The French system for assessing, auditing and challenging taxes has been extremely constant over the past few decades. The major changes essentially reflect progress in technology (use of digital data and equipment in tax audits, tax filings, tax payments and dispute procedures), the growing influence of international instruments of human rights and European Union law, and a tendency of both the tax authorities and taxpayers to be more aggressive than they used to be. Alternative dispute resolution methods have not developed, apart from voluntary disclosure programmes, and a very effective method was terminated in 2010. A first attempt at enhancing the relationship between businesses and the tax authorities was unsuccessful due to the lack of interest and means from the French tax authorities; a new attempt is in the process of being initiated. In contrast, the French criminal legislation on tax matters has been amended and refined over the past few years.

The French tax system is largely based upon self-assessment, with taxpayers filing their tax returns, and often assessing their own tax, on the basis of their assessment of the facts and interpretation of the law. In recent years, the filing and reporting obligations of taxpayers have been increased substantially, especially with respect to their cross-border assets and activities. Likewise, the French tax authorities have been granted easier access to widened means of information by the legislature in domestic situations and by international instruments in matters containing a foreign element.

Statutes of limitation have been successively amended to reduce limitation periods for certain taxpayers' claims, and to extend the periods available to the tax authorities for making reassessments or initiating criminal procedures. The criminal periods of limitation have been doubled, and no effective limitation applies to money laundering of the proceeds of tax fraud.

Statistics published by the French tax authorities in their annual report show that the overall number of tax reviews by the French tax authorities remains stable. A vast majority consists of unilateral reviews by a tax auditor of documents available to the authorities both for individuals (close to 1 million of them in total) and businesses (close to 300,000 of them in total). Taxpayers must be informed of the outcome of such reviews and may comment before the tax is assessed. More formal audit procedures are more inquisitive and involve both a discussion with the taxpayer and counsel and access to an internal review. Their numbers tend to slowly decline: in 2017, 44,287 audits with accounting checks were carried out with businesses, and 3,613 thorough audits of personal situations took place with individuals.

The total amount of reassessments and penalties slowed down to €17.9 billion in 2017, partly because the voluntary disclosure programme for individuals holding assets abroad has come to an end. Corporation tax reassessments also went down to €3.9 billion. The total amount of taxes and penalties assessed in serious frauds (defined as triggering 40 per cent penalties or more after a tax audit) increased to €6.5 billion, although this represents the same 30 per cent proportion of tax and penalties assessed in formal tax audit procedures over preceding years.

The amount and proportion of tax and penalties effectively collected decreased to approximately 52.5 per cent of the assessed amounts. This proportion has been relatively stable over a longer period and slightly increased to 57 per cent in 2015 and 2016 as a result of the voluntary disclosure programme. A 52 to 57 per cent proportion of recovery tends to confirm that a substantial amount of the taxes and penalties assessed after a tax audit are effectively reduced, by approximately €8 billion in total per year, as a result of internal reviews by, or negotiations with, the French tax authorities resulting in pre-litigation settlements or in pursuance of court decisions upon disputes. The figure of €8 billion per year accordingly represents a rough estimate of the current French market of tax controversy, an estimate that was subverted by the €10 billion cost to the government of the 3 per cent dividend tax litigation in 2017–2018.


Although there can be many steps, or administrative decisions, before a tax is assessed, taxpayers are generally barred from initiating any action until a tax is assessed. Only few exceptions enable an actual or potential taxpayer to start an action before a tax deed has been issued.

i Petitions for judicial review of administrative guidelines

Taxpayers, and certain taxpayers' associations, may file petitions for a judicial review of administrative guidelines that may be declared illegal on any point where they give an interpretation of the tax law that differs from the decision of an administrative judge on the relevant point. Such procedures have been used, successfully at times, to shortcut the lengthy administrative and judicial process of a tax controversy. Some of these petitions may be the basis for the administrative court to refer a preliminary question either to the Constitutional Council on certain matters where a legislative provision is challenged against any fundamental human rights enshrined in the French Constitution, or the European Court of Justice (ECJ) where a question of EU law is involved.

The challenge to the 3 per cent corporation tax surcharge on amounts distributed by French companies from 2012 onwards provided a recent example. Petitions were filed by certain taxpayers and by the French Association of Large Businesses, before the Council of State in the spring of 2016. Both categories of petitioners claimed the administrative guidelines were illegal because they commented upon a piece of legislation that was against the principle of equal rights on certain points and contrary to the EU Parent–Subsidiary Directive on other points. The Council of State decided in June 2016 to refer the equal treatment point to the French Constitutional Council, and the EU Directive points to the ECJ. The Constitutional Council found the law to be discriminatory and unconstitutional in a ruling of September 2016. The law was amended at year-end to extend the benefit of an exemption for intra-group dividends to domestic, European and most third-country corporate relationships. The EU case was decided by the ECJ in May 2017 after which the French Council of State further referred the case to the French Constitutional Council, which finally decided in October 2017 that the 3 per cent surcharge on dividends was entirely unconstitutional. A similar result was reached in Belgium with respect to the 'fairness tax' that was introduced in 2013 and was inspired by the French surcharge. The cost to the French government totalled approximately €10 billion and required an extraordinary surcharge to partly finance it.

Similar procedures are based upon the same lines; others are less radical or have narrower scopes and lower chances of success.

Petitions for judicial review could also be introduced with respect to individual decisions, such as an unsatisfactory ruling, notified to a taxpayer. The French tax courts have been excessively restrictive upon the admission of such petitions on the ground that, except in very special circumstances, the decision was not separable from the taxation procedure.

ii Pre-audit search warrants

Prior to a tax audit, the tax authorities may apply to a civil judge for a warrant to search premises and attach documents that could be used as evidence that a business is carried out in France and should be taxable in France. Approximately 200 searches are performed on that basis each year. Many undisclosed permanent establishments of foreign entities are being the purpose of such warrants. As a result of a 2008 ruling by the European Court of Human Rights (ECHR) in Ravon, French law was amended to the effect of allowing the potential taxpayer and the tenant of the searched premises to immediately appeal from the warrant to the president of the court of appeals and challenge the basis for the authorities' suspicions. They may also challenge the validity of the search on grounds of breach of confidentiality. Such appeals and challenges are commonly introduced shortly after the searches have been made and before the tax assessments are established. They seldom succeed in court. However, challenging the warrant may often be useful as it enables the potential taxpayer to access the documents supplied by the French tax investigators in their application for the warrant and bring forward certain points of defence to be considered, if not by the court, by the French tax authorities at a later stage.

After the search, the French tax authorities may use the collected documents against the potential taxpayer only after carrying out a full audit of its accounts with the assistance of a counsel and a discussion in person. The French tax authorities simultaneously send a request for omitted tax returns. Although the non-resident entity may claim it has no taxable presence in France, where it maintains no corporate accounts and consider that it has no tax return to file in France, it is generally advisable to cooperate with the French tax authorities.

Under French tax law, any audited business must supply its accounts and supporting documents for inspection, in their original digital format where applicable. Where cross-border transactions occur with related parties, the audited entity must also make its transfer pricing policy available to the French tax auditors. As a result, the French tax auditors would expect, and generally require, to review such documents, failing which they are entitled to formally record that they were not presented and to draw certain conclusions.

A non-resident entity that considers that it has no taxable presence in France presumably would not have separate accounts, or a transfer pricing policy, with respect to its operations in France, especially where these operations are carried out by a French subsidiary or other related entity. As a matter of law, there is no requirement for a foreign entity to have separate accounts for its French operations, even where carried out through a permanent establishment. Business entities established outside France and doing business in France from abroad accordingly are entitled to indicate that they did not maintain separate accounts but should be prepared to provide the relevant documents to French tax auditors. The accounting documents could be their full set of accounts in their original digital format and any relevant transfer pricing policy.

Depending upon the circumstances, these documents may support the position that the entity had no, or a limited, presence in France, with no or limited tax consequences. This may be true especially where the deemed permanent establishment in France can be seen as merely supplying support functions to the head office and principal activities abroad. In such a situation, no value added tax (VAT) would apply, especially within the European Union, and the corporate income tax implications would not substantially differ from a transfer pricing adjustment, if any.

In anticipation of such possible outcomes, the potential taxpayer may defer to the request of the French tax authorities and file the corresponding tax returns within 30 days of the request to do so. In these tax returns, the foreign entity may indicate why there was no reportable VAT transaction in France or how the transfer pricing policy would result in no or limited taxable income attributable to the hypothetical French permanent establishment. If a reassessment occurs, the entity may claim treaty benefits where applicable and access the mutual agreement procedure.

This scenario implies that, at some stage, the investigated taxpayer makes the decision to either challenge the existence of the permanent establishment, including before the court, or to negotiate with the French tax authorities, concede the establishment and mitigate the French tax consequences.

As a means to press the non-resident entity for such admission, the French tax authorities may take the position that the permanent establishment was not only undisclosed but hidden or concealed. Such an ugly characterisation would result in an extended period of limitation (10 years instead of three or four) and the risk of a severe penalty (80 per cent instead of 10 per cent). Depending upon the circumstances, and the country of origin of the taxpayer, defences may be available either on both grounds or in relation to the penalty only.

iii Tax claims and challenges

French tax disputes commence when a tax is assessed or paid and the taxpayer either challenges the administrative reassessment or claims for a tax refund.

Under French tax procedure, the first step for challenging a tax assessment or for claiming a tax refund is a petition to the head of the relevant tax department whatever tax is involved and even where the tax was assessed according to the taxpayer's return. Around 3 million petitions are filed, and decided upon, each year, mainly with respect to income taxes assessed by the authorities on individuals or to local taxes. Businesses file approximately 50 to 56,000 such petitions on corporation tax and a similar number on VAT.

The petition must be filed, before any referral to any court, to the head of the tax office that has jurisdiction over the relevant tax. It must:

  1. specify the tax that is being challenged;
  2. provide a summary of the facts, pleas and arguments;
  3. be signed by the taxpayer or an authorised agent; and
  4. be accompanied by a copy of the Treasury claim concerned (assessment notice, collection notice or withholding document, in the case of withholding taxes).

Generally, the claim must be filed by 31 December of the second year following that of the assessment, collection notice or payment. An extension applies after a tax audit.

Submitting a claim does not exempt the taxpayer from the obligation to pay the taxes and penalties imposed. However, the taxpayer may request that payment be suspended. Suspension of payment is granted in exchange for the provision of guarantees (e.g., mortgage or pledge up to the amount of the principal taxes; penalties need not to be secured). The suspension remains until a lower court decision on the dispute is issued.

If the lower court rules in favour of the tax authorities, the suspended tax and penalties become payable, and the taxpayer would be liable to pay a 5 or 10 per cent surcharge plus interest on the arrears. The rate of interest was 0.4 per cent per month or 4.8 per cent per annum up to 31 December 2017 and has been reduced to 0.2 per cent per month or 2.4 per cent per annum since 1 January 2018. Conversely, if the court finds for the taxpayer who has already paid the taxes claimed, the taxpayer is entitled to interest on arrears at the same rates. Considering the prevailing market rates, it has been and still could be financially advantageous for taxpayers to pay and not to apply for suspension.

The authorities must decide on a claim within six months. Failing a formal decision after six months or if the claim is totally or partially rejected, in writing or implicitly, the taxpayer is entitled to bring an action before the administrative or civil courts, depending on the case.


Where the taxpayer is not satisfied by a decision, the dispute may be brought before the courts. There are no special tax courts in France, and tax cases are heard by the common administrative, civil or criminal courts, depending upon the tax that is challenged or the penalty applied.

i Types of court

Administrative courts have jurisdiction over income tax, corporation tax, VAT and local taxes, and over the related tax penalties. Each year, approximately 20,000 tax cases are introduced in the lower administrative courts. In 2016, 3,879 appeals were recorded with administrative courts of appeals, and 440 further appeals were lodged with the Council of State, the supreme administrative court. Overall, the administrative courts decided partly or totally in favour of the taxpayers in approximately 12.4 per cent of the cases (13.6 per cent on VAT matters, and 14.8 per cent on income and corporation tax matters) in 2015.

Civil courts have jurisdiction over stamp duties, gift and inheritance taxes, annual wealth taxes and some excise duties, together with the related tax penalties. In 2016, 868 cases were filed with the lower civil courts, 220 with the courts of appeals and 58 with the Court of Cassation, the supreme court of the judiciary. Civil courts decided in favour of the taxpayers in approximately 33 per cent of the cases.

Criminal prosecutions may be initiated on any matter of tax fraud, which is widely defined, whatever the tax involved. Approximately 900 such procedures are held each year. Until recently, such procedures could be initiated at the request of the French tax authorities only. As of October 2018, the tax authorities must report matters where tax penalties of 40 per cent or more are applied in certain situations to the public prosecutor for a decision upon the opportunity to initiate criminal proceedings. Around 80 further procedures are investigated by the 'tax police', a special department of the prosecutor's office with tax auditors. The criminal procedure for money laundering of the proceeds of tax fraud (no public statistics, so far) or for tax swindles (around 133 cases on VAT carousel and other tax credit cases) may be initiated by the public prosecutor without request from the tax authorities. Criminal sanctions such as fines and imprisonment may be applied on top of the tax penalties.

Each type of court comprises three levels: the first level consists of the administrative courts and the courts of first instance; the second level consists of the courts of appeal and the administrative appeal courts; and the highest level consists of the Court of Cassation and the Council of State, which generally rule only on points of law and not fact.

Each court may, and in certain situations must, refer certain questions either to the Constitutional Council or the ECJ. The Constitutional Council has exclusive jurisdiction to decide upon the conformity of French legislative provisions with the human rights protected by the Constitution, including the Declaration of Human and Civic Rights of 1789. Several dozens of tax provisions have been reviewed accordingly upon the request of taxpayers. Referrals to the ECJ are commonly ordered by the Council of State or the Court of Cassation, including for tax matters. Lower courts are much more restrictive or reluctant to do so, and some, like the administrative courts of Paris, have never referred a tax case to the ECJ.

ii Proceedings

Before French courts, and particularly in relation to tax matters, the procedure is conducted primarily in writing, and results in an exchange of briefs and pieces of evidence between the taxpayer and the authorities.

The taxpayer must petition the court within a prescribed time following the formal rejection of its claim by the tax director. The time limit is generally two months. The petition must be reasoned and attach the tax deed, plus any piece of evidence the taxpayer would rely on, even where previously submitted to the tax authorities, since these are not expected to forward any of these to the court.

The assistance of a registered attorney is not legally required in the first instance. Before the appellate courts, representation by a registered lawyer is mandatory. Before the Council of State and Court of Cassation, the taxpayer must be represented by one of the 60 barristers admitted to represent clients before these supreme courts. This restriction does not apply before the Constitutional Council or the ECJ, where any registered lawyer may assist the parties, and the government is generally represented by its own agents.

No more than two briefs are commonly exchanged by each party, but this is not a hard rule. Following these exchanges, the court may, and often does, pronounce the closure of the period for submissions (also named 'instruction') and schedules a date for the hearing.

Administrative and civil courts conduct hearings differently and have different views of their own missions. Civil courts recognise taxpayers' right to a fair trial before them, in line with Article 6 of the European Convention of Human Rights.2 Administrative courts have taken the opposite view on the grounds that Article 6 applies only to civil obligations and criminal charges and would not apply to tax matters except where the tax penalties are equivalent to a criminal sanction. This position was not altered after the European Charter of Fundamental Rights, which does not distinguish between these positions, obtained treaty force in December 2009.

In practical terms, these differing views entail certain consequences, the most important of which are that the administrative courts consider that it is part of their mission to challenge the petition of the taxpayer, including on points of law and points of fact that are not discussed by the French tax authorities; and that in doing so, they are not raising a plea of their own motion, and accordingly can forgo from informing the parties (i.e., the taxpayer) and inviting them to submit their comments.3

Before both types of courts, a reporting judge summarises the case at a hearing. Witnesses and experts are not heard. Both parties are entitled to present oral arguments and plead their case (however briefly).

Before the administrative courts, a public reporter, who is a member of the court that does not participate in the decision-making, delivers an opinion that is based upon a draft judgment, and may raise issues that were not addressed by the parties. At this point, the parties are informed of such issues. They may then make very brief observations and, where appropriate, file a 'post-hearing brief' to clarify any points that have been raised, or overlooked, by the public reporter. The court must consider this post-hearing brief and decide whether it reopens the case before reaching a decision.

iii Effectiveness of the system

The costs of such procedures are fairly limited and are not an obstacle for taxpayers to put their case. However, the length of the proceedings is a weakness that may dissuade taxpayers from initiating them. One reason is that the tax authorities often take a long time to reply to briefs filed by taxpayers, and taxpayers do not really have any way to compel the administration to issue a response.

It is not uncommon for the administrative courts of first instance to take up to three years to rule on a matter brought before them. Regarding appeals, it can take up to 10 years to resolve a tax dispute, which penalises the taxpayer more than the tax administration.

A taxpayer who has been unsuccessful before the national courts may apply to the ECHR where fundamental rights are at stake. This is extremely rare, even though, in certain cases, the judgments delivered by the ECHR have had a real impact on French tax procedures.4


i Tax penalties

Default interest

Tax increases set by the tax offices are systematically increased through default interest of 0.2 (0.4 until 2017) per cent each month, that is, 2.4 (4.8 until 2017) per cent per annum. This default interest is not considered a penalty as such, but rather as fair compensation for the damage incurred by the Treasury owing to late payment of taxes by the taxpayer.

Since the default interest is not considered a penalty, it is applied automatically and does not have to be motivated by the tax authorities.

In practice, and for the same reason, it has become very difficult to obtain a total or partial exemption from default interest even when taxpayers act in good faith.


Assessments for back taxes are often accompanied by surcharges, the rate of which varies depending on the circumstances of the case and on whether the taxpayer is deemed to have acted in good faith.

A 10 per cent surcharge applies in cases of delay by the taxpayer in satisfying his or her declaratory obligations, plus default interest. A 40 per cent surcharge applies to unpaid taxes either where the taxpayer did not file its tax returns after a formal request or where the authorities consider that the taxpayer's dissimulation of declared amounts was deliberate. This latter surcharge is raised to 80 per cent in the event of fraud, hidden activities and 'abuse of the law'. Where the 80 per cent surcharge applies, tax intermediaries may be subject to a penalty equal to 50 per cent of the revenue derived from services to the offending taxpayer or €10,000, whichever is higher.

The deliberate nature of offences (mens rea) must be demonstrated by the tax authorities, who apply the above penalties in approximately 30 per cent of reassessments following full audits, and who bear the onus of proof in the case of a challenge before the tax courts. Tax penalties may be, and often are, mitigated by the tax authorities to reach out-of-court settlements.

Name and shame

Where the 80 per cent penalty is applied for fraud or 'abus de droit' and there is no criminal prosecution, the tax authorities may decide to publish on their website the name, profession and place of activity of the offending taxpayer, together with the nature and amount of evaded tax and related penalties. The publication is suspended if and when the tax and penalties are challenged until a final decision is reached.

ii Criminal penalties

On top of tax surcharges, criminal penalties may apply in a wide range of situations.

Legal and natural persons may be found guilty of tax evasion where they fraudulently evaded or tried to fraudulently evade the assessment or collection of tax. The French equivalent of deferred prosecution agreements is now available in tax matters. The first such agreement was made with HSBC Private Bank Swiss to settle the criminal charges against it, including laundering of the proceeds of tax fraud. The agreement was approved by the president of the Paris court on 14 November 2017. It provides for a total payment of €300 million, made up of a criminal fine of €158 million, reported to be the maximum in the circumstances, and a €142 million indemnity to the French tax authorities, reported to have been based upon an average tax rate applied to the amount of managed assets less the sums recovered or to be recovered from the taxpayers.

Criminal penalties for 'ordinary' tax evasion include a fine of €500,000, or the double the profit made from the offence, whichever is higher, and a prison sentence of up to five years. Where the offence was carried out or facilitated by using foreign bank accounts or entities such as trusts located in third countries, false identities or any false documents, fictional or artificial acts or entities, or abusive tax residence in another state, the fixed fine may be raised to €3 million and the imprisonment to seven years. The same penalties would be applicable in cases of tax fraud carried out as an organised group. Any accessory to such offences may be charged with the same penalties. Publication of the court ruling, exclusion from public procurement and suspension of civic rights also apply.

The Constitutional Court found the French system to be compatible with the non bis in idem principle on the basis that criminal prosecutions are dedicated to the most serious offences. As previously mentioned, around 1,000 criminal tax proceedings are initiated each year.

The limitation period applicable to the offence of tax evasion extends to six years. Under a 'repentance provision' any offender may benefit from a reduction of a prison term on the condition that he or she helps the tax authorities to identify his or her accomplices.


i Recovering overpaid tax

Taxpayers who believe they have paid too much tax and wish to claim it back must follow a procedure similar to that for challenging a tax reassessment. The procedure applies to a taxpayer residing abroad who has incurred French withholding tax at the statutory rate and who wishes to invoke a bilateral tax treaty to benefit from a reduced rate of withholding tax and to claim back the excess tax paid. Both the non-resident taxpayer and the paying agent may lodge a claim with the relevant office (in this example, the tax office for non-residents) within the legal time limit. If the claim is implicitly or explicitly rejected, the taxpayer or the withholding agent may bring the case to the competent courts.

In the particular case where it is claimed the tax in question breaches EU law, taxpayers are entitled to demand an exemption from or a reduction of the taxes and the repayment of any excess based on the fact that the national laws applied are contrary to EU law; and compensation for the damage incurred.

The amount of outstanding tax repayments plus interest is assessed each year in the finance bill. In the finance bill for 2019, it stands at approximately €20 billion.5

The remedy follows the tax claim procedure described above, particularly as regards the time in which to file an action.

ii Challenging administrative decisions

Taxpayers and certain other persons may petition an administrative judge to review certain administrative decisions that they deem illegal.

When examining such a petition, the administrative judge who finds the act to be illegal may declare it null but the judge may not decide upon the corresponding tax charges and must remand the case to the administrative authorities for a new decision.

iii Claimants

Tax claims may be brought only by the taxpayer, or the withholding agent in the case of withholding taxes. Group actions are not allowed in tax disputes.


Costs are limited to counsel and other fees, as the French administration of justice is free of charge.

Within the framework of court action, the losing party may be ordered to pay the successful party a sum intended to cover 'irrecoverable' costs.

A taxpayer whose action was unsuccessful may be ordered to compensate the Treasury for its legal costs.

Regardless of which party brings the action, incurred costs are almost never refunded in full. Compensation seldom exceeds a few thousand euros.


Strictly speaking, in France there are no alternatives to the tax dispute resolution procedures described in this chapter.

However, at any time during the procedure, and even when the dispute is before the courts, the taxpayer can reach a settlement with the tax authorities to end the dispute.

In the context of such settlements, the parties generally agree on a tax base. Quite often, the authorities grant a partial or total exemption from penalties. It used to be a policy of the French tax authorities not to settle when they contemplated filing a criminal complaint or when the taxpayer tried to delay the procedure in bad faith. As a matter of law, this is no longer the case. In this respect, it was recently observed that the tax authorities tended to 'inflate' the amount of the penalties in the adjustment notices sent to taxpayers to retain some room for negotiation in the event of a settlement.


French law contains both general anti-avoidance rules, namely abus de droit (or abuse of the law) and 'act of mismanagement' theories, and specific anti-avoidance rules.

Special administrative procedural rules apply to abus de droit. Article L64 of the Tax Procedure Code (LPF) provides that the tax authorities are entitled to reject as inapplicable to them acts that constitute fraud, and to restore the true character thereof where those acts either are shams that are fictitious ('fictitiousness' theory) or that comply with the letter of the law but are contrary to the purpose of its authors and inspired by no other reason than to elude or reduce the tax burden ('fraudulent evasion' theory). A special 80 per cent surcharge applies on the evaded tax where the taxpayer was the principal instigator or principal beneficiary of such a scheme. A surcharge of 40 per cent applies where the taxpayer was neither. These specific penalties do not automatically apply where the motivation to evade tax was not exclusive but only one of the purposes of the transaction.

Where the tax authorities have notified a reassessment based upon abuse of law, the taxpayer may refer the matter to the Abuse of Law Committee and present its observations in a written statement. It is then invited to a Committee session to present its oral observations and answer the questions of Committee members. Prior to the meeting, and in the absence of the taxpayer or its counsel, the Committee members hear a reporter, generally appointed from the French tax authorities. The Committee decides in favour of the applicant taxpayer in approximately one case in three.


France has one of the largest networks of international tax treaties. Currently, it has concluded 126 treaties for the avoidance of double taxation.6

Most of these treaties conform to the OECD or UN models, and when interpreting them the courts pay close attention to the OECD Comments. France also signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting on 7 June 2017 with certain reservations on Articles 3, 4, 5, 10 and 11. Eighty-eight tax treaties are covered.

Recent controversial decisions on the implementation of double taxation treaties have held that tax-exempt parties are not regarded as residents of the other contracting state and must be denied treaty benefits. This applies to both offshore activities7 and pension funds,8 including in situations where the foreign entity provided a certificate of tax residency from its country of origin. Arguably the question should have been referred to the mutual agreement procedure under double taxation treaties before being referred to the national tax courts. Similar issues arise where the French tax authorities deny a French taxpayer the tax credit for foreign withholding they deem inappropriate, sometimes with reason.

The French tax department reports that 212 mutual agreement procedures were opened in 2016, 238 were completed and 794 procedures were outstanding at year-end.

France recently concluded 25 treaties in conformity with Article 26 of the OECD Model Convention, the purpose of which is limited to the exchange of information.

On the other hand, certain foreign states or territories have not concluded any agreement with France for the exchange of fiscal information. Under French domestic law, they are regarded as 'non-cooperative' and are the subject of specific tax provisions (e.g., an increase in the withholding tax on income paid to companies that are established in such states). The shortlist of these states and territories now extends to territories blacklisted by the European Union and is updated annually.9 Pursuant to Constitutional Council decisions, the presumption of tax avoidance attached to transactions with such territories may be rebutted.


To defend their rights, taxpayers can of course rely on the law, as voted by Parliament, as well as regulatory measures taken by the government that are codified in the General Tax Code and the LPF. Moreover, the administration's own doctrine, consisting of its guidelines, instructions, ministerial replies to questions from Members of Parliament or the administrative decisions on questions put to it by taxpayers (rulings), may be invoked by taxpayers in the same situation, and are binding both for the tax authorities and the tax courts.10


French authorities regularly emphasise the need to combat fraud and tax avoidance, especially in cross-border contexts.

Parliament has substantially reinforced the means available to the authorities and increased the obligations placed on taxpayers, as well as imposed tougher penalties for breaches. More often than not, these specific measures need to be, and effectively are, checked to the fundamental rights protected by the Constitution and international instruments.


1 Philippe Derouin, a member of the Paris Bar, runs his own law firm, Philippe Derouin.

2 C cass; Ass plén 14 June 1996 Kloeckner, bull civ AP No. 5.

3 Council of State 2 June 2010 No. 318014 Fondation de France.

4 See in particular ECHR, 21 February 2008 No. 18497/03 (Ravon) in connection with house searches, and ECHR 30 June 2011 No. 8916/05 (Jehovah's Witnesses) in connection with the retrospective effect of tax measures.

5 Information report No. 1310 to the National Assembly of 17 October 2018.

6 bofip.impots.gouv.fr, BOI-ANNX-000306, updated each year.

7 Council of State, 20 May 2016, No. 389994 Easy Vista; and Administrative Court of Appeal of Versailles, 29 November 2016, No. 16VE01537.

8 Council of State, 9 November 2015, No. 371132 Santander pensiones; and Administrative Court of Appeal of Versailles, 29 November 2016, No. 14VE01266.

9 Currently, an order of 8 April 2016.

10 Article L80A of the LPF.