Since 1 January 2017, the tax authorities have had a specific procedure to audit on the spot VAT credit refund claims, codified at article L.198 A of the Tax Procedure Code. This procedure, which comes in addition to ordinary audits, strictly frames the time limits and the terms of intervention. The tax authorities have 60 days from the first on-site intervention to issue their decision, and a maximum period of 4 months from the receipt of the on-site inspection notice: once either of those two periods has expired, silence amounts to implicit acceptance and the refund is granted as of right. This time limit specific to the L.198 A procedure differs from the ordinary 6-month time limit applicable to standard contentious claims (Tax Procedure Code R*198-10). This page sets out the procedure and the good practices for asserting your rights.
The refund of a VAT credit is one of the most important financial breathers for companies with an investment activity (real estate, equipment) or a high export ratio. The on-site inspection procedure of article L.198 A of the Tax Procedure Code, introduced by the amending Finance Act for 2016 (Act no. 2016-1918 of 29 December 2016, art. 17, which reinstated that article) for claims filed from 1 January 2017, frames the audits that the tax authorities may carry out on such claims.
The issue is operational: the procedure is not intended to block refunds indefinitely. The time limits imposed on the tax authorities (60 days from the first intervention, 4 months maximum from receipt of the on-site inspection notice) protect the taxpayer against abusive blocking. Those two periods operate independently of one another: if the tax authorities allow either of them to expire without issuing a reasoned decision, silence amounts to acceptance and the refund is granted as of right (Tax Procedure Code art. L.198 A, V). Note: this 4-month period specific to the L.198 A procedure must not be confused with the ordinary 6-month time limit (Tax Procedure Code R*198-10) applicable to standard contentious claims outside an on-site inspection.
The firm assists companies faced with an audit of their refund claims: preparation of the documentation, monitoring of the time limits, dialogue with the auditing service, defence in the event of an express refusal, and litigation where appropriate.
The claim is filed together with the CA3 return (form 3519 for the general regime) or through the dedicated procedure. The claim is treated as a contentious claim and processed as such. The filing date starts the ordinary six-month period running (Tax Procedure Code art. R*198-10). The periods specific to the on-site inspection, for their part, run from receipt of the inspection notice and from the first intervention.
The tax authorities may decide to carry out an on-site inspection at the company's premises. The first intervention is preceded by an inspection notice setting out the terms and the date. From this first intervention, the 60-day period begins to run for the decision.
The tax authorities have 60 days from the first on-site intervention to issue their decision (acceptance, partial refusal or total refusal). This time limit cannot be extended: where no decision is received within sixty days of the first intervention, the refund claim is granted (Tax Procedure Code art. L.198 A, II and V; BOI-CTX-PREA-20, § 110). Observing this time limit is essential for the taxpayer's defence.
The tax authorities have in total 4 months from receipt of the on-site inspection notice to issue their decision. This period and the sixty-day period operate independently of one another: where no decision is received within sixty days of the first intervention (Tax Procedure Code art. L.198 A, II) or within four months of receipt of the notice (IV), the refund claim is granted (V). The expiry of the first of the two periods is enough. That refund does not, however, amount to a formal position taken by the tax authorities: it may be called into question in a later audit (BOI-CTX-PREA-20, § 120). The sixty-day period is counted from the day of the first intervention, the decision having to be received no later than the day before the sixtieth day; the four-month period is counted from date to date, from receipt of the notice to receipt of the decision (BOFiP BOI-CTX-PREA-20, § 130 and § 140). Reservation for groups: those two periods do not apply to a claim filed by the representative of a single taxable person (Tax Code art. 256 C); in that case the ordinary rules on contentious claims apply (Tax Procedure Code art. L.198 A, V; BOI-CTX-PREA-20, § 200). This time limit is specific to the on-site inspection procedure of L.198 A. It is not to be confused with the ordinary 6-month time limit applicable to standard contentious claims (Tax Procedure Code R*198-10), which governs the situation where the tax authorities do not trigger the on-site inspection procedure.
The VAT credit refund claim is itself a contentious claim: there is therefore no question of bringing a "supplementary contentious claim" in the event of a refusal. In the event of an express refusal, the taxpayer may refer the matter to the administrative court (then the administrative court of appeal and the Conseil d'État), after a possible hierarchical appeal to the superior service. The starting point of the time limit for referral to the administrative court depends on the indications of remedies and time limits appearing on the decision and on whether or not an express decision exists, hence the importance of a careful procedural analysis before any appeal. The court must be seised within two months of receipt of an express decision duly served and stating the remedies and time limits; where that statement is missing, the two-month period cannot be relied on against the taxpayer. Where no decision has been received, the court may be seised as soon as the six-month period has expired (Tax Procedure Code art. R*199-1). For as long as no express decision has been duly served, no appeal period runs against you (CE, opinion, 21 October 2020, no. 443327); as soon as an express decision is received, a period starts to run. Its starting points and its length are set out in our note Appeal period against rejections of VAT credit refund claims. Record precisely the date of receipt of the notice, the date of the first intervention and the date of receipt of the decision: implicit acceptance and the calculation of the appeal period both depend on those three dates.
The firm assists companies under an L.198 A audit: upstream preparation of the supporting documentation, monitoring of the time limits and of the conduct of the on-site interventions, reasoned dialogue with the auditor, hierarchical appeal in the event of a refusal, and litigation before the administrative courts.
For high-stakes audits (significant amounts, complex operations), we prepare in advance a standard response file that anticipates the auditor's requests and demonstrates the economic and legal consistency of the operations underlying the VAT credit.
The on-site inspection procedure for VAT credit refund claims, codified at article L.198 A of the Tax Procedure Code and applicable since 1 January 2017. This procedure allows the tax authorities to audit on the spot the documents supporting the VAT credit, while strictly framing the time limits and the terms. It differs from ordinary audits by its speed and its formalised framework.
Two time limits to know: (1) 60 days from the first on-site intervention to issue the decision; (2) 4 months maximum from receipt of the on-site inspection notice (L.198 A procedure). The expiry of either of those two periods is enough: where no decision is received within sixty days of the first intervention or within four months of receipt of the notice, silence amounts to implicit acceptance and the refund claim is granted (Tax Procedure Code art. L.198 A, V). Acceptance may therefore be acquired as early as the sixty-first day after the first intervention, without waiting for the four months to run out. Those two periods do not apply where the claim is filed by the representative of a single taxable person (Tax Code art. 256 C): the ordinary rules on contentious claims apply instead. This L.198 A time limit is not to be confused with the ordinary 6-month time limit (Tax Procedure Code R*198-10) applicable to standard contentious claims where the tax authorities do not trigger the on-site inspection procedure.
Important: the VAT credit refund claim is already a contentious claim: there is therefore no question of bringing a "supplementary contentious claim" in the event of a refusal. Two avenues of appeal: (1) a gracious or hierarchical appeal to the service, which remains available but is optional, does not suspend the period for seising the court and does not open the safeguards of an on-site tax audit, the L.198 A inspection not being an accounting audit (Tax Procedure Code art. L.198 A, VI); (2) a contentious appeal before the administrative court (then the administrative court of appeal and the Conseil d'État). The starting point of the time limit for referral to the administrative court depends on the indications of remedies and time limits shown on the decision and on whether or not an express decision exists: the procedural analysis must be carried out case by case before any appeal. The court is seised within two months of receipt of an express decision duly served and stating the remedies and time limits, that period not being capable of being relied on against the taxpayer where the statement is missing; where no decision has been received, the court may be seised as soon as the six-month period has expired (Tax Procedure Code art. R*199-1). For as long as no express decision has been duly served, no appeal period runs against you (CE, opinion, 21 October 2020, no. 443327); from receipt of an express decision, a period starts to run: see our note Appeal period against rejections of VAT credit refund claims.
Documents typically requested by the tax authorities: detailed input invoices (with a check of the mandatory mentions of art. 242 nonies A of annex II), documents supporting the right to deduct (allocation to the taxable activity), earlier CA3 returns and the history of the credit, key contracts (acquisition, works, leases) underlying the deducted amounts, and evidence of taxable-person status and of the allocation. Upstream preparation considerably speeds up the inspection.
Yes, indirectly. If the on-site inspection reveals significant irregularities (non-compliant invoices, abusive deductions, inconsistent situation), the tax authorities may broaden the audit beyond the refund alone and initiate an ordinary accounting audit. Rigour in preparing the refund file is therefore essential so as not to open that door.
If the refund occurs after the time limits (or is obtained on a contentious appeal), the taxpayer may claim default interest (Tax Procedure Code art. L.208) at the late-payment interest rate (Tax Code art. 1727 — 0.20% per month, i.e. 2.40% per year), from the date the refund claim was filed and until the day of actual payment. This interest partly compensates the financial loss caused by a prolonged blocking.
VAT framework and audits specific to real-estate operations.
Voir la page VATReporting framework and refund claim.
Voir la page VATRegularisation and defence where VAT is wrongly mentioned.
Voir la page LitigationThe starting points and the length of the period for challenging a rejection: essential reading before any appeal.
Voir la page LitigationGeneral audit and defence procedure.
Voir la pageA confidential first exchange to analyse the procedure, monitor the time limits, and defend your interests before the auditor or in litigation.
© BENSAID Avocats — The information on this site does not constitute legal advice and cannot replace a personalised tax analysis.
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