Following recent amendments to the tax audit requirements, all French companies, including branches of foreign companies and foreign companies registered in France for value added tax (VAT) purposes, are now required to provide the French Tax Administration (FTA) with a Standard Audit File for Tax (SAFT) called Fichiers des Ecritures Comptables (FEC) at the very beginning of a tax audit.
These new requirements will particularly impact those foreign companies operating or registered for VAT purposes in France, as the amendment to the regulations is also effective as from January 1, 2014. In line with the new regulations, the audit file must be issued according to a standardized format. Failure to comply with these new requirements could result in both financial and operational consequences for these companies. In addition to a fine of 5,000 euros, which could also be accompanied by a reassessment and a further fine of 10%, the company will be considered as not having kept proper accounting books. In this case, the company is open to an evaluation of its taxable bases by the tax inspector, and the burden of proof will lie with the company. Furthermore, in addition to the late interest payments, following inspection, the company may also be liable to a further penalty of 40%.
The SAFT, as defined by the Organisation for Economic Co-Operation and Development (OECD), is spreading in Europe, and most European countries are increasingly adopting the standard as a means to file tax returns electronically. The SAFT was adopted by France in December 2012, making it obligatory as of January 1, 2014 for companies to supply electronic files.
These new regulations may have a significant impact on your company. As a taxpayer, you may have to defend and substantiate your position. It is advisable to pre-empt and review your auditing processes. If you require any assistance, Ryan tax specialists are happy to discuss the impact on your company and assist you with your position.
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