The following description offers an in-depth understanding of tax litigation in France. A surge in tax litigation is observed in France due to tax deficit issues and alleged tax evasion, often related to topics like management fees, transfer pricing, intangibles, and more.
French tax law is governed by the General Tax Code, the Book of Tax Procedures, and additional codes. Tax evasion and related offenses fall under the French Tax Code.
The French tax system is based on self-reporting, with taxpayers filing annual income tax returns. In case of discrepancies or overpayments, authorities investigate and adjust accordingly. Taxpayers can engage a conciliation commission if the issue remains unresolved.
Before seizing the court, a long pre-litigation procedure must be respected (this procedure includes two main steps, whereby the administration and the taxpayer discuss about the tax reassessment and exchange argues – generally via some written letters but physical meetings to discuss and negotiate often occur during this pre-litigation phase). In the event no agreement was settled between the administration and the taxpayer, the latter can decide to act before the competent jurisdictions.
The French tax litigation process is mostly written and generally doesn’t necessitate parties’ presence at hearings. Judges play a crucial role in case administration, as disputes are decided in bench trials, not jury trials. No specialized tax courts exist so tax issues are heard by ordinary courts.
Depending on the tax type, the case will proceed in administrative courts (direct taxes like income tax, corporate income tax, VAT) or civil courts (registration duties, wealth tax, certain indirect taxes, and criminal tax issues). There are three levels of jurisdiction for both, with Supreme Court ruling only on points of law.
To start litigation proceedings before civil or administrative courts, taxpayers must submit a claim within two months (four for non-residents) after receiving the rejection letter from the tax authority. The tax authority has to respond within the court-allocated timeframe, usually two months, though extensions are common and rarely compelled by courts. Court proceedings for tax disputes involve the taxpayer initiating the proceedings, the tax administration responding, the taxpayer usually replying, scheduling and conducting the hearing, and the judgement being notified to all parties.
A taxpayer is required to pay disputed tax upon receiving an assessment notice, although the case is in tribunal hands. However, it is possible to ask beforehand (via a specific letter sent to the administration) to suspend the tax payment. In that event, financial guarantees must be given to the administration if the disputed tax amount is higher than €4.000,00.
In litigation, the burden of proof is generally borne by the administration. However, depending on the pre-litigation circumstances, it can have been “reversed” so the tax payer has to provide the court with evidence showing the requested tax amount is not legally grounded.
There are no specific rules governing document disclosure in civil proceedings, but tax authorities must provide taxpayers with documents obtained from foreign authorities. Evidence introduced must align with the written procedure, and documents must be truthful, not prepared solely for defense, and specific to the taxpayer. Non-French documents require an official translation to be admissible.
Oral testimonies are typically not admitted in tax litigation as proceedings are written, with exceptions in specific circumstances. Both parties can provide written affidavits that satisfy the requirements for documentary evidence.
There are no varying degrees of evidence under French law, so there is no special rule on hearsay evidence. Expert reports are admissible as evidence in tax disputes. Before an expert report is admissible, the expert must guarantee that there has been no collusion of interest with one of the parties to the procedure.
Closing arguments in French courts mainly consist of an exchange of written statements between the taxpayer and the tax authorities. After the exchange of statements, the court announces the close of the submission period and schedules a hearing.
Legal fees and disbursements incurred prior to court proceedings cannot be recovered within the framework of the pre-litigation procedure.
When a party is dissatisfied with the decision of a lower court, the decision can be appealed, as of right, to the relevant administrative or civil court of appeal. Appeals can be made against points of law and findings of fact.
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