What is the VAT status of limitation in France?

The principle: the administration can check the current year and the last three years

The general deadline

In principle, the administration can check the declarations filed by the taxpayer up to the 3rd year following the year in which VAT became due: in other words, it can check up to three years before the current year.

Thus, for illustration, the administration can control the declaration from January 2022 until December 31, 2025 (that is to say the year 2022 and the following 3 years).

Interruption cases

However, the limitation period may be delayed by the issuance of:

• of a proposed correction

• or an ex officio notification of taxation by which the administration itself determines the amount of tax.

The act issued by the administration must be regular and duly motivated.

It must also be received before the end of the recovery period (before 31 December of the year in question): it is the presentation to the taxpayer by post at the correct address or in person that proves that it should be taken into account.

The interruption only has an effect on notified taxes: a corporate tax notification has no effect on VAT. The administration cannot send a proposal for a correction without specifying the tax that is affected by this adjustment.

Moreover, the interruption only has an effect on the amounts notified. Therefore, for the year 2018, the administration cannot send:

• a proposal for correction at the end of December of 2022 (N+3) for an amount of 100,000 euros;

• then issue a new proposal in 2023, a proposed correction for an amount greater than 150,000 euros.

Special cases where the administration may control the start of a financial year as a matter of prescribed principle

When the administration controls a company whose financial year does not correspond to a calendar year (ending on 31 December), it can control the start of the oldest financial year subject to the right of takeover.

For example, a company closes on September 31 of each year. In 2022, the administration controlled the Company. It will be able to verify 2019, 2020, 2021 and 2022 according to the rule of principle. However, it will also be able to monitor the first 3 months of the Company's 2018-2019 fiscal year (October, November and December 2018).

Exceptions: the administration can check up to the tenth year preceding the current year

In case of fraud or occult activity

The right of return is exercised, in respect of turnover tax, until the end of the 10th year following the year in respect of which the tax became chargeable when:

• the Administration has notified a report of flagrance for a subsequent year;

• the taxpayer engages in a hidden activity.

The period may also be extended until the end of the tenth year following that for which taxation is due in the following cases:

- Filing a complaint for tax fraud

- Opening of a judicial investigation for tax fraud

- Omission or inadequacy revealed in the context of litigation

If it is impossible to apply the deadline in principle, the relief must be notified until 31 December of the year following that of the decision terminating the judicial, investigation or other proceedings as referred to above.

In case of requests for international assistance

In addition, the deadline in principle is extended when the administration puts in place a request for international administrative assistance. The administration can thus make adjustments up to the end of the year following the year in which the foreign authority's response was received and at the latest until 31 December of the third year following the year in which the initial recovery period expired.

To go further: the distortion between the time limit for claiming VAT paid wrongly or not deducted and the limitation period open to the administration

As indicated, the deadline for the inspection by the tax administration is in principle up to three years before the current year.

However, with regard to the deduction of VAT, it is possible to deduct the VAT due up to two years before the current year: this period is uniform for reporting it on the deductible VAT return or for filing a claim for a refund of VAT paid incorrectly.

The deadline for deducting VAT is therefore one year less than the deadline for recovery from the tax administration. As a result, in certain cases of regularization, the administration may correct one more year than the one open to the taxpayer to regularize the situation on its own initiative.

However, some nuances should be added to this point:

• there are opportunities for amicable regularization with the tax administration (transaction, overall settlement) ;

• After an adjustment, the taxpayer has the same period as the administration to claim VAT paid incorrectly or charged but not reimbursed. The administration must have adjusted VAT for the years concerned by the taxpayer's claims.

So in 2022,

• in principle, the administration can monitor the years 2019 to 2021;

• the taxpayer can charge and claim VAT for 2020 and 2021;

• However, if the administration rectifies 2019, the taxpayer can claim VAT that he would have wrongly paid in respect of that year.