
- an 80% penalty in the event of the discovery of a hidden activity.
In addition, if the return filed by the corporate entity is inaccurate, the French Tax Administration may apply a 40% penalty on the reassessed tax (in case of bad faith) or an 80% penalty if the French Tax Administration concludes that there has been fraudulent behaviour or an abuse of the law.
A late payment of tax triggers late payment interest at 0.2% per month. In addition, a 5% penalty is applicable on the corporate income tax, CVAE contribution, VAT or transfer tax due.
Non-compliance with the requirements on electronic filings or the electronic payment of taxes is sanctioned by a 0.2% increase in the tax due.
The directors of corporate entities can be declared jointly liable for company taxes and penalties if their fraudulent behaviour or serious and repeated failure to observe tax obligations has made it impossible to recover taxes and penalties from the company. They can also be fined for failure to prepare the annual accounts and the management report.
Some penalties can be very high. Corporate entities should file a specific tax return for each beneficiary (individual or legal person) that receives passive income from them, such as interest, dividends, directors’ fees, advances, any instalments and loans. Any failure to declare, delay, omissions or inaccurate information will trigger the application of financial penalties, which could be significant – for example, a fine of up to 50% of the non-reported amount or, in the event of late filing, a €150 fine per late return.
Since the publication of Law 2018-727, in certain situations, if a corporate entity has not spontaneously regularised its situation, the French Tax Administration will invite it to do so within a specified timeframe before it imposes a penalty. This procedure is limited to the first involuntary infringement of the applicable rules and for mistakes that may be regularised.