In a case that was recently heard in the French Supreme Court, the Cour de Cassation, the French tax authority undertook an investigation of the affairs of a US national who owned an apartment in Paris.
As a result, the tax authority claimed additional income tax and social charges were due, covering a 2-year period.
The individual was unsuccessful in his challenge to the demand in the local tribunal, but appealed the decision to the appeal court, who ruled in his favour. The French tax authority, in turn, appealed the case to the Supreme Court.
The nub of the case turned on whether the individual had been properly notified of the investigation.
Under French tax law, a tax investigation cannot be initiated without the taxpayer having been notified in writing of the audit, which must also specify the years under review. The notice must also state that the taxpayer had the right to be assisted by a counsel of their choice.
Although in court it was established that the taxpayer notified the tax authority of his new address in the USA, whilst retaining the apartment in Paris, the tax authority was unable to demonstrate that they had duly notified him at this address.
They claimed that a notice to his apartment in France was sufficient, and that the owner should have made appropriate arrangements for forwarding of mail.
Neither did the tax authority establish that the US address was fictious, so had no grounds to claim that they should not have notified him at that address.
It also emerged that subsequent to the notice of investigation having been sent the tax authority had written to the US address on another issue.
As a result, the court dimissed the appeal by the tax authority, on whom it imposed damages of €3,000.
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