Tax penalties and surcharges
A reassessment is not limited to the additional tax assessed: late-payment interest is added and, often, surcharges that can double the bill. Yet these penalties are subject to strict conditions and must be reasoned by the tax authorities. Challenging them is a defence line in its own right. The firm disputes both their principle and their rate.
- Late-payment interest
- 0.20% per month, i.e. 2.4% per year (French Tax Code art. 1727)
- Reporting default
- 10%, 40% after formal notice, 80% for undisclosed activity (French Tax Code art. 1728)
- Deliberate breach
- 40% (French Tax Code art. 1729)
- Fraud / abuse
- 80% (French Tax Code art. 1729)
- Safeguard
- Penalties reasoned by the tax authorities (French Book of Tax Procedures art. L. 80 D)
Late-payment interest
Late-payment interest (French Tax Code art. 1727) compensates the cash-flow loss suffered by the Treasury: it is owed as soon as a tax is paid late, regardless of any fault. Its rate is 0.20% per month, i.e. 2.4% per year. It is not a sanction, which distinguishes it from surcharges.
This interest is reduced by 50% in the event of voluntary regularisation: to benefit from it, one must file an amended return before any audit, act in good faith and pay the corresponding duties (French Tax Code art. 1727, V). This is the whole point of anticipating. Administrative doctrine: BOI-CF-INF-10-10-20.
The scale of penalties
Penalties depend on the conduct at issue and on its seriousness:
| Item | Rate / amount | Source |
|---|---|---|
| Late-payment interest | 0.20%/month (2.4%/year), reduced by 50% for voluntary regularisation | French Tax Code art. 1727 |
| Failure or delay in filing | 10%, raised to 40% after formal notice | French Tax Code art. 1728 |
| Deliberate breach | 40% | French Tax Code art. 1729 |
| Fraudulent manoeuvres, abuse of law | 80% | French Tax Code art. 1729 |
| Undisclosed activity | 80% | French Tax Code art. 1728 |
| Late payment (income tax, property taxes, IFI) | 10% | French Tax Code art. 1730 |
| Late payment (other taxes) | 5% | French Tax Code art. 1731 |
| Undeclared foreign account or policy | EUR 1,500 (EUR 10,000 if non-cooperative State) | French Tax Code art. 1736, 1766 |
| Reasoning and observation period | mandatory, 30 days before application | French Book of Tax Procedures art. L. 80 D |
The applicable rate is never automatic: it requires the tax authorities to characterise and prove the conduct at issue. Administrative doctrine: BOI-CF-INF-20-10 (surcharges).
Specific fines
Beyond the surcharges on the tax base, fines sanction specific breaches, in particular relating to foreign assets: failure to report an account or a life-insurance policy held abroad, EUR 1,500 per account, raised to EUR 10,000 when the account is opened in a non-cooperative State or territory (French Tax Code art. 1736 and 1766); failure to report a trust, EUR 20,000 (French Tax Code art. 1736, IV bis, and art. 1649 AB). Added to these are breaches of documentary obligations, sham invoices, among others. Their regime, thresholds and conditions of application are specific to each and must be verified case by case. Administrative doctrine: BOI-CF-INF-20-10-50 (foreign assets).
Grounds for challenge
Penalties are challenged independently of the duties. Two main levers: the reasoning, the tax authorities being required to set out the elements of fact and law underpinning the sanction and to allow the taxpayer a period of 30 days to submit observations before the penalties are put into collection (French Book of Tax Procedures art. L. 80 D); and the characterisation, deliberate breach or fraudulent manoeuvres requiring proof, borne by the tax authorities, of the intent or conduct at issue.
Added to this, where appropriate, is the discretionary route: remission, reduction or settlement on the amount of the penalties. The firm combines a challenge on the merits with negotiation according to the interest of the case.
Tax penalties: your questions
What is the difference between late-payment interest and a surcharge?
Late-payment interest (French Tax Code art. 1727, 0.20% per month) compensates the payment delay and is owed automatically, without fault. Surcharges (French Tax Code art. 1728 and 1729) are sanctions, subject to conditions and to a reasoning requirement.
When does the 40% surcharge apply?
In particular in the event of a deliberate breach (French Tax Code art. 1729) or failure to file after a formal notice that went unheeded (French Tax Code art. 1728). The tax authorities must establish and reason this conduct.
Can penalties be cancelled or reduced?
Yes. They may be discharged in litigation if they are insufficiently reasoned or wrongly characterised, and mitigated through the discretionary route (remission, reduction, settlement).
Does a voluntary regularisation reduce the penalties?
Regularising before any audit avoids the surcharges and reduces the late-payment interest. This is the benefit of anticipating, for example by means of a prior review of one's situation.
Can a surcharge and late-payment interest be combined?
Yes, late-payment interest and surcharges may be combined on the same reassessment. Challenging them, however, follows distinct logics.
Penalties to challenge?
A confidential initial consultation to examine the reasoning and characterisation of the surcharges, and to define the best route between challenge and negotiation.
This page presents the tax-penalty regime for information purposes; each case calls for a specific analysis. References to the French Tax Code and the French Book of Tax Procedures in force at the date of drafting.