Tax fraud: criminal and tax defence
Are you facing a complaint or proceedings for tax fraud? Beyond the tax reassessment, tax fraud is a criminal offence, punishable by heavy fines and imprisonment, and referral to the public prosecutor is now automatic above certain thresholds. The defence is fought on two fronts, tax and criminal, which must be coordinated from the outset. The firm handles this defence as a whole.
- Nature
- Criminal offence, distinct from the tax reassessment (French Tax Code art. 1741)
- Penalties
- EUR 500,000 and 5 years; EUR 3 million and 7 years for organised gangs
- Referral
- Automatic referral to the public prosecutor above certain thresholds (LPF art. L. 228)
- Combination
- Tax and criminal penalties may be combined, but only in the most serious cases
- Defence
- Coordination of the tax and criminal fronts, from the first alert
Tax fraud, a criminal offence
Tax fraud is the act of fraudulently evading, or attempting to evade, the assessment or payment of tax (French Tax Code art. 1741). It differs from a mere tax reassessment, which is of a tax nature: fraud is a criminal offence, which requires an intentional element and fraudulent conduct (concealment of sums, organised insolvency, false accounting entries, undeclared foreign accounts).
The penalties incurred are severe: up to a EUR 500,000 fine and 5 years' imprisonment, increased to EUR 3 million and 7 years where the acts are committed by an organised gang or with aggravating circumstances (foreign accounts, interposition of persons or entities). Additional penalties (publication of the decision, deprivation of rights) may also apply.
The "verrou de Bercy", loosened
For a long time, criminal prosecution for tax fraud required a prior complaint from the tax authorities: this was the so-called "verrou de Bercy" (Bercy lock). The law of 23 October 2018 loosened it:
- The tax authorities must now make a mandatory referral to the public prosecutor of the most serious cases exceeding certain thresholds of evaded tax combined with high penalties (LPF art. L. 228);
- Below those thresholds, a complaint from the tax authorities remains necessary, after an opinion from the tax offences commission;
- The prosecutor may then bring proceedings, including through fast-track procedures (guilty-plea procedure, CJIP (judicial public-interest agreement) for legal entities).
This automatic mechanism has sharply increased the number of criminal referrals: a reassessment carrying high surcharges can now trigger prosecution without any specific step by the tax authorities. Hence the importance of anticipating the criminal risk from the audit stage onwards.
Combining tax and criminal penalties
For the same facts, a taxpayer may bear both tax penalties (surcharges of 40% or 80%) and criminal penalties. The French Constitutional Council allows this combination but has strictly framed it: it is reserved for the most serious cases, and the overall amount of the penalties imposed may not exceed the highest maximum of any of the penalties incurred. The coordination of the two proceedings, and the consistency of the positions taken before the tax courts and the criminal court, are therefore decisive.
A defence on two fronts
The firm provides a coordinated defence, on both the tax and criminal fronts. On the tax side, it challenges the additional assessments, the characterisation and the surcharges. On the criminal side, it contests the intentional element and the materiality of the conduct, monitors the regularity of the procedure (searches, police custody, rights of the defence), and where appropriate pursues negotiated avenues. Consistency between the two fronts prevents a position taken in one from weakening the other. Where the situation allows, an upstream voluntary disclosure remains the best protection.
Tax fraud: your questions
What is the difference between a tax reassessment and tax fraud?
The tax reassessment is a tax procedure (additional tax and penalties) before the tax courts. Tax fraud is a criminal offence (French Tax Code art. 1741), tried before the criminal court, which requires intent and fraudulent conduct.
What are the penalties for tax fraud?
Up to a EUR 500,000 fine and 5 years' imprisonment, increased to EUR 3 million and 7 years for organised gangs or with aggravating circumstances, as well as additional penalties (publication of the decision, deprivation of rights).
What is the "verrou de Bercy"?
It was the former monopoly of the tax authorities over the initiation of criminal proceedings. Since the law of 23 October 2018, the tax authorities must make a mandatory referral to the public prosecutor of the most serious cases exceeding certain thresholds (LPF art. L. 228).
Can you be punished twice for the same facts?
The combination of tax and criminal penalties is allowed, but reserved for the most serious cases and capped: the total may not exceed the highest maximum of any of the penalties incurred. Coordinating the proceedings is essential.
Does a voluntary disclosure avoid prosecution?
A voluntary disclosure, made before any audit, greatly reduces the criminal risk and the penalties. Once an audit has begun, the room for manoeuvre narrows, hence the importance of acting early with counsel.
Facing tax fraud proceedings?
A confidential initial discussion to coordinate the tax and criminal defence, address intent and procedure, and protect your rights.
This page presents the offence of tax fraud for information purposes; each case requires a specific analysis. References to the French Tax Code and the French Book of Tax Procedures as in force at the date of writing.