Case note · CE 14 Nov. 2025, no. 498880 (Penn Ar Bed) — VAT appeal period

Appeal period against rejections of VAT credit refund claims

The Conseil d'État ruling of 14 November 2025 (Penn Ar Bed) sheds light on a decisive question: the time limit for challenging a decision rejecting a VAT credit refund claim. The rule is a two-month period running from receipt of the notice by which the tax authorities serve their decision (LPF, art. R* 199-1). That period can only be relied on against the taxpayer if the notification states the appeal routes and time limits; only where it does not, the appeal remains open for up to one year from the date the taxpayer became aware of the rejection. After that, the rejection becomes final. A critical distinction applies between a rejection on the merits and a rejection for missing supporting documents. The note also covers the Conseil d'État ruling of 22 July 2026 (no. 504330) on the recovery of VAT paid in error by a business in an intermittent credit position.

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Analysis by François Ouairy · Tax lawyer · Paris · 4 December 2025
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Key points in 30 seconds

The time limit for challenging, before the administrative court, a decision rejecting a VAT credit refund claim is two months from the day the taxpayer receives the notice by which the tax authorities serve their decision (LPF, art. R* 199-1). That is the rule, and it is the most common situation. The period can only be relied on against the taxpayer, however, if it was stated, together with the appeal routes, in the notification itself (Code of Administrative Justice, art. R. 421-5).

The one-year period is only the exception: where the rejection decision states neither the appeal routes nor the time limits, the two-month period does not start to run, but the appeal must still be brought within a reasonable period which, save exceptional circumstances, cannot exceed one year from the date the taxpayer became aware of the decision. That rule has been settled in tax matters since the opinion CE 21 October 2020, no. 443327, Sté Marken Trading, which applies the Czabaj case law to the rejection of a tax claim; it is therefore not what Penn Ar Bed contributes.

What Penn Ar Bed does contribute lies elsewhere: a reassessment notice challenging the credit on the merits may carry the express rejection of the initial refund claim, and therefore start the appeal period running. To know which period applies to you, look at the decision you received. If it expressly rejects the claim and states the court to be seised together with the two-month period, that period runs from receipt. If that statement is missing, you have at most one year from the day you became aware of the decision. If the tax authorities have served nothing, no period runs against you: you may seise the court as soon as the six-month period for examining the claim has expired (LPF, art. R* 199-1).

Once the period has expired, the rejection becomes final: no refund and, where the rejection has settled that the credit does not exist, no set-off against subsequent returns and no further claim. A critical distinction applies between a rejection on the merits (final on expiry of the appeal period) and a rejection for missing supporting documents (potentially curable under certain conditions). This nuance determines the company's defence strategy.

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Legal contributions of the Penn Ar Bed decision

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1. Recognition of an express rejection through the reassessment notice

A reassessment notice may constitute an express rejection of the refund claim, provided it challenges the credit on the merits.

  • Silence kept by the tax authorities for six months gives the taxpayer the option of seising the court (LPF, art. R* 199-1), but starts no appeal period running against the taxpayer
  • After Penn Ar Bed: a reassessment notice challenging the credit on the merits amounts to an explicit rejection
  • If the reassessment notice states the appeal routes and time limits, the two-month period runs from its receipt; failing that, the appeal must be brought within one year of becoming aware of the decision
  • Implication: the company must treat every reassessment notice as a potential starting point of the appeal period
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2. Two months as a matter of principle, one year at most where no statement is given

The ordinary period is two months (LPF, art. R* 199-1). Even in the absence of formal notification of the appeal routes and time limits, the period for challenge is limited to one year.

  • Where the rejection decision is served stating the appeal routes and time limits, the period is two months from its receipt (LPF, art. R* 199-1): this is the most common situation
  • That period can only be relied on against the taxpayer if it was stated, together with the appeal routes, in the notification (Code of Administrative Justice, art. R. 421-5)
  • The one-year period applies in the absence of express notification of the appeal routes and time limits, and runs from the date the taxpayer became aware of the decision
  • Application of the Conseil d'État's general case law on the reasonable period for administrative appeals
  • Computation: the period is a clear period running from date to date, counting neither the day of receipt nor the day of expiry; if the last day is a Saturday, a Sunday or a public holiday, it is extended to the next working day
  • Beyond the applicable period: time-barred, save exceptional circumstances (force majeure, administrative fraud)
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3. Consequences of foreclosure

The rejected VAT credit is definitively lost, with no alternative.

  • No refund possible
  • No set-off against subsequent returns where the rejection, having become final, has settled that the credit does not exist; a rejection that has not settled whether the right to deduct exists does not of itself produce that consequence — the exact wording of the decision governs the answer
  • No new claim possible on the same facts
  • Significant cash-flow consequence for companies with a structural credit position (construction, export, etc.)
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4. Distinction between rejection on the merits and missing documents

A nuanced reading depending on the ground for rejection, which is decisive for the defence strategy.

  • Rejection on the merits (reasoned in law or in fact): final on expiry of the appeal period, two months or, where the appeal routes and time limits are not stated, one year
  • Rejection for missing supporting documents: may potentially allow a new claim filed with the missing documents
  • Analysing the actual ground for the rejection is fundamental
  • In case of doubt: work to the two-month period, the shorter of the two, to preserve the company's rights
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Intermittent credit: recovering VAT paid in error

A business that is sometimes in a VAT credit position and sometimes in a debit position, and finds that it has charged VAT in error, must in principle correct its returns, carry the resulting credit forward to its subsequent returns, and then claim a refund of the excess (French Tax Code, art. 271, IV; Annex II, art. 208, II and 242-0 A). Failing that, it may claim repayment under article L. 190 of the Tax Procedure Code (LPF), but only for the months in which it was in a debit position, and up to the amount it would not have paid had it carried its excess credits forward. For that calculation, the Conseil d'État held on 22 July 2026 that those excess credits are carried forward to all subsequent debit months of the period covered by the claim: the tax authorities may not split that period in a way that relieves them from carrying unused credit balances forward to the following sub-periods.

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The rule: carry forward first, a tax claim failing that

The Conseil d'État laid it down in CE, 28 December 2016, no. 385232, Société Icade Promotion Logement (reported in the tables of the Recueil Lebon): a taxpayer who, during a period in which it was sometimes in credit and sometimes in debit, declared more tax payable than it should have must carry the credit arising from that correction forward to its subsequent returns, and then claim a refund of the excess.

The administrative court of appeal had held the repayment claim inadmissible because no refund claim had been filed in the prescribed form. The Conseil d'État set that ground aside: the claim under article L. 190 of the LPF remains open for the debit months.

02

The 2026 clarification: carry-forward over the whole period

In CE, 22 July 2026, no. 504330, Société Caisse d'Epargne Normandie (reported in the tables), the tax authorities had split the period covered by the claim, 2013 to 2015, into sub-periods each ending with a debit month, set the excess credits of each sub-period against the tax paid for that last month only, and left the balance aside.

The Conseil d'État held that the unused balances should have been carried forward to the following sub-periods, to be set against the tax paid for the subsequent debit months. The judgment of the Paris administrative court of appeal of 14 March 2025 (no. 24PA02655) was set aside and the case remitted to it.

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A worked example (hypothetical)

Month 1, credit position: correcting the VAT charged in error increases the credit by €100,000. Month 2, debit position: €40,000 paid. Month 3, credit position: the correction increases the credit by €10,000. Month 4, debit position: €50,000 paid.

Method set aside: €40,000 repaid for month 2 and €10,000 for month 4, i.e. €50,000; the €60,000 balance from month 1 is lost. Method upheld by the Conseil d'État: the €60,000 balance is added to the €10,000 of month 3 and set against the €50,000 of month 4, i.e. a total repayment of €90,000. The remaining €20,000 cannot be obtained through this claim: it falls under the carry-forward and refund route, subject to its own conditions and time limits.

04

What the firm checks

(i) The business's position, month by month, in debit or in credit, over the whole period, before and after correction. (ii) The route to follow: correcting returns, carrying forward and then claiming a refund, or a tax claim for the debit months, to be filed in principle no later than 31 December of the second year following the year in which the disputed tax was paid (LPF, art. R* 196-1, b) or, where the business is subject to a reassessment procedure, within a period equal to that available to the tax authorities (LPF, art. R* 196-3). (iii) The tax authorities' calculation: any unused credit balance is carried forward, until exhausted, to the subsequent debit months within the period claimed. (iv) If the claim is rejected, the time limit for bringing the case before the administrative court, which is the subject of this note.

The Conseil d'État did not rule on the other grounds of appeal, in particular the one concerning whether VAT reassessed at the end of the audit should be taken into account.

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Practical implications for businesses

The ruling requires heightened vigilance in tracking correspondence with the tax authorities.

4 reflexes to put in place now

Any company that regularly claims refunds of VAT credits (typically exporters, construction companies, VAT holding structures, real-estate companies under a VAT election) should adapt its internal procedures so that the appeal period is never missed — a period which, in most cases, is only two months.

4 reflexes to put in place

1. Systematic monitoring of correspondence from the tax authorities

Put in place an internal procedure for receiving and logging all tax correspondence, in particular reassessment notices, which may now constitute an express rejection. The date of receipt must be recorded without fail (postmark, acknowledgement of receipt, etc.).

2. Treat every reassessment notice as a potential starting point

Any reassessment notice affecting a VAT credit under refund examination must be analysed immediately by a tax lawyer in order to: (i) characterise the rejection (merits or missing documents), (ii) assess the available remedies, (iii) schedule the decision within the applicable appeal period, two months or, where the appeal routes and time limits are not stated, one year.

3. Keep rigorous records linking returns and supporting documents

The ruling indirectly recalls the importance of preventive documentation: supplier invoices, export evidence, contracts, transport certificates. Without solid documentation, the credit is fragile from the outset and the defence in the event of a rejection becomes difficult.

4. Consult a tax lawyer as soon as an unfavourable decision is received

The appeal period is, in most cases, only two months: an appeal has to be prepared without delay. A tax lawyer should be instructed upon receipt of the unfavourable decision, in order to: (i) legally characterise the rejection, (ii) assess the prospects of success, (iii) choose between the hierarchical appeal under article L. 54 C of the LPF, which suspends the running of the litigation period where it is available, and going directly to the court.

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Lead counsel: François Ouairy

François Ouairy, partner in charge of the Paris office and a member of the Paris Bar, assists companies with VAT credit refund litigation: review of unfavourable decisions, characterisation of the rejection (merits or missing documents), hierarchical appeals and litigation, and defence before the administrative courts. Recognised by Best Lawyers® 2026 in Tax Law.

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Q&A: operational questions on VAT credit rejections

Does a reassessment notice really amount to an express rejection of my refund claim?

Yes, under the ruling CE 14 November 2025, no. 498880, Sté Penn Ar Bed, provided that the notice challenges the credit on the merits. A notice dealing with other matters (e.g. reverse charge, applicable rate) without touching the principle of the refund does not amount to an express rejection. A case-by-case analysis is essential: the actual ground for the reassessment determines its legal effect.

Which period applies to me: two months or one year?

Two months in the vast majority of cases. The ordinary period is two months from receipt of the notice serving the rejection decision (LPF, art. R* 199-1). Look at the decision you received: if it states the court to be seised and the appeal period, those two months run from its receipt. One year is only the ceiling that applies where that statement is missing, the period then not being capable of being relied on against you (Code of Administrative Justice, art. R. 421-5); the company then has one year at most from the date it became aware of the decision, save exceptional circumstances. This reasonable-period rule is not what Penn Ar Bed contributes: it has been settled in tax matters since the opinion CE 21 October 2020, no. 443327, Sté Marken Trading, which applies to the rejection of a tax claim the reasonable period derived from the Czabaj ruling (CE Ass., 13 July 2016, no. 387763). Lastly, if the tax authorities have served no express decision, no period runs against you.

What happens if I let the appeal period lapse?

The rejection decision becomes final. No refund and, where the rejection, having become final, has settled that the credit does not exist, no set-off against subsequent returns and no further claim on the same facts. A rejection that has not settled whether the right to deduct exists does not of itself cause the credit to be lost: the exact wording of the rejection decision, and the time limits that apply to correcting returns, govern the answer. For companies with a structural credit position (construction, export, real estate), the cash-flow impact can be very significant. The only escape route is to demonstrate exceptional circumstances (force majeure, administrative fraud), which is an exceptional remedy with uncertain prospects.

What is the difference between a rejection on the merits and a rejection for missing documents?

Rejection on the merits means the tax authorities legally dispute the right to the credit (taxable-person status, rate, non-taxable transaction, etc.). It becomes final on expiry of the appeal period. Rejection for missing supporting documents means the tax authorities consider they cannot verify the credit for lack of probative documents (invoices, export evidence, etc.). In that case, the company may potentially file a new claim supplying the documents, without being blocked by the appeal period. But this characterisation depends on the explicit ground stated in the rejection.

What is the right reflex when a reassessment notice affects a VAT credit under refund examination?

Immediate receipt and logging of the notice (acknowledgement-of-receipt date), legal analysis within 30 days by a tax lawyer, reply to the notice within the statutory 30-day period (or 60 days if an extension is requested), preparation of the hierarchical appeal in the event of an unfavourable decision, and a procedural timetable built around the appeal period against the rejection decision, two months in most cases. Take care: there are two different hierarchical appeals, with opposite effects on the period. The one under article L. 54 C of the LPF, available against a reassessment notice that does not arise from an accounting audit, a remote accounting examination or a personal tax position review (LPF, arts. L. 12, L. 13 and L. 13 G), is exercised "within the period allowed for bringing litigation proceedings" and suspends the running of that period: it therefore costs nothing and should be considered. The one under the charter of rights and obligations of the audited taxpayer, available in the event of an on-site tax audit, is a substantive safeguard but carries no suspension: it does not extend the period for seising the court (LPF, art. R* 199-1) and must be pursued in parallel with the preparation of the litigation claim.

Can a business in an intermittent credit position recover VAT charged in error through a tax claim?

Yes, but that is not the primary route. The business must first carry the credit arising from the correction forward to its subsequent returns, and then claim a refund of the excess (CE, 28 December 2016, no. 385232). Failing that, a claim under article L. 190 of the LPF covers only the tax paid for the debit months, up to the amount that would not have been paid had the excess credits been carried forward. Those excess credits are carried forward, until exhausted, to all subsequent debit months of the period claimed: the tax authorities may not stop at the last month of each sub-period and drop the balance (CE, 22 July 2026, no. 504330, Caisse d'Epargne Normandie).

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© BENSAID Avocats — The information published on this site does not constitute legal advice. Sources: CE 14 November 2025, no. 498880, Sté Penn Ar Bed ; CE 13 July 2016 no. 387763 (Czabaj, reasonable period) ; CE opinion, 21 October 2020, no. 443327, Sté Marken Trading ; LPF art. R*199-1 (two-month period for seising the court) ; Code of Administrative Justice art. R. 421-5 (time limits may only be relied on where stated) ; LPF art. L.198 A (examination of VAT refund claims) ; LPF art. R*196-1 (claim time limits) ; LPF art. L. 54 C (hierarchical appeal suspending the litigation period) ; LPF art. L.208 (late-payment interest due by the State) ; French Tax Code art. 271 (right to deduct VAT; IV, refunds) ; CE 22 July 2026, no. 504330, Sté Caisse d'Epargne Normandie ; CE 28 December 2016, no. 385232, Sté Icade Promotion Logement ; LPF art. L. 190 and R*196-3 ; French Tax Code, Annex II, art. 208 and 242-0 A (versions in force on 4 November 2026). Editorial update: 4 November 2026.