Being audited is a worrying enterprise. Being audited in France is a complete different stage of stress as a consequence of the truth that tax and accountancy in France aren’t simply issues of paperwork and submitting, however issues of inflexible legal guidelines that depart little or no room for errors and carry excessive penalties.
We spoke to Alain Scemama (pictured) from the chartered accountants agency Motion & Stratégie who’re primarily based in Le Mesnil Le Roi close to Paris to get the complete story about what lies forward for anybody who will get the dreaded letter informing them of an audit on their French firm.
“Why would the French tax workplace wish to audit somebody? Is it a random choice or is it as a result of they do not perceive your online business exercise or your tax declarations?”
A number of causes could result in a tax audit. These embrace:
- a random choice
- being late to your tax returns
- your financial institution transactions not matching your statements
- due to inconsistencies in your accounts or inconsistency between the European declarations made by your clients or suppliers and your declarations
- due to suspicion linked to business relations with corporations beneath surveillance
- following cross-checks on the verification of one other firm
- a tip-off from an individual both inside or exterior your organization reporting you for tax fraud
“How will the French tax workplace method you with an audit? Do they phone, do they ship a letter or do they simply flip up in your doorstep out of the blue?”
The tax audit is carried out by sending a registered letter to the top workplace of the corporate specifying the interval to be checked and notifying you with the primary date of a gathering which known as an “intervention”. The discover interval is often 15 days.
In instances of suspicion of fraud, the customs service could perform a right away intervention the place they’ve the fitting to enter your property with out discover and have the fitting to request or seize paperwork. At this level, you might be now not in a tax audit framework, however are as a substitute inside a police investigation.
“How a lot time do you need to put together your paperwork between the preliminary contact and the primary assembly? Or are there situations after they wish to see your paperwork immediately?”
The delay earlier than the primary appointment is about 15 days. Throughout this primary appointment, the subsequent two or three dates of the additional interventions are set. Subsequent dates are fastened as and when required. On the whole, the auditor will test the accounts of the corporate one to 2 occasions per week. Throughout every intervention, he asks for info or paperwork that should be ready for him for the subsequent assembly.
“What’s going to they require you to arrange and what’s going to they wish to see?”
Through the first assembly, the primary aim is to elucidate the exercise of the corporate, its mode of operation and to attract up an organizational chart of the corporate. Some auditors could ask to overview paperwork on the primary date, however that is uncommon.
The paperwork to be submitted will typically be:
- Authorized paperwork, basic decision of the board
- Stability sheets
- Account books
- VAT justifications
- The contracts
- Invoices and buy orders
- Customs clearance justifications for exports
- Financial institution statements
Associated article: How Do I Pay VAT/TVA in France?
“Is it higher to ask for the assistance of a chartered accountant to assist or are you able to do it your self? What are the risks of going it alone with out skilled assist?”
It’s important to be assisted by an accountant. It’s a bit like having a lawyer in your facet. For those who don’t have a chartered accountant to help you, you might find yourself saying an excessive amount of and never realise that these phrases will then find yourself resulting in requests for added info. Equally, when requesting paperwork, the consumer has no excuse to not give them instantly, whereas his accountant can successfully say that the paperwork aren’t a part of the interval or aren’t related for the actual audit. The identical applies to any query requested, which supplies time for reflection or analysis.
Knowledgeable accountant is accustomed to being in touch with auditors, our language is identical, we all know their limitations and we are able to reply them on questions of legislation. A tax audit isn’t just a pile of paperwork, however a dialogue between two events. Belief is simpler to place in place when you find yourself not the particular person within the direct firing line.
“How lengthy can an audit take?”
The audit could cowl the present 12 months and the three earlier calendar years. So in 2017, the auditor can are available in to regulate 2017, 2016, 2015 and 2014. In case you have a undertaking that straddles two calendar years, it will possibly exceed three years. For instance, in case you have a fiscal 12 months that runs from July 1 to June 30, 2017, the auditor can management 2017, 2016, 2015, 2014 and because the fiscal 12 months that closed on June 30, 2014 started on July 1 2013, it will possibly go as much as 1 July 2013. The period of the audit is often three months nevertheless it could possibly be longer if the corporate’s turnover is greater than 234,000 € per 12 months. There’s then no deadline and no time restrict besides to inform by 31 December the changes for the 12 months.
“What occurs throughout an audit?”
A room should be made out there to the auditor with the requested paperwork. Ceaselessly, an accountant has discussions with the auditor throughout the interventions, and makes some extent after every intervention to provide them the reasons requested or to put in writing them down for the subsequent intervention.
The auditor provides an inventory of requests for paperwork or info to be ready, in addition to the checklist of paperwork that they need copied. Accountants should make each effort to maintain the connection pleasant and to have cordial and clever exchanges with the auditor. Taking her or him for an fool or insulting her or him can solely strengthen their dedication and make it tougher in analyzing your information.
“Do you’ve got any recommendation on make an audit much less worrying? Are there errors folks make that make issues worse throughout an audit?”
To make it much less worrying, it’s best to rent an expert. Actually, if doable it’s higher to ask that the audit takes place bodily within the accountant’s places of work if they’re in the identical area. We additionally really feel it’s higher that purchasers aren’t current, aside from the primary and final appointment, which is necessary, as a result of an accountant is aware of the tax legal guidelines and will likely be higher capable of defend the purchasers relatively than the consumer attempting to do the job himself. The auditor who checks on the verified handle can see what occurs within the firm and might observe down all info they want.
Frequent errors are that the consumer may give an excessive amount of info, which is commonly incomplete, and that may create extra confusion and extra prejudice. Likewise, they wish to give the auditor each single doc to show their good religion, however this could result in additional investigations that may drag the method out. Typically clients additionally say issues which are unsuitable as a result of they sound cheap however can usually simply trigger them hurt as a result of they don’t know the sophisticated tax legal guidelines.
Is the tax workplace tougher on expat entrepreneurs as a result of they do not perceive the tradition of the enterprise exercise?
This may be the case as a result of the consumer is acquainted solely with the legal guidelines of their nation of origin. In lots of nations accounting is just a help for the enterprise however in France, accounting is definitely a requirement by legislation for companies. Failure to adjust to the French accounting legislation could lead to very robust penalties.
Language can also be a barrier – each for understanding questions, and for giving solutions which may be misinterpreted. Many expats don’t perceive that from the second they work in France, the French legal guidelines apply just about the accounting, fiscal, social or authorized framework.
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What are the assorted completely different outcomes of an audit, and what occurs if the tax workplace finds there’s something unsuitable together with your accounts?
If the audit exhibits no inconsistencies with the accounts, there could also be no tax adjustment to make. But when there’s a drawback, then changes could should be made to the VAT, company tax and varied taxes. These changes should be paid by the corporate plus the penalty fines.
The penalties are often:
- Curiosity on delays of fee (0.4% per 30 days)
- A penalty of 10% of the sum if good religion is admitted
- A penalty of 40%, 80% or 200% if the sum is calculated to have been in dangerous religion or as a consequence of fraud.
If any of those penalties are disputed, it’s doable to return to the audit fee and go earlier than the executive courtroom nevertheless it’s a pricey process and because the judges are administrative consultants it’s very uncommon that penalties are overturned.
For those who want any additional details about audits in France, want an expert English-speaking chartered accountant in France, or need extra info on arrange an organization in France you’ll be able to obtain our free information beneath or get in contact utilizing our contact web page and we’ll be glad to assist.
