The rectification proposal

The adjustment proposal is the most important element of the tax procedure. Indeed, this document marks the end of the audit operations and the opening of the pre-contentious phase.

We will review the key features of the adjustment proposal and the crucial points in drafting the taxpayer’s observations.

Key Features of the Adjustment Proposal

The date of receipt is very important as it triggers a 30-day period for the taxpayer to submit observations, but we will come back to that later.

An extension of 30 days can be requested under Article L57 of the Tax Procedures Code (hereinafter LPF) when adjustments are proposed under the adversarial procedure.

At the beginning of this document, the controlled years or periods for which adjustments are proposed are mentioned.

The adjustment proposal generally includes a recapitulation of the course of the accounting verification or examination of the taxpayer’s personal tax situation. The rectification procedure used by the tax authorities is indicated at the beginning of the proposal. There are two main types of procedures:

• The adversarial rectification procedure of Article L 55 of the LPF, which is the ordinary procedure;
• The ex officio taxation procedure provided for in Articles L66 and following of the LPF. This procedure can be used when a taxpayer, individual or legal entity, has not filed their income or profit declaration within the deadlines, has not responded to a request for clarification or justification, or in the case of opposition to a tax audit. When this procedure is used, the tax authorities will determine the taxable income or profit themselves, and it is the responsibility of the taxpayer to contest the figures chosen. In the case of ex officio taxation, the taxpayer’s rights and guarantees are less than those granted in an adversarial procedure.

Then comes the various items of rectification. The tax authorities go over each point, justifying their position based on the law, jurisprudence, or their own doctrine (contained in the Official Bulletin of Public Finances or BOFip). Note that administrative doctrine is not binding on the taxpayer.

Next is the explanation of late penalties and any additional penalties for deliberate omissions (40%) or fraudulent maneuvers (80%).

At the end of the adjustment proposal, the tax authorities are obliged to summarize the financial consequences of the audit: additional taxes, penalties, and late payment fees.

The document in which the taxpayer will contest the proposed adjustments is titled “Taxpayer’s Observations.”  

Taxpayer’s Observations

The failure of a taxpayer to respond to an adjustment proposal constitutes tacit acceptance of the proposed adjustments. Therefore, it is extremely important to draft and submit to the tax authorities, within the specified deadlines, observations contesting each point of the adjustment proposal.

Objections should not be made haphazardly. It is necessary to present legal arguments (law, jurisprudence, administrative doctrine), supported, if necessary, by supporting documents to the tax authorities.

Taxpayer’s observations are extremely important as they can lead to the abandonment of adjustments. If not, this document will still serve as a basis for negotiations during various administrative appeals.

Therefore, it is crucial to be assisted by a professional when drafting taxpayer’s observations. The tax lawyer will be a valuable ally due to their perfect mastery of taxation and tax procedure rules.

It is necessary to establish a strategy from the adjustment proposal stage to defend your interests and achieve the most favorable outcome. Many disputes with the tax authorities are resolved at the pre-contentious stage, avoiding a lengthy and costly procedure before the tax judge.

The lawyers at LEXPERTAX are experts in taxation. They have developed extensive experience in tax disputes and procedures.

We can assist you in analyzing the adjustment proposal and developing a strategy in line with your expectations. Finally, we will put our thorough knowledge of tax rules to use in contesting the proposed adjustments through the taxpayer’s observations.