All you need to know about this latest audit requirement
A new tax law has changed requirements in French tax audit procedure, and your company may be affected.
An “FEC” file must now be provided to the tax auditor at the start of any tax audit.
What is an FEC? The Fichier des Ecritures Comptables could be understood as a computerized accounting entries file, issued by your accounting software. Its function is to bring together all the data related to the bookkeeping and all the entries which are booked during a fiscal year. This New FEC file required in France, has been stipulated by article L.47A I of the Tax Procedure Code (Livres des Procédures Fiscales), requiring 18 fields to have been filled in for each accounting entry. The change is applicable to all tax audit notifications received after January 1st 2014.
Failure to comply with the new regulations could prove critical. If the FEC is not provided to the tax auditor, if it is incomplete or if it is not compliant with the regulation, it may lead to a rejection of all the bookkeeping, including the rejection of all the related returns and taxes (VAT, corporate tax, Financial Statements…). In such a case, the French tax administration itself may assess the profit and turnover of the French company and it will be the taxpayer’s responsibility to prove that these assessments are untrue. Foreign companies which are registered for VAT in France without being established there are also required to provide the FEC file upon request of the French tax administration.
Moreover, in the case of this new FEC file required in France, there is a particular file format (.txt) which is precisely described in the article L47A I and which is required by the French tax administration. Any other format will not be accepted.
Failure to provide the tax auditor with the FEC file is punishable by a fine of € 5,000 or 10 % of the reassessments if they are higher than this figure.
Please bear in mind that bookkeeping of any company or branch based in France must comply with French accounting standards (FR GAAP); US GAAP and IFRS accounting standards are not accepted. All bookkeeping of companies/branches based in France must be available for consultation in French.
Please note that, even in the case of a compilation mission for which the bookkeeping is usually held abroad with the supervision of a French CPA on a limited review basis, all the information mentioned above is still requested.
If you are concerned that your business may not be ready in the event of a tax audit, you are seeking assistance in implementing this new obligation, or would simply like more information on the FEC, contact us. Our multilingual team of CPAs can consult on the new requirements and the necessary presentation of the FEC file.