A surge in tax litigation is observed in France due to tax deficit issues and alleged tax evasion, often related to topics like management fees, transfer pricing, intangibles, and more. In this comprehensive guide, we’ll walk you through the complex world of tax litigation in France, covering everything from the pre-litigation procedure to the role of courts in tax disputes.
What are the key aspects of French tax law?
The French tax system is governed by the General Tax Code (Code Général des Impôts), the Book of Tax Procedures (Livre des Procédures Fiscales), and additional codes. Tax evasion and related offenses fall under the French Tax Code. The system is based on self-reporting, with taxpayers filing annual income tax returns. In case of discrepancies or overpayments, authorities investigate and adjust accordingly. Taxpayers can engage a conciliation commission if the issue remains unresolved. For more information on the French tax system, see the French Ministry of Economy and Finance website.
The tax system is a complex and ever-changing landscape, and it’s essential to stay informed and seek expert advice to navigate its intricacies. – Pascal Saint-Amans, former Director of the OECD Centre for Tax Policy and Administration (2012-2021)
How do you navigate the pre-litigation procedure?
Before seizing the court, a long pre-litigation procedure must be respected. This procedure includes two main steps:
- Discussion between the administration and the taxpayer about the tax reassessment
- Exchange of arguments via written letters or physical meetings
During this phase, the taxpayer and the tax authority will discuss and negotiate the tax reassessment. If no agreement is reached, the taxpayer can decide to act before the competent jurisdictions. In some cases, debt recovery may be necessary to resolve tax disputes. Our debt recovery services can help you recover outstanding debts and resolve tax-related disputes.
What happens during the tax litigation process?
The French tax litigation process is mostly written and generally doesn’t necessitate parties’ presence at hearings. Judges play a crucial role in case administration, with disputes decided in bench trials, not jury trials. No specialized tax courts exist, so tax issues are heard by ordinary courts. Depending on the tax type, cases proceed in:
- Administrative courts (direct taxes like income tax, corporate income tax, VAT)
- Civil courts (registration duties, wealth tax, certain indirect taxes, and criminal tax issues)
The French tax authorities provide guidance on tax litigation procedures, including information on tax dispute resolution. For businesses facing tax-related disputes, our business and commercial issues services can help you navigate the complexities of tax law and protect your interests.
What are the key aspects of tax litigation?
When navigating the complex world of tax litigation in France, it’s essential to understand the key aspects that can make or break your case. These key aspects include:
- Time limits: Taxpayers must submit a claim within two months (four for non-residents) after receiving the rejection letter from the tax authority.
- Burden of proof: Generally borne by the administration, but can be reversed in certain circumstances.
- Evidence: Must align with the written procedure, be truthful, and specific to the taxpayer. Documents must be translated if not in French.
- Expert reports: Admissible as evidence in tax disputes. Before an expert report is admissible, the expert must guarantee that there has been no collusion of interest with one of the parties to the procedure.
By understanding these key aspects, taxpayers and businesses can better prepare themselves for the tax litigation process and increase their chances of a successful outcome.
The key to success in tax litigation is to be proactive and prepared, and to have a clear understanding of the tax authority’s position. – Marc Timmermans, Partner, Tax/Corporate
How do court proceedings work in tax disputes?
There are three levels of jurisdiction for both administrative and civil courts, with the Supreme Court ruling only on points of law. The court proceedings for tax disputes involve:
- The taxpayer initiating the proceedings
- The tax administration responding
- The taxpayer usually replying
- Scheduling and conducting the hearing
- The judgement being notified to all parties
The French Cour de Cassation provides information on the Supreme Court’s role in tax litigation.
What about payment of disputed tax?
A taxpayer is required to pay disputed tax upon receiving an assessment notice, although the case is in tribunal hands. However, it is possible to ask beforehand (via a specific letter sent to the administration) to suspend the tax payment. In that event, financial guarantees must be given to the administration if the disputed tax amount is higher than €4,000.00.
How do appeals and closing arguments work?
Decisions can be appealed to the relevant administrative or civil court of appeal. Appeals can be made against points of law and findings of fact. Closing arguments in French courts mainly consist of an exchange of written statements between the taxpayer and the tax authorities. After the exchange of statements, the court announces the close of the submission period and schedules a hearing.
What about legal fees and disbursements?
Legal fees and disbursements incurred prior to court proceedings cannot be recovered within the framework of the pre-litigation procedure. This means that taxpayers will typically bear these costs themselves, and should carefully consider their budget and strategy when engaging with tax authorities and preparing for potential litigation.
Mastering tax litigation in France
In conclusion, navigating the complex world of tax litigation in France requires a deep understanding of the tax system, litigation procedures, and court processes. By understanding the key aspects of tax litigation, including time limits, burden of proof, and evidence, taxpayers and businesses can better protect their interests and achieve a successful outcome. If you’re setting up a company in France, it’s essential to understand the tax implications and potential risks involved. Check out our guide on company setting-up for more information. Our tax assistance services can help you navigate the complexities of tax law and protect your interests.
Book a consultation with a tax lawyer
My French Lawyer connects you with experienced French lawyers who specialize in tax litigation. As we’ve explored in this article, navigating tax disputes in France can be complex and requires expert guidance. If you’re facing a tax dispute, our partner lawyers can provide the support you need. We’ll match you with the best lawyers to handle your situation and protect your interests. To get expert advice and find a solution to your tax litigation needs, book a consultation with one of our partner lawyers today.