Tax relief: how is interest on arrears calculated?

It's not uncommon for errors to be made in calculating a tax assessment. In such cases, the sums already collected are reimbursed to the taxpayer, triggering the payment of interest on arrears. This interest is calculated from the date of payment of the taxes concerned.



What is a tax rebate?

Tax relief corresponds to a total or partial reduction in the amount of tax owed by a taxpayer. It may be legislative in origin, result from a correction or error in tax calculation, or be pronounced ex officio by the tax authorities.

The taxpayer may apply for a tax rebate if he can prove:

  • unforeseeable loss of income
  • exceptional circumstances
  • a shift in the tax payment period
  • a disproportion between the amount of the tax and his level of income
  • or an error by the tax authorities

In theabsence of a reply from the tax authorities within two months of the request, it is considered to have been rejected.

In the event of a positive response, the tax authorities send a notice of tax relief to the applicant. Any taxpayer who is granted a tax rebate by a court or the tax authorities as a result of an error made by the latter is entitled to interest on arrears, in addition to the refund of sums already paid. This interest takes into account the period during which the taxpayer was deprived of the sums in question.

Calculation of interest on arrears following a tax rebate

In a ruling handed down on June 5, 2023, the Conseil d'Etat recalled that the rate applicable to interest on arrears is that of late payment interest underarticle 1727 of the French General Tax Code, and that interest runs from the date of payment of the tax.

In this case, a company had asked the administrative court to order the French State to award it interest on arrears for a total of 152.82 euros and 251.26 euros respectively in respect of the CVAE (cotisation sur la valeur ajoutée des entreprises) rebates granted to it in 2014 and 2015. More specifically, it had claimed that the period during which advance payments were made in respect of these taxes should be taken into account, rather than their date of liquidation.

Initially, the court rejected the claim. In a ruling dated May 24, 2022, the Administrative Court of Appeal finally ordered the French State to pay the company 371.97 euros in default interest. The Minister of the Economy, Finance, Industrial and Digital Sovereignty appealed against articles 1-3 of this ruling, but the Conseil d'Etat ruled in favor of the taxpayer, holding that interest on arrears cannot be calculated for a period prior to the liquidation of the CVAE balance.