Procedural Guarantees and the Scope of the Taxpayer’s Charter

A private security company underwent a tax audit covering fiscal years 2015 to 2017, extended to July 31, 2018 for VAT and the contribution on private security activities. Following the audit, the tax authorities issued VAT and contribution reassessments, along with penalties, some under the automatic taxation procedure.

Legal Framework

• Article L.57 of the French Tax Procedure Code (LPF): requires the administration to justify the proposed adjustment and respond to taxpayer observations.
• Article L.59 LPF: allows referral to the commission on direct taxes and turnover taxes in case of disagreement.
• Taxpayer’s Charter (Article L.10 LPF): guarantees hierarchical appeals.

Court’s Analysis

The Paris Administrative Court of Appeal ruled that:

• The administration’s failure to respond to the company’s letter contesting the adjustments did not deprive the company of the guarantees under Articles L.57 and L.59 where:
  • The reassessments were made under the automatic taxation procedure (Article L.66 LPF).
  • The adjustments related to deductible VAT did not concern turnover (outside the commission’s scope).
• However, for adjustments under the contradictory procedure, the lack of response deprived the company of a substantial guarantee under the Charter (hierarchical appeals), making the procedure irregular.

Consequences

• Reassessments under automatic taxation were upheld.
• Taxes assessed under the contradictory procedure were canceled due to procedural irregularity.

Key Takeaway

The Taxpayer’s Charter is binding on the administration. Failure to comply can lead to annulment of reassessments.