Accounting examination – 2016 Amending Finance Law

Article 14 of the amending Finance Act for 2016 has introduced a new procedure for “distance” tax audits: the accounting examination (article L.13G of the Book of Fiscal Procedures – LPF). This new procedure allows the French Tax Administration (FTA) to examine the taxpayer’s accountings without going on site.

In the context of this new audit, taxpayers who keep their accountings by means of a computer system must, on request of the administration, submit their File of Electronic Accounting Entries (FEC) within 15 days of the receipt of the accounting examination notice.

Failure to provide the FEC will entail the imposition of a fine of € 5,000 (Article 1729 D, II of the French Tax Code – CGI).

Tax administration has to analyze the FEC within a 6 months delay. It also has the possibility to request additional information, justifications or clarifications to characterize any anomalies found. It may then carry out computer processing on the supplementary files transmitted, without the obligation to comply with the regulation stated in Article L.47 A, II of the LPF providing for IT processing requests during on site tax audits.

Tax Administration shall close its control by:

A proposal for rectification (mentioning the results of computer processing);

A letter of non-rectification.

Contradictory debate will apply, with the taxpayer having the opportunity to exchange views with the FTA in writing or orally during the accounting examination. In addition, the taxpayer will be allowed to request within 30 days of the rectification proposal reception a correction of errors, inaccuracies, omissions or shortcomings in the declarations. He will have to pay a default interest equal to 70% of the normal late payment interest (article L.62 of the LPF).
This new procedure reinforces the need for companies to proceed with the generation of their FEC, as well as control of technical, accounting and tax compliance aspects of the file.

Deloitte Société d’Avocats has developed a TaxAnalytics website allowing companies to analyze their FEC in a very short timeframe with several levels of analysis (technical, accounting and tax compliance).