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Here are the main stages in a tax audit, particularly as regards transfer pricing.
Have you just received a notice of an accounting audit, indicating that your company is going to be audited? Don't panic, you are not yet facing a tax adjustment. Here are the main stages in a tax audit, particularly with regard to transfer pricing.
In the vast majority of cases, tax audits relating to transfer pricing are on-site audits.
In this case, your company receives a notice of accounting audit, sent by registered letter with acknowledgement of receipt. This letter is addressed to the company's legal representative and contains the following information:
For large companies (with turnover in excess of €152.4 million for sales of goods and €76.2 million for the provision of services), this will often be the DVNI (Direction des Vérifications Nationales et Internationales).
For medium-sized companies (turnover of between €1.5 and €15.2 million for sales of goods and between €0.5 and €76.2 million for the provision of services), it will be a DIRCOFI (Direction spécialisée de Contrôle Fiscal). There are eight DIRCOFIs in France, divided by geographical area.
In corporate tax matters, the statute of limitations in France is generally 3 years, except in cases of hidden activity or tax fraud. This period corresponds to the period during which the French tax authorities can check the company's tax returns.
For example, in 2025, the tax years that can be audited are :
If your company has loss carry-forwards, the French tax authorities may extend their audit to the year in which the loss originated.
The audit notice may mention the taxes specifically targeted by the audit (e.g. corporation tax, VAT, etc.). If not, it will state that the audit will cover all taxes for which the company is liable.
You have at least 2 days between the date of receipt of the audit notice and the start of the audit. This period does not include the day on which you receive the notice or Saturdays, Sundays and public holidays. If you receive the notice on a Monday, the first inspection cannot take place until Thursday.
If necessary, you can ask for the first meeting to be postponed. It is advisable to request this by post or e-mail (or to confirm by post or e-mail what has been agreed verbally). No new tax audit notification will be sent.
The taux audit notice informs the company that it may be assisted by an advisor of its choice. This person is generally a chartered accountant or a lawyer.
The presence of the advisor is optional when the tax auditor first intervenes, but may be useful later.
The company is also informed that it is possible to consult the ‘Charter of rights and obligations of the audited taxpayer’, which is available on the French tax authorities' website.
The tax audit notice may specify the remedies available to the company at the end of the verification procedure: the first recourse may be made to the head of the brigade (the auditor's hierarchical superior) and the second to the departmental interlocutor (the head of brigade's hierarchical superior).
The tax auditor generally visits the company's premises to carry out the audit. In some cases, the audit may take place at the chartered accountant's premises if the company's accounting documents are kept there.
The tax auditor will want to have a main contact person with whom he can communicate throughout the audit. This contact person is usually the company's legal representative or someone from the accounting or finance department.
You may be assisted and/or represented by your chartered accountant or lawyer. This assistance can take several forms: being present alongside the company during the audit, preparing responses to the tax auditor's questionnaires or representing the company during the tax audit. It should be noted that, unlike a chartered accountant who needs a representation mandate, a lawyer can assist or represent you without a specific mandate.
When the auditor wishes to examine transfer pricing, he/she may ask for the support of international consultants present within the DVNI and in some DIRCOFIs, who have expertise in transfer pricing. In this case, it may be necessary to seek expert advice on these topics so that you can best answer the technical questions of international consultants.
The tax auditor's first meeting is more about making contact. The subjects generally covered are as follows:
The tax auditor tells the company what audits he/she intends to carry out and the timetable for his/her various visits.
It is also at this stage that the tax auditor specifies whether he/she intends to audit transfer prices.
The tax auditor generally asks for a presentation of the company in order to gain a better understanding of its activities, its position within the group and its interactions with the other companies in the group.
He/she may also ask to visit the company's premises.
Your company is required to provide the tax auditor with the accounting records file ("Fichier des Ecritures Comptables" - FEC), in electronic form, in accordance with legal requirements.
At the end of this first visit, the tax auditor will provide a list of the documents and information to be provided during the next visit.
The purpose of the accounting audit is to assess the probative value of the accounting entries and compliance with the tax rules applied by your company.
The tax auditor will examine the company's accounting documents (accounting book, inventory, supporting documents, etc.). He/she may also ask questions about the way your accounts work, the accounting systems or tools used, including those of your accounting firm if you outsource these services.
The tax auditor may request the intervention of the Brigade de vérification des comptabilités informatisées (BVCI), a unit made up of IT auditors within the DVNI. The BVCI assists the tax auditor to carry out more detailed computer processing of certain accounting data. It should be noted that the BVCI's involvement does not in itself constitute a new tax audit, but technical assistance provided to the tax auditor.
The tax auditor analyzes all the documents that give him a better understanding of your company's activities and its interactions with the other entities in the group.
He/she may request any document considered relevant, including :
It is essential to ensure consistency between the various elements transmitted (for example, the amounts of documented intra-group transactions must correspond to those in the FEC, your company's functional organisation chart must reflect the functions described in the transfer pricing documentation...).
The tax auditor may implement the international administrative assistance procedure, which allows him/her to request information from another foreign tax authority.
This exchange of information is possible with :
This procedure extends the limitation period by 3 years (article L 188 A of the LPF).
It should be noted that the French tax authorities are not obliged to inform you of the implementation of this procedure, unless they wish to take advantage of the extension of the statute of limitations.
At the end of the audit, the tax auditor organizes a meeting to :
The company then receives a reassessment proposal or a notice that no adjustment has been made.
There is no specific time limit for a tax audit, but the tax auditor is obliged to notify any adjustments before the expiry of the limitation period for the financial years concerned. There is an exception for small companies, for which the maximum duration of a tax audit is 3 months. These are companies with a turnover of less than €840,000 for manufacturing or commercial activities and less than €254,000 for services.
By anticipating each stage and being assisted of experts, you will be better prepared to deal with a transfer pricing tax audit.
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