A company's inaction may constitute opposition to a tax audit

Opposing a tax audit can have disastrous consequences for a company. In effect, this authorizes the tax authorities to set the tax bases ex officio, based on the elements of assessment available to them. This is the meaning of the decision handed down on June 9, 2022 by the Nancy Administrative Court of Appeal, which establishes that a company's inaction can be interpreted as opposition to the tax audit to which it is subject.

What situations characterize an objection to a tax audit?

The administration has control powers to ensure that taxpayers comply with their obligations. For example, the law authorizes it to carry out a tax audit, even if the taxpayer fails to cooperate.

There are several situations in which a tax audit can be opposed:

  • The taxpayer refuses to provide his accounts or information enabling them to be reconstructed;
  • The taxpayer leaves unanswered several reminders to submit his accounts;
  • The taxpayer decides to close its headquarters without providing a new address;
  • The taxpayer systematically postpones appointments with the inspector;
  • The taxpayer uses various means to postpone the audit of his accounts.

This list is not exhaustive and is constantly evolving. In a decision dated June 9, 2022, the Nancy administrative court of appeal ruled that the taxpayer's inaction, even over a short period, can constitute opposition to a tax audit.

In this case, a limited liability company (SARL) applied to the administrative court for a discharge of the value added tax (VAT) reminders and corresponding surcharges levied on it for the period from March 2011 to December 2013. This request follows the company's receipt of an audit notice informing it of the audit of all its tax returns for the years 2011, 2012 and 2013. The tax authorities had planned to visit the company's head office on June 18, 2014. On June 17, 2014, the SARL requested a postponement of the meeting, stating that its accounts for the 2013 financial year had not yet been drawn up. On July 1, 2014, the tax authorities sent the company a letter stating that the absence of accounting records did not justify the postponement and that it should contact the auditor to arrange a new appointment. The company did not reply to this letter. Consequently, on July 11, the tax authorities issued a statement of objection to the tax audit.

The judges ruled in favor of the tax authorities, considering that the company had obstructed the audit.

The consequences of objecting to a tax audit

Companies that resist a tax audit expose themselves to serious consequences. Indeed, this behavior authorizes the tax authorities to set the tax bases immediately. In this situation, the "rectification contradictoire" procedure gives way to the "imposition d'office" procedure.

Other consequences: the application of a 100% surcharge to recalled duties or tax claims to be returned to the State, and a ban on the taxpayer sitting on any of the commissions set up underarticle 1732 of the French General Tax Code.