The law for a “State in the service of a trust society” was adopted on 10 August 2018 in France. Several provisions of this law that came into effect on 11 August 2018 concern corrective statements, applications, proposals for corrections and notices sent since that date. This is the legal transcription of the “right to error” that was defended by the presidential candidate Emmanuel Macron during the 2017 election campaign.

New possibilities for taxpayers to have errors corrected

Companies that are audited or undergo an accounting check are able to correct errors committed in good faith in their tax returns, and they will pay a 30% reduced interest rate for late filing (i.e., a rate of interest for late filing of 0.14% per month).

This procedure for spontaneous correction during an audit becomes applicable where there is an audit “on the papers” and a joint examination of the personal tax situation, which permits both individuals and companies to take advantage of it under Article L.62 of the Tax Procedures Book (“LPF”).

Additionally, the taxpayer who spontaneously corrects in good faith an insufficiency in a return before any audit, now has the advantage of having the amount due as interest for late filing being halved (i.e., a rate of 0.10% per month).

Last, lack of production of certain documents that was penalised by a 5% fine becomes inapplicable:
– if it is the first offence committed in the calendar year in progress and over the three previous years;
– if the repair of this omission is done spontaneously or following the tax authority’s first request.

Enhancement of guarantees for the taxpayer

Protection of the taxpayer when the government’s position changes

The existing arrangement, making it possible to make use of changes in doctrine by the government, is enhanced. Thus, any point examined in a tax audit that is not subject to a correction may be binding on the taxation authority if a later audit is done; for this to happen, the audited point shall be shown on the correction proposal or on the notice of no correction. The guarantee will apply to audits for which the findings will be sent as of 1 January 2019, as long as the taxpayer is acting in good faith and as the taxation authority has made a ruling from an informed position.

The arrangement called “rescrit contrôle” (ruling made after audit) set forth by administrative doctrine is legalised and its scope expanded. For audits for which the findings are sent on or after 11 August 2018, during the audit or the accounting check the taxpayer has the option of requesting in writing a formal statement of position from the taxation authority in the correction proposal or on the notice of no correction concerning the points that do not contain any insufficiency, inaccuracy, omission or concealment.

The taxpayer’s new rights

The law provides for free access to real estate values. The PATRIM database, set up over the last few years, provides taxpayers with access to the values of real estate transfers. Previously, to access the database, you required a logon to the individuals area of the taxation authority’s website (impôt.gouv.fr) as well as the reason for the search (inheritance, wealth tax, donation, etc.). Now, the transfer is done online, without any identification or reason being required.

Taxpayers can now exercise an appeal to the immediate superior of the tax inspector who performed the audit, in the case of an audit on the papers.

Last, the new law empowers the Government to draw up by order a system enabling the administration, at the request of companies, to examine the compliance of their operations with the tax legislation and to formally take a position on the application of the law.

We are entirely available if you have any further queries about the issues discussed in this newsletter or about any other accounting, tax, social security or law related topic.