Corporate tax litigation in France : the complete guide for SME managers and CEOs

As an SME manager, a tax dispute with the administration (DGFIP) can endanger your cash flow, your growth... and sometimes your personal responsibility. One corporate tax litigation lawyer helps you get back in control: secure your returns, respond to a notice of adjustment, negotiate with the tax litigation department or bring the dispute before the administrative court.

The objective of this article is to offer you a real Practical bible corporate tax litigation, structured around the questions you really ask yourself: how does a tax audit take place, what are the tax penalties, how to react to a proposed correction, what is tax recovery litigation, when and why to go see a tax lawyer in Paris.

Corporate tax litigation: what are we talking about?

The corporate tax litigation refers to all disputes between your company and the tax authorities: contestation of an adjustment, disagreement on a taxable basis, questioning of an arrangement, penalties considered excessive, or even payment difficulties after collection.

Concretely, litigation most often arises at the end of a fiscal control (accounting audit, accounting exam, ESFP for the manager), but it can also result from a simple check on documents or from a dispute over the interpretation of a tax text, even out of control.

The main tax litigation situations for an SME

In the practice of SMEs, tax disputes frequently relate to:

• La VAT (deductibility, rates, intra-community transactions, non-compliant invoices).
• THEcorporate tax (non-deductible expenses, provisions, executive remuneration, tax integration).
• Les deductions at source, various taxes or sectoral contributions.
• Les fines and penalties (declarative breaches, late payments, fraudulent manoeuvres, abuse of rights).

For example, a manager of a service SME may be accused of deducing expenses deemed “not incurred in the interests of the company” (receipts, vehicles, mixed expenses), with an increase in corporate income, a VAT reminder and penalties of 40% for deliberate breach of duty if the administration considers that you knew what you were doing.

“Base” and “recovery” tax litigation

Conventionally, there are two main types of litigation:

• The Disputes : you dispute the tenet Or the mounting tax (base, rate, qualification). This is the typical case of a post-recovery claim.
• The tax recovery litigation : you are no longer (or no longer just) discussing the merits, but the How tax is collected (payment terms, seizures, notice to third party holder, mortgages, opposition to lawsuits).

In many cases, the two dimensions combine: for example, you dispute the tax base and simultaneously request a schedule to avoid a bank account being blocked by the public accountant.

What draws the attention of the tax authorities to a company?

The administration does not randomly choose which companies to check. Certain situations or behaviors significantly increase the tax control risk.

Statistical and sectoral risk factors

Among the frequently cited signals:

• Of repeated declarative anomalies (missing declarations, inconsistencies between VAT, IS and bundles).
• Of abnormally low margins in relation to the sector or sudden changes in results.
• Of important VAT credits recurring or significant VAT credit refund requests.
• Of international relations complex (transfer pricing, intragroup invoicing, flows with states with preferential taxation).

Example: a trading SME that has margins twice lower than the sectoral median for several years in a row, while paying little VAT, has a profile that is typically “selectable” by the DGFIP algorithms.

Declarative behaviors that trigger controls

Some behaviors are directly targeted:

• Deposits late or incomplete VAT or IS declarations.
• Lack of response to requests for clarifications or justifications from the administration.
• Use of aggressive optimization schemes without documentation (executive remuneration, intragroup management fees, invoicing of intragroup services without economic reality).

In these contexts, the support of a corporate tax litigation lawyer makes it possible to anticipate: preventive audit, documentary compliance, preparation of accounting for a possible audit.

What is the procedure for a corporate tax dispute?

The procedure takes place in several successive steps, with an increasingly contentious logic: control, proposal for correction, administrative phase (complaint), then judicial phase (administrative court, administrative court of appeal).

1. Tax control: the starting point for many disputes

For businesses, tax control mainly takes the form of:

• Of a accounting audit on site, on the premises of the company or accountant.
• Or of a accounting exam remotely, on dematerialized files (FEC).

The administration notifies a audit notice which specifies the nature of the audit, the period audited and the rights of the taxpayer (in particular the possibility of being assisted by counsel, such as a tax lawyer).

Example: a construction SME receives an audit opinion for the last three fiscal years of tax and VAT. The tax lawyer participates in the first meeting, prepares explanations on certain loss-making projects and organizes documented exchanges with the auditor.

2. The proposed correction and the tax adjustment notice

At the end of the audit, if the administration is considering improvements, it sends a Rectification proposal (often referred to as an “adjustment notice”) setting out the reasons, the taxes involved and the penalties envisaged.

• In principle, you have a 30-day delay to respond, sometimes extendable for an additional 30 days upon reasoned request.
• The lack of response paves the way for debt collection and will make future contests more difficult.

This phase is strategic: a precise and well-reasoned answer, written with the help of a tax litigation lawyer (often in tax law in Paris) sometimes makes it possible to obtain the total or partial abandonment of adjustments even before formal litigation.

3. The contentious complaint: administrative phase of litigation

If the administration maintains its adjustments, you can file a contentious claim with the tax services (often the department that issued the tax notice).

• The claim must be written, reasoned and accompanied by supporting documents ; it is in principle sent by registered mail with AR.
• It must be deposited in strict deadlines, generally no later than 31 December of the third year following that of the assessment or the proposed correction (depending on the nature of the tax).

The administration has a period (often 6 months) to respond. In the event of an explicit refusal or prolonged silence, you can move on to the judicial phase.

4. Tax litigation before the administrative court

In terms of state taxes (IS, VAT, etc.), the Administrative court is, in the vast majority of cases, the competent judge.

• You need to file a tax request In a period of two months from the notification of the decision to reject your claim.
• The request must comply with strict admissibility requirements (statement of facts, means, conclusions, production of documents).

Before the administrative court, the assistance of a lawyer is not always mandatory, but it is strongly Recommended to structure your resources, respond to the administration's defense briefs and consider a possible appeal to the administrative court of appeal.

What are the tax penalties incurred by a company?

A tax dispute is not only about the main tax, but also about late payment interest And the penalties which can represent a significant portion of the final cost.

Late payment interest

Les late payment interest penalize the time during which the Treasury did not dispose of the amounts that should have been paid to it.

• They are calculated for each day that the amount of additional fees is overdue.
• In principle, they apply automatically as soon as a tax reminder is charged to you.

Even when no heavy penalty is applied, these interests can be significant for an SME over several adjusted financial years.

Penalties and surcharges (10%, 40%, 80%...)

Les fee increases are applied according to the seriousness of the breach:

• Increase of 10% or 20% for late filing or late settlement.
• Increase of 40% In case of deliberate breach Or ofabuse of rights (when the administration considers that you have voluntarily evaded tax).
• Increase of 80% In case of Fraudulent manoeuvres, concealment or occult activities.

In the most serious cases, a tax file can be sent to the public prosecutor's office for criminal tax evasion, exposing the manager to criminal sanctions (fine, imprisonment) in addition to tax penalties.

Numerical example of tax sanctions

Imagine a €100,000 tax adjustment.

• Late interest: several years of delay can represent several thousand euros.
• 40% increase for deliberate breach: €40,000 additional.

The total cost of tax litigation can thus go far beyond the simple tax reminder, not to mention the impact on your banking reputation and the strain on your cash flow.

What is tax recovery litigation?

The tax recovery litigation concerns disputes about how tax is recovered by the Treasury, once the debt has been established for tax purposes.

Recovery measures implemented by the DGFIP

The public accountant has several levers:

• Demonitals, debt collection notices and payment orders.
• Seizures on bank accounts, foreclosures, mortgage registrations, third-party notice.
• Refusal to grant or withdrawal oftimelines in case of non-compliance with commitments.

These measures may be contested if they are irregular, disproportionate, prescriptive or if the underlying tax is itself the subject of a tax dispute.

Dispute and debt collection negotiation

The lawyer in corporate tax litigation often intervenes on two axes:

• Negotiation with the public accountant (settlement plan, suspension of proceedings, partial voluntary remission of penalties).
• Recovery litigation before the judge (contestation of a seizure, of a notice to a third party holder, of a refusal of delay).

Example: an industrial SME is sent several notices to a third party owner blocking professional accounts. The lawyer refers the matter to the enforcement judge to challenge certain measures and negotiates, at the same time, a realistic schedule to maintain the activity.

Spontaneous regularization and the right to make mistakes: can a tax dispute be avoided?

Even before the check, or at the first alerts, a spontaneous regularization can significantly reduce sanctions and avoid head-on litigation with the DGFIP.

Spontaneous regularization (tax audit)

La spontaneous regularization consists for the company to file a rectifying or supplementary statement before any action by the administration (before receiving a formal notice or an inspection notice).

• It is encouraged by the law known as “ESSOC”, which enshrines a Right to make mistakes for bona fide taxpayers.
• Sanctions (penalties, interests) can be significantly reduced compared to a post-audit adjustment.

Example: a start-up realizes that it has treated certain intra-community VAT transactions incorrectly. With the help of a tax lawyer, she files corrective declarations and negotiates an instalment of payment, with reduced penalties.

Conditions for benefiting from preferential measures

To take advantage of this leniency regime:

• Regularization must be really spontaneous, i.e. prior to any control act or procedure.
• The mistake must be made of Good faith, unintentional, and the payment of fees must be made or secured (schedule).

The corporate tax litigation lawyer helps you secure the process (scope of corrections, communication strategy, requests for discounts) in order not to transform well-intentioned regularization into a poorly managed admission.

Mediation, hierarchical appeals and departmental commissions: amicable solutions

Between the tax administration and the administrative court, several dialogue mechanisms allow you to attempt an amicable solution or to obtain an outside perspective on the case.

Hierarchical remedies and commissions

Before or after responding to your complaint, it is possible to:

• To enter the line manager of the auditor (principal or divisional inspector) as part of a Hierarchical recourse.
• To seek the opinion of the Departmental Tax Commission on certain disputes concerning bases (questions of fact, evaluation, etc.).

These bodies do not always have final decision-making power, but their opinion weighs in the rest of the exchanges, especially before the judge.

The fiscal mediator

One fiscal mediator may be referred for certain disputes with the administration, in particular when the disagreement concerns the interpretation of a text or the way in which the DGFIP handled your file.

• The mediator is not a judge, but a neutral intermediary responsible for facilitating a balanced solution.
• It can recommend adjustments or encourage the administration to review its position in deadlock situations.

Again, a tax lawyer prepares a structured file (chronology, documents, legal arguments) to maximize your chances of a favorable outcome.

Tax litigation lawyer Paris: in what way is his role decisive?

Call on a corporate tax litigation lawyer is not a luxury reserved for large groups. For an SME, this is often what makes the difference between a sustained recovery and a controlled negotiation.

Why go see a tax lawyer?

The tax lawyer intervenes at several levels:

• Upstream : tax risk audit, preparation for control, securing schemes (manager remuneration, intragroup flows, transfer pricing).
• During the check : assistance to meetings, writing observations, ensuring that your rights and deadlines are respected.
• After the check : drafting the response to the correction proposal, contentious complaint, negotiations with the DGFIP, pleading before the administrative court.

The tax lawyer in Paris, accustomed to dealing with disputes with the local services of the DGFIP and the Paris Administrative Court, knows the field practices, which is crucial for adapting the defense strategy.

Lawyer, tax litigation, corporate and defense strategy

A good defense isn't just about “saying no.” It involves:

• Of prioritize the issues (points to defend at all costs, negotiable points, points to give up).
• To identify the Motivational flaws reorganization, calculation errors, procedural violations.
• To design, if necessary, a long-term litigation strategy, by immediately anticipating the arguments that will be brought before the administrative tribunal.

Example: an e-commerce SME receives a significant adjustment on VAT and VAT, with an increase for deliberate non-compliance. The lawyer shows that the error results from the interpretation of an ambiguous administrative doctrine, obtains the abolition of the 40% penalty and the significant reduction of reminders.

How to defend yourself during a business tax audit?

How you manage the fiscal control determines the possible continuation of the litigation.

Best practices during the check

Some essential reflexes:

• Prepare and provide a Orderly accounting and consistent, without concealment.
• Centralize exchanges with the verifier via a single point of contact (CFO, chartered accountant, lawyer) to avoid contradictory answers.
• Ask for Writings for any important administrative request and keep a complete control file.

A corporate tax litigation lawyer can participate in some meetings, review your answers and report any procedural irregularity (overdue date, non-compliance with the charter of the verified taxpayer, etc.).

Response to a tax adjustment notice

La Response to the proposed correction is a key moment:

• She must be motivated point by point, contesting each claim of reorganization, with factual and legal arguments.
• It can integrate subsidiary arguments (primarily, the adjustment is contested; in the alternative, the rate, period, or penalty is discussed).

Example of response structure (to be adapted to the specific case):

• Reminder of the context and the impositions in question.
• Legal discussion for each point (text, doctrine, case law).
• Conclusion with specific requests: total/partial abandonment of adjustments, remission of penalties, application of a more favourable regime.

Tax litigation department, DGFIP and administrative court: who are we talking to?

In a Tax administration litigation, several actors intervene, each at a different stage.

The services of the DGFIP and the tax litigation department

At the administrative level, you mainly interact with:

• The verifier service during the check (inspector, main inspector).
• The litigation department or complaints department for the written complaint phase.
• The public accountant (treasurer, collection service) for questions of payment, deadlines and seizures.

The clarity of your letters, the quality of your legal arguments and the consistency of your position directly influence the way in which these services will handle your case.

Tax control and the administrative court

When the administrative phase is not successful, the Administrative court becomes your main contact person.

• The judge checks the legality of the tax decision, the regularity of the procedure and the accuracy of the tax charged to you.
• The procedure is essentially Written : exchanges of briefs between your lawyer and the administration, then hearing and judgment.

Again, a documentation and evidence strategy well-prepared right from the check greatly facilitates the judge's work and increases your chances of success.

Example of a contractual clause to anticipate a tax dispute

In some contracts (partners' agreements, transfers of shares, intragroup agreements), it is useful to provide for tax guarantee clauses in order to spread the risks of a future recovery.

Educational example of a tax guarantee clause

To be adapted to each situation and with the help of advice, a clause of this type can be inserted:

“The Assignor guarantees the Assignee against any additional taxation, penalty or late interest charged to the Company for a period prior to [date], resulting from a tax adjustment notified after the Transfer Date, and arising from facts, acts or omissions prior to that date.

In the event of recovery, the Assignor undertakes to reimburse the Assignee, within [x] days from the request, all the amounts paid by the Company in respect of the reorganization as well as the reasonable defense costs incurred by the Company, upon presentation of the corresponding supporting documents.”

This type of contractual arrangement allows secure an operation by transferring the economic burden of a possible tax dispute to the party that “managed” the previous period, generally the transferor.

Practical box: summary table of the main risks and levers

FAQ — Corporate tax litigation and the role of the lawyer

This section covers the main questions related to corporate tax litigation and to the intervention oftax litigation lawyer.

What is the procedure for a tax dispute?

The procedure consists of two main phases: administrative then Juridictional.

• Administrative phase: response to the correction proposal, then contentious claim with the tax services within the legal deadlines (often until December 31 of the third year).
• Jurisdictional phase: in case of rejection, filing of a tax request before the Administrative Court within two months and then possibly appeal to the Administrative Court of Appeal.

At each stage, a corporate tax litigation lawyer can structure your arguments, secure deadlines and choose the right legal remedies.

What are the tax sanctions?

Tax sanctions consist of:

• Of late payment interest, calculated on the additional fees due.
• Of penalties or markups : 10— 20% for delays or errors, 40% for deliberate breach or abuse of rights, 80% for fraudulent maneuvers or hidden activity.

In the most serious cases, a procedure of criminal tax evasion may be added, with fines and prison sentences against the manager.

What attracts the attention of the tax authorities?

The tax authorities are particularly attentive to:

• Aux inconsistencies between your various statements (VAT, VAT, bundles).
• With low or very variable margins compared to the sector, with significant VAT credits, with undocumented international flows.
• To filing delays, to missing declarations, to late or non-existent responses to requests from the administration.

A tax lawyer can help you identify these risk signals and prepare yourself in advance.

What is tax recovery litigation?

The tax recovery litigation concerns the contestation of measures taken to recover tax (seizures, notices to third party owners, mortgages, refusal of deadlines), once the debt has been established.

You can challenge:

• The validity of certain measures (irregularities, disproportion).
• The refusal of a schedule or a free discount.

The tax recovery litigation lawyer intervenes to negotiate with the public accountant and, if necessary, refer the matter to the competent judge.

How do I respond to a tax adjustment notice?

Faced with a Rectification proposal :

• Strictly respect the response time (in principle 30 days, sometimes extendable).
• Write a response structured, precise and well-reasoned, point by point, with legal references and supporting documents.

A corporate tax litigation lawyer (or tax lawyer in Paris) identifies the flaws in the motivation, proposes main and subsidiary arguments and prepares the ground for a possible claim or legal action.

What is DGFIP litigation?

The DGFIP litigation refers to all disputes between you and the General Directorate of Public Finances: correction of corporate income tax or VAT, penalties, recovery, refusal to refund VAT credit, dispute of late payment interest, etc.

They treat each other:

• First in front of the DGFIP services per claim.
• Then, in case of failure, in front of the Administrative court or the administrative court of appeal.

What is the tax litigation service?

The tax litigation service is the DGFIP entity responsible for examining your contentious claims and some debt collection disputes.

• He analyzes your arguments, checks the pieces and decides whether to maintain or adapt the initial position.
• The quality of your claim, prepared with a lawyer, is decisive in convincing this service to review the recovery.

How to bring a tax dispute before the administrative court?

After rejection (or prolonged silence) of your claim:

• You file a tax request before the competent administrative court, within a period of two months from the date of notification of the rejection decision.
• The request must set out the facts, the Means of law And the conclusions (what you ask the judge), with production of the documents.

The corporate tax litigation lawyer structures your request, chooses the most relevant arguments and assists you throughout the procedure.

What is a fiscal mediator?

The fiscal mediator Intervenes as a neutral third party to try to resolve certain disputes between the taxpayer and the administration, in particular when the dispute results from a misunderstanding or questionable application of a text.

It does not replace the judge, but can:

• Facilitate an amicable agreement or a balanced solution.
• Encourage the DGFIP to correct a clearly excessive position.

Tax litigation lawyer Paris, tax lawyer Paris, best tax lawyer Paris: how to choose?

For an SME manager, the useful criteria are:

• THEconcrete experience in corporate tax litigation (inspections, DGFIP, administrative court).
• The ability to work As a team with your accountant and other advice.
• A speech pedagogical, oriented to business issues (cash flow, image, criminal risks).

The concept of “best tax lawyer in Paris” is subjective; the main thing is to choose a tax litigation lawyer that you can work with confidence over the long term.

Why go see a tax lawyer?

It is in your best interest to consult a tax lawyer:

• From the first risk signals (anomalies detected, repeated requests for clarification).
• Upon receipt of a control notice Or of a Rectification proposal.

Early intervention often makes it possible to avoid litigation escalation and to negotiate more favorable solutions than if you intervene at the seizure or court stage.

How to defend yourself during a tax audit?

To defend yourself well:

• Organize your documents, track your decisions, and respond On time, in writing, consistently.​
• Get accompanied by a corporate tax litigation lawyer to check the regularity of the procedure, supervise exchanges and anticipate the future.

The objective is not to systematically oppose the verifier, but to protect your rights while maintaining strategic control of the file.

Regulated matter and the need to consult a lawyer

Corporate tax litigation is a subject highly regulated, at the crossroads of the General Tax Code, fiscal procedure, fiscal criminal law and numerous administrative doctrines and case law decisions that are constantly evolving.

The information presented in this article is necessarily general and does not take into account the specificity of your business (size, sector, tax history, group structure). Personalized support from a solicitor is essential to anticipate and understand all the fiscal, legal, financial and, where applicable, criminal considerations specific to your situation as an SME manager.

Article written by Guillaume Leclerc, lawyer in Paris.

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