You run your French SAS or SARL from London, New York, Dubai or Singapore. The Kbis, the company identity certificate issued by the greffe, the registry office of the French commercial court, arrived without drama, the company is entered in the RCS, the Registre du commerce et des societes, the French Trade and Companies Register, and life went on. Then a letter from the DGFIP, the Direction generale des finances publiques, the French tax administration, arrives at your Paris registered office or in the inbox of your French accountant. It announces a verification de comptabilite, a full on-site audit of your accounts, for 2023 and 2024. Your first reflex from abroad is often the wrong one: forwarding the letter to the accountant with a short note saying handle it, booking no time for the auditor, and discovering eighteen months later a six-figure reassessment with late interest and a 40 percent penalty. This article explains the French tax audit as it really works for a foreign-owned company, which guarantees protect you from the first letter, how the reassessment is built, and how you contest each step from abroad without losing your rights through delay. It completes our general guide for foreign founders on setting up a company in France, from bank account and Kbis to VAT and first hire, and it follows the same enforcement logic as our pieces on French corporate tax for foreign owners and French VAT registration refused or delayed before the first invoice.

I. What a French tax audit really means when you run the company from abroad

A. How does a verification de comptabilite start and which guarantees apply from day one

A verification de comptabilite is not a polite request for documents. It is the procedure by which tax inspectors come and check, on the premises, that your accounting records match the tax returns your French company filed for corporate income tax, known as IS, impot sur les societes, and for VAT, TVA, taxe sur la valeur ajoutee. The article L. 13 of the Livre des procedures fiscales, the French Tax Procedure Code states: “Les agents de l’administration des impôts vérifient sur place, en suivant les règles prévues par le présent livre, la comptabilité des contribuables astreints à tenir et à présenter des documents comptables.” In plain English, the inspectors verify the accounts on site, following the rules of that Code. For a foreign owner this sentence matters because the audit happens in France, at the registered office or at the accountant’s office, while you sit abroad. Everything the auditor sees, asks and writes down passes through your French representative, which is why the first days decide the rest of the case.

The administration cannot simply walk in. The article L. 47 of the Livre des procedures fiscales states: “Un examen contradictoire de la situation fiscale personnelle d’une personne physique au regard de l’impôt sur le revenu, une vérification de comptabilité ou un examen de comptabilité ne peut être engagé sans que le contribuable en ait été informé par l’envoi ou la remise d’un avis de vérification ou par l’envoi d’un avis d’examen de comptabilité.” In other words, no audit without a prior audit notice, the avis de verification, sent or handed over before the work starts. The same article adds: “Cet avis doit préciser les années soumises à vérification et mentionner expressément, sous peine de nullité de la procédure, que le contribuable a la faculté de se faire assister par un conseil de son choix.” The notice must list the years under audit and must state, on pain of nullity of the whole procedure, that you may be assisted by an adviser of your choice. A notice that omits the years, or omits the right to counsel, can bring the entire reassessment down, and courts apply this strictly. The notice also tells you that the charter of the audited taxpayer can be consulted on the tax administration website or handed over on request. The official page presenting that charter is published by the administration at the charter of rights and obligations of the audited taxpayer on impots.gouv.fr, and its provisions can be invoked against the administration.

Three recent court cases show how seriously judges take the starting point. In CAA Bordeaux, 14 January 2025, No. 22BX02425, a company argued that “la vérification de comptabilité dont elle a fait l’objet a débuté avant qu’elle ait reçu l’avis de vérification de comptabilité en méconnaissance de l’article L. 47 du livre des procédures fiscales, ce qui l’a privé d’un débat oral et contradictoire”. The court examined the calendar day by day instead of dismissing the argument as formalistic. In CAA Paris, 31 July 2020, No. 19PA01616, the taxpayer argued that “le service vérificateur a débuté une vérification de comptabilité préalablement à l’envoi d’un avis de vérification en procédant à des investigations sur les conditions d’exploitation de son activité professionnelle et à un examen critique de ses pièces comptables”. The court had to decide whether those early steps were already an audit. The lesson for a foreign owner is practical. Keep the envelope, the email headers, the date of actual receipt at the registered office, and the date of the first visit. If your domiciliation company in Paris received the notice on 5 May and forwarded it to you in Dubai on 20 May while the auditor came on 12 May, that chronology is evidence. Ask your French counsel to check immediately whether the notice lists the right years, mentions the right to counsel, and left you a real preparation time. An unannounced visit to note the physical state of the premises is allowed, but the substantive audit work cannot start before you hold the notice. From abroad, the most common mistake is treating the notice as routine mail. It is the document that frames every later deadline, and the only moment when several nullity arguments are still fully open.

Two further reflexes protect foreign-owned structures at this stage. First, appoint one French contact point in writing the day the notice arrives: your lawyer, your accountant, or both, with authority to receive the auditor, to sign receipts, and to forward every request to you within 48 hours with a translation if needed. Auditors note who answers, who refuses, who delays, and those notes later feed penalty qualifications such as deliberate failure. Second, freeze the document base. Instruct the French team not to rewrite, reclassify or delete anything after the notice, and to preserve the accounting software, the sales journals, the purchase files, the bank statements, the contracts with the foreign parent, the transfer-pricing documentation, and the VAT returns with their supporting schedules. Under French rules the audit covers all information and computer processing that directly or indirectly shapes the accounting and tax result, so a missing export file or a rebuilt 2023 ledger created after the notice can be read as an irregularity. A foreign parent that keeps the real commercial records on its London or New York server should give the French auditor a workable access path early, with a named person who can explain each file, rather than forcing the auditor to conclude that the French accounts cannot be verified.

B. What happens during the on-site audit and how long can it last

Once the notice is in your hands, the audit takes place where the accounts are, normally the registered office, sometimes the accountant’s office by agreement, sometimes in the administration’s own offices if no agreement is reached. For a foreign-run company the meeting pattern is predictable: the auditor asks for the general ledger, the journals, the inventory file, the invoices issued and received, the bank statements, the payroll records, the VAT workings, the intra-group agreements, and the documentation for any computerised accounting system. The auditor then tests coherence, margins, stock movements, cash, and the reality of charges billed by the foreign parent such as management fees, royalties or interest. This is also where VAT becomes dangerous for foreign sellers: exempt intra-Community supplies without the transport proof, French VAT charged or not charged on B2B services, distance sales thresholds, and e-invoicing trails are all re-read line by line. The auditor works in French, writes in French, and expects answers in French, which means a foreign director who tries to handle the meetings in English from abroad without a French-speaking representative quickly loses control of the record.

Duration is capped, and the cap is a real guarantee. The article L. 52 of the Livre des procedures fiscales provides: “Sous peine de nullité de l’imposition, la vérification sur place des livres ou documents comptables ne peut s’étendre sur une durée supérieure à trois mois en ce qui concerne :” small companies defined by turnover thresholds. In plain terms, for a small French subsidiary or SAS, the on-site verification cannot run longer than three months, on pain of nullity of the assessment. The same article lists exceptions, including instruction of observations after the end of verification work, examination of private and professional bank accounts, verification of accounts used for separate activities, and serious irregularities depriving the accounts of probative value, in which case on-site work can run up to six months. Large foreign-owned subsidiaries therefore often fall outside the three-month shield, while small first French entities stay inside it. From abroad, diary the first and last on-site intervention dates yourself, because the administration’s calendar and yours can differ, and the three-month argument turns entirely on those dates.

The heart of the procedure is the oral and adversarial debate, the debat oral et contradictoire. The auditor must discuss the envisaged adjustments with you before closing, so that you can explain, complete or correct. In CAA Paris, 31 July 2020, No. 19PA01616, the taxpayer stated that “son droit à un débat oral et contradictoire a été méconnu”, his right to an oral and adversarial debate was disregarded, and the court reviewed the meeting history to test that claim. A foreign owner who never meets the auditor, never designates anyone to discuss, and only discovers the auditor’s theory in the written rectification proposal will struggle to prove that no debate happened, because silence looks like absence. The practical fix is simple: request at least one interim meeting and one closing meeting, attend by video with your French adviser physically present, ask for the auditor’s questions in writing, answer in writing, and keep minutes. If the auditor refuses a closing discussion or notifies adjustments the company never heard about orally, that record becomes the backbone of a nullity plea. Equally, use those meetings to narrow the case early. An auditor who understands, with bank proof, that a 200,000 euro transfer from the UK parent was a documented shareholder loan with interest and repayment, rather than hidden sales, may drop the point before it hardens into a formal proposal. An auditor who meets only silence will formalise the worst reading.

Computerised accounting deserves a separate warning for foreign groups. French auditors can test the software, the data, the processing logs and the programming documentation, and they can ask for specific exports. Groups that run SAP, NetSuite or Xero from abroad sometimes answer that the French entity has no access, or deliver PDFs instead of data files. That answer invites the auditor to treat the accounts as unverifiable and to reconstruct turnover by external methods, margins, stock flows, bank credits, which almost always produces a higher base than the real one. Give the auditor a user-level access or a full export with the file map, keep the person who configured the chart of accounts available for questions, and document every delivery with a dated list. If a file truly does not exist, say so in writing on day one and explain what replaces it, rather than letting the auditor discover the gap in month three. Courts distinguish a cooperative taxpayer with an imperfect system from a taxpayer whose system cannot be tested, and only the second routinely loses the accounting-evidence battle.

II. How the reassessment is built and how a foreign company fights it step by step

A. How do you receive the tax bill and how are interest and penalties calculated

When the auditor considers that the returns were wrong, the case moves from verification to rectification. The article L. 55 of the Livre des procedures fiscales states: “Sous réserve des dispositions de l’article L. 56, lorsque l’administration des impôts constate une insuffisance, une inexactitude, une omission ou une dissimulation dans les éléments servant de base au calcul des impôts, droits, taxes, redevances ou sommes quelconques dues en vertu du code général des impôts ou de l’article L. 2333-55-2 du code général des collectivités territoriales, les rectifications correspondantes sont effectuées suivant la procédure de rectification contradictoire définie aux articles L. 57 à L. 61 A.” In short, any shortfall, inaccuracy, omission or concealment in the taxable base leads to a formal adversarial rectification procedure. For corporate tax and VAT this is the standard route, and it gives you structured reply rights at each stage. The administration cannot jump straight from the audit to enforced collection without going through it.

The key document is the proposition de rectification, the proposed adjustment notice. The article L. 57 of the Livre des procedures fiscales states: “L’administration adresse au contribuable une proposition de rectification qui doit être motivée de manière à lui permettre de formuler ses observations ou de faire connaître son acceptation.” The proposal must be reasoned so that you can respond or accept with full knowledge. The same article adds: “Lorsque l’administration rejette les observations du contribuable sa réponse doit également être motivée.” If you reply and the administration maintains the adjustment, its answer must also be reasoned. This is where foreign-owned companies win or lose most cases on the merits. In CAA Bordeaux, 7 June 2022, No. 20BX00437, the company argued that “la proposition de rectification du 21 novembre 2013 est insuffisamment motivée”, and the court recalled “aux termes de l’article L. 57 du livre des procédures fiscales”, before testing whether the notice allowed the company to understand and answer. In CAA Paris, 31 July 2020, No. 19PA01616, the taxpayer argued that “la proposition de rectification du 15 décembre 2016 est insuffisamment motivée dès lors que le vérificateur a procédé à une reconstitution de ses recettes sans avoir préalablement exposé les motifs justifiant le rejet de la comptabilité présentée”. The pattern is identical in almost every foreign-subsidiary file: the auditor rejects the accounts as irregular, then rebuilds turnover from margins, bank credits or comparable companies. If the rejection reasons are missing, vague or notified only after the rebuild, the motivation plea is open. From abroad, read the proposal as a litigator on day one. Number each adjustment, check whether the facts, the method, the comparables and the legal basis are stated for each tax and each year, and list what is missing. A proposal that states a 120,000 euro VAT recall without saying which invoices, which months and which legal rule were applied is not a proposal you can usefully answer, and the court may say so.

Your reply deadline is short and strict. The article L. 11 of the Livre des procedures fiscales states: “A moins qu’un délai ne soit prévu par le présent livre, le délai accordé aux contribuables pour répondre aux demandes de renseignements, de justifications ou d’éclaircissements et, d’une manière générale, à toute notification émanant d’un agent de l’administration des impôts est fixé à trente jours à compter de la réception de cette notification.” Thirty days from receipt is the default. For a rectification proposal the specific rule in article L. 57 extends this to thirty days with a possible thirty-day extension on request made before expiry, so a foreign owner can in practice obtain sixty days by writing early. The trap for companies run from abroad is the starting point. Time runs from receipt at the French address, not from the day you open the forwarded scan in another time zone. A proposal received at the Paris registered office on 10 October leaves you until 9 November even if you discover it on 25 October during a business trip. Give your French counsel a standing instruction to request the extension systematically before the first deadline expires, and to file a holding response reserving the right to complete. A late observation is not automatically discarded, but it loses the procedural protections that attach to a timely reply, including referral to the departmental tax commission in eligible cases.

The final bill adds three layers on top of the recalled principal. First, late interest. The article 1727 of the Code general des impots, the French Tax Code states: “Toute créance de nature fiscale, dont l’établissement ou le recouvrement incombe aux administrations fiscales, qui n’a pas été acquittée dans le délai légal donne lieu au versement d’un intérêt de retard.” Any tax debt paid late bears late interest, currently 0.20 percent per month, running from the original due date to payment. It is due even when you acted in good faith, subject only to narrow statutory exceptions such as an express disclosure in the return of the disputed treatment. Second, the penalty for the principal. The article 1729 of the Code general des impots states: “Les inexactitudes ou les omissions relevées dans une déclaration ou un acte comportant l’indication d’éléments à retenir pour l’assiette ou la liquidation de l’impôt ainsi que la restitution d’une créance de nature fiscale dont le versement a été indûment obtenu de l’Etat entraînent l’application d’une majoration de :” with “40 % en cas de manquement délibéré”, 40 percent for deliberate failure, 80 percent for abuse of law or fraud. In foreign-subsidiary files the administration routinely asserts deliberate failure from missing invoices, repeated VAT errors or undocumented parent charges. That qualification must be proved with facts specific to your file, not presumed from the mere existence of a recall, and it can be fought adjustment by adjustment. Third, collection surcharges. The article 1731 of the Code general des impots provides: “Donne lieu à l’application d’une majoration de 5 % tout retard dans le paiement des sommes qui doivent être versées aux comptables de l’administration fiscale”. Late payment draws a 5 percent surcharge on top. A 100,000 euro corporate-tax recall over three years can therefore easily become 115,000 to 150,000 euros once interest and a 40 percent penalty are added, before any criminal exposure, which is why negotiating the penalty qualification down is often worth more than disputing a small slice of principal.

Time limits cut both ways. The article L. 169 of the Livre des procedures fiscales states: “Pour l’impôt sur le revenu et l’impôt sur les sociétés, le droit de reprise de l’administration des impôts s’exerce jusqu’à la fin de la troisième année qui suit celle au titre de laquelle l’imposition est due.” For income tax and corporate tax the administration can reassess until the end of the third year following the year the tax relates to. The same article extends the period to ten years for hidden activity, defined in substance as failing to file the required returns while never registering the business with the business formalities body or while conducting an illicit activity. Foreign founders sometimes trigger this extension without realising it: a company that billed French clients for two years without ever registering for VAT, without filing corporate returns, and without a French establishment filing can be characterised as exercising an undisclosed activity, which reopens ten years instead of three. Regularising the filing position before the audit notice arrives, even late with penalties, usually keeps you inside the three-year window, while waiting for the auditor to discover the gap invites the ten-year reading. Check the prescription year by year as soon as the notice lists the audited period, because an adjustment notified after the reprise deadline for that year falls, whatever its merits.

B. How can a foreign company contest the reassessment without coming to France

The contest follows a fixed ladder, and each rung has its own deadline. Step one is the written observations on the rectification proposal, within thirty days plus the extension, with evidence. Answer adjustment by adjustment, in French, with exhibits: bank statements proving the nature of parent transfers, signed loan agreements with interest terms, transport documents proving intra-Community deliveries, corrected VAT workings, margin explanations with purchase invoices. Ask explicitly for a meeting with the auditor’s superior, the interlocuteur superieur, and then with the departmental interlocutor if the dispute persists. These hierarchical appeals are free, fast, and often effective on penalty qualifications, because a superior can cancel a 40 percent increase that the auditor applied mechanically. If the dispute concerns facts such as the rejection of accounts or the reconstruction method, request referral to the commission departementale des impots directs et des taxes sur le chiffre d’affaires, the departmental commission for direct taxes and turnover taxes, where provided for. Its opinion does not bind the administration but a favourable opinion shifts settlement leverage strongly.

Step two is the formal claim after the tax is assessed and collected. Once the avis de mise en recouvrement, the collection notice, arrives, you file a reclamation contentieuse, a formal tax claim, with the SIE, the Service des impots des entreprises, the corporate tax office handling your file. The standard deadline is 31 December of the second year following assessment or payment, and the claim must state the tax, the years, the amounts and the grounds. From abroad, file by registered letter with acknowledgment of receipt or through the professional online account, keep the proof of filing, and calendar the administration’s six-month reply period. Silence for six months is an implied rejection that opens the court route. Do not mix this claim with informal emails to the auditor. Only the formal claim interrupts limitation and preserves the right to go to court. Attach everything: the corrected accounts, the missing transport proofs, the transfer-pricing file, the witness statements from the French team, the bank certificates from the foreign parent. A claim that simply states we disagree with no exhibit will be rejected and will weaken the later court case.

Step three is the administrative court. Appeals go to the tribunal administratif, the administrative court, of the place of taxation, which for a Paris-registered company is normally Montreuil for Paris-area files or Paris itself depending on allocation, with representation by a French lawyer. The court reviews both procedure and merits: nullity of the audit for breach of article L. 47 or L. 52, lack of oral debate, insufficient motivation under article L. 57, expiry of the reprise period under article L. 169, wrong legal qualification of parent flows, excessive reconstruction, unjustified penalty rate. The three court rulings used in this article show the method judges apply: they test the notice dates against the first audit acts, they test the proposal’s reasoning adjustment by adjustment, and they test whether the accounts were truly deprived of probative value before allowing a reconstruction. A foreign owner does not need to attend the hearing in person. Your lawyer represents you, files in French, and answers the rapporteur public, the public reporter whose conclusions preview the likely outcome. Budget eighteen to thirty months for a first-instance judgment, longer on appeal to the CAA, the cour administrative d’appel, the administrative court of appeal. Interest continues to run during the case unless you pay or guarantee, so consider paying the disputed amount under protest and claiming repayment with moratory interest if you win, rather than letting a 40 percent penalty plus monthly interest compound for two years.

Four practical rules make the whole ladder workable from abroad. First, centralise time. Convert every French deadline into your own calendar with alerts at minus fourteen, minus seven and minus two days, because French extensions are counted from receipt in France and French courts show little sympathy for a founder who discovered the letter late. Second, pay attention to language. Every observation, claim and pleading must be in French to be processed reliably. Send your English instructions to French counsel early enough for translation and exhibit numbering, and sign powers of attorney in advance so counsel can file without waiting for a notarised document from another continent. Third, separate the roles. Your French accountant rebuilds the numbers and produces clean workings, your lawyer frames the procedure pleas and the penalty defence, and you as the foreign director decide the settlement line. Auditors and judges can tell when the accountant argues law or the lawyer invents accounting, and neither is persuasive. Fourth, keep settlement open at every rung. A transaction, a formal settlement with the administration, can reduce penalties, spread payment, and close criminal risk, while a full court win takes years. The best files from abroad combine firm procedure pleas that create settlement leverage with a credible corrected computation that lets the administration save face by keeping part of the principal and dropping the 40 percent increase. Companies that answer fast, document everything, and escalate calmly through superior, commission, claim and court collect the largest penalty cancellations. Companies that ignore the auditor and write directly to the judge two years later pay the full bill.

Conclusion

A French tax audit of a foreign-owned company is a procedure with rules, not an ambush without remedy. The notice must come first and must name the years and the right to counsel, the on-site work must respect the time limits and the oral debate, the proposal must explain each adjustment so you can answer it, and the reprise must stay inside its three-year window except for hidden activity. The bill stacks principal, monthly late interest, a 40 or 80 percent penalty for deliberate or fraudulent conduct, and a 5 percent collection surcharge, which is why the penalty qualification often matters more than the last thousand euros of principal. The defence runs in order: detailed observations with exhibits inside thirty days plus extension, hierarchical interviews and commission referral, formal claim to the corporate tax office, then the administrative court. Foreign owners lose when they learn about each letter weeks late, when no one in France is authorised to meet the auditor, and when the accounts live on a foreign server nobody can explain. They win, or settle well, when one French representative owns the calendar, when every delivery is dated and complete, and when procedure pleas and corrected numbers are presented together from the first reply. If the audit notice is already on your desk, the next move is not to wait for the proposal. It is to check the notice, appoint counsel, freeze the files, diary the thirty days, and prepare the meeting that frames everything after.

Need a quick opinion on your case

Received an audit notice, a rectification proposal or a collection notice for your French SAS, SARL, branch or subsidiary and running the company from abroad? Our firm offers a phone consultation within 48 hours with a lawyer of the firm to review your notice, your deadlines and your defence. Call +33 6 46 60 58 22 or write through our contact page. Our office in Paris advises foreign founders and groups across Paris and Ile-de-France and from abroad in English.