Spot checks, or something that flags up in their system. What those flags might be is known only to the tax inspection system itself, I donât think that there are any publicly available and verified sources as to what triggers an investigation.
You get a letter, or these days, you probably get made aware that a communication from your local tax office is in your âpersonal communication spaceâ for you to go and take notice of.
Yes, they go into detail, as assigning an inspector to a case is time consuming and costly for the inspectorate, they only generally take on something if they think that there is a worthwhile chance of getting some money out of it.
Yes, I had one in 2021, because I am a sole trader (Entreprise Individuelle), work with clients and suppliers all over the world. They looked at both my business and personal tax affairs. They knew all of the bank accounts that both I, and my spouse, had opened.
You are invited to an opening interview, in which the inspector indicates which âpartsâ of your declaration they are most âinterested inâ, but that the investigation may turn up other queries which would subsequently also need to be addressed. The inspection can go on for 3 months (if you fall under the accelerated program), or much, much longer, if they find other stuff of interest, or if they believe that you are somehow being evasive or uncooperative. You can represent yourself, or seek representation through an accountant or tax advisor.
The inspectors like to have a first interview without your accountant/tax advisor present (if it is based on a business inspection), because then they can ask you all sorts of innocuous questions by which you can tie a noose around your neck, without being counter-checked by the accountant - a bit like being cross-examined without your attorney present. It is best to be prepped beforehand by your representative, to avoid saying anything which you might deem completely unsuspicious and which in the inspectorâs mind will raise more red flags. If you can, it is best to avoid being alone at this first interview. Any subsequent interviews (I had a 2nd physical one after the initial one and a few email exchanges after a request for documents), can be handled by your representative.
Obviously, as an individual, you are potentially in a much weaker position, as the tax inspector knows which loopholes people target, and will try to determine whether they are being exploited incorrectly, or whether you are just making simple mistakes in your returns.
I couldnât answer that question specifically, as Iâve been in the French tax system for 30 years, but what I can say is that at the first interview, they should ask you whether you understand French, as otherwise there may be a requirement for a translator, or a representative that is conversant in both English and French. The inspector on my case had come into the investigation assuming that I didnât speak any French, presumably just from the name alone, but it soon became clear that they had no idea of the profession I was engaged in, which has a legal requirement for a certain level of French, in order to sit the qualifying exam. Additionally, not understanding what the inspector is asking for, or hinting at, can lead to all sorts of misinterpretations on both sides.
The basic rule is to remain polite and courteous at all times. That doesnât mean that you have to roll over like a dog having its belly rubbed, but be prepared to back up any counters to their arguments with some solid legal foundation taken from French tax law, European tax law, and any international tax law treaties to which France is a party. In my case, the inspector focussed on VAT obviously, as thatâs a classic in French business taxation, but also on a particularly odd withholding tax regime for work carried out on behalf of non-French domiciled clients. There is a current drive to try and claw back that withholding tax from unsuspecting French-based service provider professionals - it can amount to quite significant penalties with interest in the absence of a âtax-neutralâ double taxation treaty.
On a personal level, there is usually less to be gained unless they have a suspicion that you arenât fully declaring all of your worldwide income to them, even if some of it is subject to another countryâs taxation.
