The personal tax-situation review (ESFP)
The ESFP is the in-depth tax audit of individuals: the tax authorities compare your declared income with your standard of living, your assets and your bank flows. It is a strictly regulated procedure, backed by strong safeguards, but one where an imprecise reply can lead to an ex officio assessment. The firm assists you from the notice of review through to closure.
- Framework
- Personal tax-situation review (French Book of Tax Procedures, LPF art. L. 12)
- Who
- Individuals, with regard to income tax
- Duration
- Limited to one year from receipt of the notice (LPF art. L. 12)
- Method
- Consistency of income / standard of living / bank flows; cash-position analysis
- Risk
- Ex officio assessment where no reply is given (LPF art. L. 69)
What is an ESFP?
The personal tax-situation review (LPF art. L. 12) allows the tax authorities to check the overall consistency between the income you have declared and your asset position, your standard of living and your available funds. It targets individuals with regard to income tax.
In practice, the auditor reconstructs your flows from your bank statements and draws up a cash-position analysis: if the recorded spending and savings exceed the known income, the gap must be justified.
The process, step by step
The review opens with a notice (LPF art. L. 47) accompanied by the taxpayer’s charter, and follows a precise sequence:
- Notice of review, charter delivered, right to be assisted by the counsel of your choice;
- Production of bank statements: since 1 January 2023, the notice lists the known accounts whose statements the tax authorities request from the banks; you produce the statements of the unlisted accounts within 60 days (LPF art. L. 12);
- Requests for clarification and supporting evidence on the points of inconsistency (LPF art. L. 16);
- Adversarial dialogue, then an adjustment notice where appropriate.
The review may in principle not extend beyond one year from receipt of the notice (LPF art. L. 12), a period that may be extended in limited cases.
ESFP: the key figures
| Item | Value | Source |
|---|---|---|
| Maximum duration of the ESFP | 1 year (raised to 2 years in the event of undisclosed activity) | LPF art. L. 12 |
| Reply to a request for supporting evidence | 2 months minimum (30-day formal notice to complete) | LPF art. L. 16 A |
| Statements of unlisted accounts | 60 days | LPF art. L. 12 |
| Reply to the adjustment notice | 30 days, extendable by a further 30 days | LPF art. L. 57 |
| Reassessment period (limitation) | 3 years, raised to 10 years (undisclosed activity, unreported foreign assets) | LPF art. L. 169 |
| Late-payment interest | 0.20% per month (2.4% per year) | French Tax Code art. 1727 |
| Surcharge (deliberate default; manoeuvres or abuse) | 40%; 80% | French Tax Code art. 1729 |
| National volume of ESFPs | around 3,600 per year (source DGFiP, 2017) | DGFiP |
ESFP, desk review and accounts audit
Not to be confused: the ESFP targets individuals, the accounts audit targets businesses.
| Criterion | Desk review | ESFP | Accounts audit |
|---|---|---|---|
| Target | All taxpayers | Individuals (income tax) | Professionals and businesses |
| Purpose | Consistency of returns, from the office | Consistency of income / standard of living / assets | The business’s accounts |
| Legal basis | LPF art. L. 10 | LPF art. L. 12 | LPF art. L. 13 |
| Capped duration | No (within the reassessment period) | 1 year, on pain of nullity | 3 months for small businesses (L. 52) |
Your safeguards
The ESFP is surrounded by safeguards whose breach may vitiate the procedure: prior information through the notice (which must state, on pain of nullity, the right to be assisted by counsel), delivery of the charter enforceable against the tax authorities, oral and adversarial debate, and the duration limit. Requests for supporting evidence (LPF art. L. 16) must relate to precise items and allow you a sufficient time to reply.
On completion of a concluded ESFP, an often decisive safeguard applies: the tax authorities may no longer increase your overall income for the same period and the same tax (LPF art. L. 50; BOI-CF-PGR-30-30), save for incomplete or inaccurate items you may have provided, or fraud. A notification is sent to you even where no reassessment is made.
Pitfalls to avoid
The main risk is ex officio assessment (LPF art. L. 69): where no reply is given, or where a reply to a request for supporting evidence is deemed insufficient, the tax authorities may assess the unexplained sums ex officio. The most frequent points of attention:
- Unjustified bank credits (family loans, sales, repayments);
- Support and gifts to be documented;
- Foreign-source accounts or income to be reported (see regularising your foreign accounts);
- Time limits to reply to requests for supporting evidence, never to be missed.
The ESFP: your questions
How long does an ESFP last?
In principle one year at most from receipt of the notice of review (LPF art. L. 12), with limited cases of extension, notably where the tax authorities discover accounts or income abroad.
Can the tax authorities consult my bank accounts?
Yes. Within the ESFP, you produce your bank statements (LPF art. L. 47 A) and the auditor draws up a cash-position analysis to check consistency with your declared income.
What happens if I do not reply to a request for supporting evidence?
A failure to reply, or an insufficient reply, to a request for supporting evidence (LPF art. L. 16) exposes you to an ex officio assessment of the sums left unexplained (LPF art. L. 69). Hence the importance of replying within the time limits, with supporting documents.
How do I justify a transfer received in my account?
By any probative and contemporaneous document: registered loan agreement, deed of gift, evidence of sale, cross-referenced statements. The quality and dating of the supporting documents are decisive.
Should I be assisted during an ESFP?
It is strongly recommended. The lawyer secures the procedure, checks compliance with the safeguards, structures the replies to requests for supporting evidence and, where appropriate, pursues the challenge before the tax courts. The exchanges are covered by professional secrecy.
An ESFP under way or announced?
A confidential initial consultation to prepare your replies, secure your supporting documents and have your safeguards respected throughout the review.
This page presents the ESFP for information purposes; each matter calls for a specific analysis. References to the French Book of Tax Procedures in force at the date of writing.