This control can generally lead to a rectification of the prices or valuations used in documents subject to the registration formality (these are numerous and include transactions involving movable and immovable property (gifts, transfers, inheritance in particular, but also IFI).

When it comes to registration duty, the taxable value generally results from the statements made by the parties. Thus, in principle, agreements for which a price is stipulated are subject to proportional duties on the basis of an agreed price. When the deed does not contain an indication of the value of the property, the parties must make up for this by a detailed declaration of estimate (successions, gifts, exchanges and divisions).

The administration has the right to rectify the prices or valuations of goods (L17 of the LPF) declared to it by proving either a concealment of price or an insufficiency.

Concerning price concealment

To conceal the real price, the taxpayer will knowingly enter a lower price in the deed than that actually agreed. This concealment is very risky, as it can lead to a triple penalty (nullity of the deed in civil law, a tax fine equal to half the duties omitted) and in the worst case a criminal penalty (up to imprisonment). All this, not to mention the fact that the increase in value increases the taxable capital gain when the property is resold.

Reducing the sale price

Underpricing occurs when the price stipulated in the deed of sale is lower than the market value of the property. This value is not defined by law. Generally speaking, it is considered to correspond to the price that normal supply and demand would bring from the sale of the asset. But in this case, the sincerity of the deed is not called into question, nor is the alleged fraud.

The administration will therefore adjust the value of the property in relation to the price stipulated in the deed.

Rectification is carried out in accordance with the contradictory rectification procedure set out in article L55 of the LPF.The burden of proof lies with the tax authorities in rectifying the figures and terms of comparison that justify the proposed price or valuation adjustments.

The adversarial procedure may include, where appropriate, the intervention of the departmental conciliation commission, which may be called upon either at the taxpayer’s request or at the administration’s initiative.

In the event of deliberate failure to comply or fraudulent maneuvering on the part of the taxpayer, interest on late payment is added to the corresponding reduced duties.

Controlling inheritance tax

With regard to inheritance tax, article L19 of the LPF authorizes the tax authorities’ auditors to ask heirs for clarification or justification concerning their estate.

This may relate to the value of securities or claims not mentioned in the declaration, which are nevertheless presumed, until proven otherwise, to be part of the estate, pursuant to the first paragraph of article 752 of the CGI.

Still on the subject of inheritance tax, the administration may also demand proof of all debts deducted from the estate’s assets (LPF art L20).

If the justifications are deemed insufficient, the company may rectify the declarations in accordance with the “rectification contradictoire” procedure.

Article L21 B of the LPF provides for a special procedure for checking donations and inheritances on request. It enables signatories to the declaration of inheritance and donees to request a check on the deed they have signed. This request must be made within three months of registration of the deed, and must be signed by the beneficiaries of at least one third of the net assets declared and transferred at the time of the transfer. This reduces the administration’s recovery period by one year.

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France’s tax police: towards a repressive tax policy

The fight against tax fraud has become a major preoccupation for tax authorities in France. In response to this problem, the government has introduced a new tool: the tax police. This measure is an important step in the crackdown on tax crime, which is becoming increasingly severe. In this article, we’ll look at the introduction of the tax police in France and its impact on tax policy, as well as the importance of calling on the services of a tax lawyer specializing in criminal tax matters.

What is the annual 3% contribution on real estate?

Legal entities that own real estate in France are subject to a tax of 3% on the value of their properties. This tax on the fair market value of real estate was introduced by the 1983 Finance Law with the objective of ensuring visibility of the chains of ownership of properties by French and foreign entities, allowing the identification of shareholders and thereby verifying the proper application of the Wealth Tax (ISF), now replaced by the Real Estate Wealth Tax (IFI).

What debts are deductible under the IFI?

Debts on taxable (real estate) assets are deductible from the value of these assets for IFI purposes. However, this deductibility is excluded by law if the debts are not related to taxable real estate assets. This is the case, for example, for debts incurred to maintain the family’s lifestyle, to acquire non-taxable assets (such as a business) or exempt assets (such as premises used by a taxpayer for professional purposes).

Home visits based on mere suspicion of tax fraud

In two rulings handed down on February 15, 2023 (Cass. com., February 15, 2023, no. 20-20.599 and Cass. com., February 15, 2023, no. 20-20.600), the Commercial Chamber of the French Supreme Court confirms that the tax authorities can initiate home visits against a taxpayer on the basis of mere suspicions of tax fraud.

What is the 3% annual contribution on buildings?

Legal entities owning real estate in France are liable for a 3% tax on the value of this real estate.
This 3% tax on the market value of real estate was introduced by the 1983 Finance Act, with the aim of ensuring the visibility of chains of real estate ownership by French and foreign entities; making it possible to obtain the identity of associates and thus verify the correct application of the wealth tax (ISF), now replaced by the real estate wealth tax (IFI).