You formed your SAS in Paris from London, New York, Dubai or Singapore. The Kbis, the official identity certificate of a French company issued by the greffe, the registry office of the commercial court, arrived on schedule, your company is registered with the RCS, the Registre du commerce et des sociétés, the French Trade and Companies Register, and business went on. Then a letter from the French tax administration, the DGFIP, the Direction générale des finances publiques, reaches your registered office in Paris or your accountant’s inbox. It announces a vérification de comptabilité, a full on-site audit of your company’s accounts, covering 2023 and 2024. From abroad, the reflex is often to forward the letter to the accountant with a short message and think no more about it, until a proposition de rectification, a proposed reassessment notice, arrives eighteen months later with extra corporate tax, late interest and a 40 percent penalty. This article explains, in English and step by step, how a French tax audit works when the owner lives outside France, which written guarantees protect you from the first letter, how the reassessment is built, and how you contest each stage from abroad without losing rights through missed deadlines. 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 uses the same enforcement logic as our pieces on French VAT registration and on recovering unpaid invoices in France.
I. How a French tax audit starts and how long it lasts when you run the company from abroad
A. Why does the administration audit your French company and what does the opening notice guarantee
A vérification de comptabilité is not a polite request for documents. It is the procedure through which tax inspectors come and check, on the premises, that the accounting records of your French company match the tax returns it filed, mainly for IS, the impôt sur les sociétés, the French corporate income tax, and for TVA, the taxe sur la valeur ajoutée, the French value added tax. The article L. 13 of the Livre des procédures 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 has a direct consequence. The audit takes place in France, at the registered office or at the premises of your French accountant, while you live abroad. Everything the auditor sees, asks and writes passes through your French representative, so the organisation of the first days decides the rest of the file.
The administration cannot simply walk in. The article L. 47 of the Livre des procédures 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.” No audit without a prior audit notice, called the avis de vérification, sent or handed over before the work starts. The same article continues: “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 tax years under audit and must state, on pain of nullity of the whole procedure, that the taxpayer may be assisted by an adviser of their choice. A notice that omits the years, or omits the right to counsel, can bring the entire reassessment down, and the French administrative courts apply this strictly. The notice also informs you that the charter of rights and obligations of the audited taxpayer is available on the tax administration website or on request, and the detailed guarantees are published in the official tax commentary, the BOFiP, the Bulletin officiel des finances publiques, kept on the impots.gouv.fr portal, for example the BOFiP commentary on the guarantees applicable during tax control procedures.
The Conseil d’État, the highest French administrative court, has given this notice a precise and practical meaning. In Conseil d’État, 9th and 10th chambers combined, 12 October 2018, no. 401749, it held that “la première intervention de l’administration sur place aux fins de vérification de la comptabilité du contribuable ne peut avoir lieu qu’après que ce dernier a été informé par l’envoi ou la remise d’un avis de notification, dans un délai raisonnable qui ne peut être inférieur à deux jours ouvrés, de l’engagement du contrôle, cette garantie étant de nature à permettre au contribuable d’être présent ou représenté lors des interventions sur place du vérificateur”. The first on-site visit can only take place after the taxpayer has been informed by the audit notice within a reasonable period of at least two working days, so that the taxpayer can be present or represented when the inspector comes. For a foreign owner, the lesson is concrete. Two working days is a floor, not a comfortable preparation time. If the notice arrives at your Paris address while you are abroad, the clock already runs, and you need a person in France authorised to receive the letter, call counsel, and meet the inspector. The same decision adds a useful clarification for postponed visits: “aucune disposition législative ou réglementaire ne prescrit à l’administration, lorsqu’elle décide de reporter, de sa propre initiative ou à la demande du contribuable, la date qui avait été initialement prévue pour la première intervention sur place du vérificateur, d’envoyer ou de remettre un avis de vérification rectificatif au contribuable.” When the first visit is postponed, the administration does not have to send a second corrected notice. It must still inform the taxpayer in good time, by any means, of the new date. Asking for a postponement therefore never restarts the procedure, but it also never removes your right to be assisted. The article L. 47 closes the point with a sentence foreign owners should memorise: “L’examen au fond des documents comptables ne peut commencer qu’à l’issue d’un délai raisonnable permettant au contribuable de se faire assister par un conseil.” The substantive review of the accounts can only start after a reasonable period allowing the taxpayer to arrange assistance by counsel. Use that period to appoint your French lawyer and your accountant as a team, not one after the other.
In practice, the audit is run by the SIE, the service des impôts des entreprises, the local corporate tax office that manages your company’s file, or for larger files by a specialised audit unit such as the DIRCOFI, the direction spécialisée de contrôle fiscal, the interregional tax audit directorate, for example the the DIRCOFI for Île-de-France, the Paris region. The notice names the inspector, the years, and the taxes concerned. From the day you receive it, freeze the file. Tell your accountant to preserve the FEC, the fichier des écritures comptables, the standardised electronic accounting file the inspector will request, to suspend any clean-up of old mailboxes, and to log every document handed over with dates. Foreign groups often keep invoices on a server abroad or in English only. French inspectors work in French and check French accounting records, so prepare translations of key contracts, transfer pricing documentation, and management fee agreements before the first meeting. An auditor who cannot understand a document treats it as unjustified, and an unjustified charge is a reassessed charge.
B. How long can the on-site audit last and what happens during the visits
Once the notice period has passed, the inspector works on site, reviews the books, tests invoices, checks VAT returns against accounting entries, interviews staff, and notes questions in a contradictory debate, meaning you or your representative can answer at each stage. For small and medium-sized companies, the law sets a hard time limit. The article L. 52 of the Livre des procédures 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”. On pain of nullity of the assessment, the on-site verification of the books cannot extend beyond three months for the companies concerned, essentially industrial, commercial and non-commercial businesses below the turnover thresholds set by the Code. Most foreign-owned SAS and SARL structures fall inside this protection. The three months run from the first on-site visit to the last, and exceeding them can annul the resulting tax. The same article lists exceptions, including serious accounting irregularities depriving the books of probative value, in which case the on-site work can extend up to six months, and cases of tax flagrancy. The practical message for a foreign owner is twofold. First, diary the dates of each visit from day one, because only a dated record proves an overrun. Second, do not confuse duration with pressure. An inspector who stays within three months but finds unsupported expenses, undocumented management fees paid to the foreign parent, or VAT charged late, still reassesses. Speed of cooperation matters more than the calendar alone.
During the visits, the central guarantee is the contradictory debate. The inspector must present their findings orally before writing them into the reassessment proposal, so that you can respond, produce missing invoices, and correct misunderstandings. A foreign director who never appears and never mandates anyone to speak leaves the debate one-sided. Designate in writing one French contact person, usually your accountant alongside your lawyer, authorised to answer factual questions and to receive copies. Keep your own role for decisions: which adjustments to accept, which to fight, and what settlement line to hold. Three files typically cause trouble for foreign-owned companies. Management fees billed by the foreign parent without a written service agreement or time records. Cash movements between the French company and the foreign shareholder recorded as current account advances without interest terms. VAT on cross-border services where the reverse charge mechanism, the autoliquidation, was misapplied. Prepare these three folders before the audit rather than during it, because reconstructing them under inspector questions from another continent costs months and credibility.
The audit closes with an oral synthesis meeting, then the written phase begins. Nothing said orally binds either side until the administration sends the formal proposal, but everything said orally shapes that proposal. Ask your representative to take notes at each visit, to confirm by email what was requested and what was delivered, and to request the end-of-audit interview expressly. Companies that keep a dated log of deliveries and interviews negotiate the written phase from a position of order. Companies that hand over boxes of unsorted PDFs from abroad spend the written phase explaining what the inspector already misread. The difference shows in the amount of the final bill.
II. From the proposed reassessment to contesting it step by step without living in France
A. How do you read the proposed reassessment: principal, interest, penalties and time limits
The proposition de rectification is the letter that turns the audit into money. It lists each adjustment, head by head, explains the legal basis, states the additional tax, adds interest and penalties, and invites you to reply. The article L. 57 of the Livre des procédures 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 the taxpayer can answer it or accept it. This is not a formality. A proposal that states figures without explaining how they were computed, or that cites a legal basis without linking it to your facts, can be annulled on that ground alone. Read each head separately: corporate tax on disallowed expenses, VAT reminders, withholding on payments to the foreign parent. For each head, check the facts used, the method, and the text cited. The same article adds a sentence that protects you after your reply: “Lorsque l’administration rejette les observations du contribuable sa réponse doit également être motivée.” When the administration rejects your observations, its answer must also be reasoned. A rejection that simply repeats the proposal without answering your evidence is vulnerable before the court.
The Conseil d’État has refined this requirement in a way that directly serves foreign owners who receive long proposals. In Conseil d’État, 10th and 9th chambers combined, 26 July 2018, no. 408480, it held: “Le caractère suffisant de la motivation d’une proposition de rectification doit être apprécié distinctement par chef de redressement.” Whether the reasoning is sufficient is assessed separately for each head of reassessment. The decision continues: “l’insuffisance de motivation de l’un des éléments du redressement n’affecte pas nécessairement la régularité de la notification du chef de redressement dans son ensemble.” Poor reasoning on one element of an adjustment does not necessarily invalidate the whole head. The tactic follows from these two sentences. Attack each head independently, and inside each head, attack each weak element. If the inspector disallowed five invoices but reasoned only three, claim the discharge of the two unexplained ones while arguing the substance of the other three. Foreign owners often send a single general letter saying the audit is unfair. Courts do not work that way. They go head by head, and your reply must do the same, with exhibits numbered per head.
You have thirty days from receipt of the proposal to reply, with a possible extension. The article L. 11 of the Livre des procédures 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 of the notification. The proposal itself recalls this period, and on your request made before expiry the period is extended by thirty days. From abroad, treat receipt as the date the letter reached your French address or your representative, not the date you opened the forwarded scan. Diary the deadline in your own time zone with alerts at fourteen, seven and two days. The reply must be in French, structured head by head, attaching invoices, bank statements, contracts, and transfer pricing support. This is the single most important document of the whole procedure. A complete, exhibit-backed reply often halves the final bill through abandoned heads. A late or empty reply locks the file in the inspector’s version.
Beyond the principal, two layers inflate the bill. First, late interest. The article 1727 of the Code général des impôts, the French General 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 not paid within the legal period bears late interest, on top of any penalties. The interest runs monthly from the original due date, so a 2023 adjustment notified in 2026 already carries years of interest. Second, penalties for inaccuracy. The article 1729 of the Code général des impôts 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 : a. 40 % en cas de manquement délibéré ;” Inaccuracies or omissions in a return trigger an increase of 40 percent for deliberate failure, and the same article continues: “c. 80 % en cas de manœuvres frauduleuses ou de dissimulation d’une partie du prix stipulé dans un contrat ou en cas d’application de l’article 792 bis .” 80 percent for fraudulent manoeuvres or concealment of part of an agreed price. The difference between an error and a deliberate failure is often the largest financial question in the file, larger than the principal itself. Fight the penalty qualification separately: show that the expense was declared openly in the accounts, that the VAT position followed a written analysis, that no document was hidden. Inspectors apply 40 percent routinely. Courts cancel it frequently when the file shows transparency, even while maintaining the principal.
Finally, check the time limit for reassessing, called the délai de reprise or prescription. The article L. 169 of the Livre des procédures 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’s right to reassess runs until the end of the third year following the year for which the tax is due. Your French company pays IS, the corporate tax to which the article 206 of the Code général des impôts submits French commercial companies, so the 2023 corporate tax can normally be reassessed until 31 December 2026. For VAT the mirror rule is the article L. 176 of the Livre des procédures fiscales: “Pour les taxes sur le chiffre d’affaires, le droit de reprise de l’administration s’exerce jusqu’à la fin de la troisième année suivant celle au cours de laquelle la taxe est devenue exigible conformément aux dispositions du 2 de l’ article 269 du code général des impôts.” Ten-year extensions exist for hidden activity, fraud, or flagrancy reports, but the administration must establish the facts opening the extension. When a proposal reaches back four or five years, demand the precise legal basis for the extension and test it. Many foreign-owned companies pay old-year reminders that were already time-barred, simply because nobody checked the calendar.
B. How do you contest from abroad: reply, superior, commission, claim and court
The defence runs as a ladder, and each rung has its own deadline. Miss one and the next narrows. First rung, the observations on the proposal, within thirty days plus extension, as above. Write them in French, head by head, with exhibits. Ask expressly for the hierarchical interview, the recours hiérarchique, a meeting with the inspector’s superior, and for the departmental interview where available. These meetings are not courtesy calls. Superiors abandon fragile heads before the file hardens, especially penalty qualifications, and a foreign owner can attend by videoconference or through counsel with a written mandate. Prepare a one-page settlement line before the meeting: which heads you accept, which penalty you contest, what corrected computation you propose. Inspectors settle files with taxpayers who bring numbers. They harden files with taxpayers who bring speeches.
Second rung, the commission. The article L. 59 of the Livre des procédures fiscales states: “Lorsque le désaccord persiste sur les rectifications notifiées, l’administration, si le contribuable le demande, soumet le litige à l’avis soit de la commission des impôts directs et des taxes sur le chiffre d’affaires prévue à l’article 1651 du code général des impôts”. When disagreement persists, the administration, if the taxpayer requests it, submits the dispute to the commission for direct taxes and turnover taxes. The request must be made in your reply or shortly after, within the stated time limit, and it covers questions of fact such as valuation of expenses, stock, or work in progress, not pure questions of law. The commission hears both sides and gives an opinion that the administration usually follows on facts. For a foreign owner, the commission is valuable because it is collegial and document-driven. A well-indexed exhibit file in French, with translated contracts and bank proofs, weighs more there than the director’s physical presence. Your lawyer presents, your accountant explains the figures, and you join remotely for questions.
Third rung, the formal claim, the réclamation, after the tax is assessed and notified by the avis de mise en recouvrement, the collection notice. The official service-public page for business disputes with the tax administration, disputes with the tax administration and out-of-court remedies on service-public.fr, describes the available amicable and contentious routes before going to court. File the claim with the SIE that issued the assessment, in French, within the legal time limit stated on the notice, attaching everything again. The administration must answer with a reasoned decision. A silent or late rejection opens the court door on its own. Fourth rung, the court. The tribunal administratif, the French administrative court, hears the case in full, re-examines facts and law, and can discharge heads, cancel penalties, and order repayment. For a company registered in Paris or Île-de-France, the competent court is generally the tribunal administratif of the place of taxation, most often Paris or Montreuil for the inner suburbs, and appeals go to the CAA, the cour administrative d’appel, the administrative court of appeal. Budget eighteen to thirty months for a first judgment. Your lawyer represents you and pleads in French. You do not need to fly in, but you need to be reachable for instructions when the rapporteur public, the public reporter whose conclusions preview the likely outcome, raises a new point.
Four practical rules make this 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 run from receipt in France and courts show little sympathy for a founder who discovered the letter late. Second, mind the language. Every observation, claim and pleading must be in French to be processed reliably. Send 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 arguments and the penalty defence, and you as the foreign director set the settlement line. Auditors and judges notice when the accountant argues law or the lawyer invents accounting, and neither persuades. Fourth, keep settlement open at every rung. A transaction, a formal settlement with the administration, can reduce penalties, spread payment, and close the file, while a full court win takes years. The strongest files from abroad combine firm procedure arguments, which create settlement leverage, with a credible corrected computation that lets the administration keep part of the principal and drop the 40 percent increase. Companies that answer fast, document everything, and escalate calmly through superior, commission, claim and court obtain the largest penalty cancellations. Companies that ignore the auditor and write 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 contradictory debate, the proposal must explain each adjustment so you can answer it, and the reassessment must stay inside its three-year window except for hidden activity. The bill stacks three layers, the principal, monthly late interest, and a 40 or 80 percent penalty for deliberate or fraudulent conduct, 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 nobody in France is authorised to meet the auditor, and when the accounts sit 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 arguments 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 proposed reassessment or a collection notice for your French SAS, SARL, branch or subsidiary while running the company from abroad? Our firm offers a telephone 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 (Maître Reda Kohen) or write through our contact page. Our office in Paris advises foreign founders and groups across Paris and Île-de-France and from abroad, in English.
Sources: Livre des procédures fiscales and Code général des impôts on Légifrance; Conseil d’État decisions on Légifrance; official tax commentary (BOFiP) on impots.gouv.fr; business procedures on service-public.fr.