A Spanish company which carried out an economic activity in France did not complete any administrative procedures (no declaration of the activity to the “centre of formalities” for businesses, or to the registry of the commercial court, and no tax return submitted within the relevant deadlines). The tax authorities issued assessments for corporation tax and VAT along with penalties for “hidden activity”.
The Conseil d’Etat considered that a “hidden activity” exists if a taxpayer has not submitted a tax return and has not made the activity known to a centre of formalities or to the registry of the commercial court. In such a case, the tax authorities are deemed to have established the presence of a hidden activity if the taxpayer is not able to show that it made an error justifying the fact that it did not comply with any of its obligations. In this respect, if the taxpayer can demonstrate that it complied with all of its tax obligations in another Member State, the justification of the error made must be analysed by taking into account the level of taxation in that other Member State and the arrangements for the exchange of information between the tax authorities of the two Member States.