National rules in respect of a Tax Control Framework, differences due to size
Since the OECD report (2013) and the OECD guidance (2016) were issued, several tests have been carried out to explore the advantages and drawbacks that can be derived from a TCF.
In 2013, the government established the principle of the “relationship of trust”, which means a new relationship between companies and tax administration. The principle was to support the company throughout their reporting processes for all taxation falling within the “Direction Generale des Finances publiques” (DGFiP). The revenue authorities and taxpayers had been encouraged to establish a working environment, processes and protocols within which a working relationship based upon mutual trust, transparency and cooperation can be achieved.
Thus, the FTA and the company conducted a complete review of the tax options and tax obligations of the company. This new procedure began in October 2013 with a sample of companies before considering how it could be extended. It was reserved for mid-sized companies whose turnover did not exceed EUR 150 million.
Benefits for the taxpayer resulting from a TCF
The first test was positive but not conclusive. It concerned 11 companies and was followed by a second test in 2014. Unfortunately, at this point, the test has neither been extended nor repeated. However, the enhancement of the relationship between the tax authority and the taxpayer has become a major concern and a key element in government policy and all signs indicate that this movement will continue further.
Are the tax authorities bound to check or consider the TCF? If yes, also for past years?
In France, there is no clear evidence of effective “co-operative compliance”, but there is a real and strong intention to ease the relationship by the previous and current government. To make this goal more concrete, the government in its electoral commitments would like to encourage a relationship based on co-operation and trust by having “the right to make mistakes”.
This right could put an end to the automatic suspicion of deliberate intention or recklessness in complying with tax duties by recognising the possibility of an error instead and opening a dialogue. What is expected is a state that accompanies and facilitates the tax and legal step that needs to be taken by the taxpayer to comply with its duties by applying this right. The role of the tax administration would be to correct the taxpayer, help them to apply it and not to reduce to sanction all the time. We are waiting for the next financial bill which will give us more information. No further details have been provided yet.
Cooperative compliance – is it agreed by the fiscal authority? Cross-border applicability of cooperative compliance
In France there are no internal rules on co-operative compliance.
Are there any rules regarding digitisation of tax processes?
Digitisation exists in all segments of taxes and tax processes. In the case of a tax audit, the accounts need to be delivered to the French tax authorities in a standardised electronic format (fichier d’écritures comptables = FEC). Most tax returns need to be filed electronically, for example in the following matters: value added tax, corporate tax, income tax.