Deliberate tax evasion is one of the most severe penalties that the tax authorities can impose on taxpayers. This 40% surcharge is added to tax reminders when the tax authorities consider that you have deliberately sought to evade tax. Understanding this concept is essential if you are to avoid serious financial consequences and preserve your rights when dealing with the tax authorities.

What is deliberate default?

Deliberate tax evasion is a tax offence characterized by the taxpayer’s intention to evade tax. This notion is defined by article 1729 of the CGI, which provides for a 40% increase in the amount of tax evaded. Unlike simple negligence, deliberate tax evasion implies a conscious intention to conceal income or to obtain an undue tax advantage.

The tax authorities must provide concrete evidence of your fraudulent intent, and cannot be satisfied with general allegations. This burden of proof protects you, as judges examine all the circumstances to determine whether your behavior reveals a genuine intention to evade tax. This case-by-case assessment underlines the importance of a rigorous legal defense to this qualification.

Criteria for characterizing deliberate misconduct

The intentional element: the cornerstone

Fraudulent intent is at the heart of deliberate non-compliance. The tax authorities must prove that you were aware of your tax obligations and that you deliberately chose not to comply with them. Mere ignorance of tax law is not sufficient to establish deliberate failure to comply.

Clues used by jurisprudence include the repetition of omissions, the size of the sums concealed, or the implementation of complex schemes. Your level of training, professional experience and knowledge of the tax system are also taken into account.

Revealing behaviors

Certain behaviors are systematically considered to be indicative of deliberate misconduct. The failure to declare substantial income, the concealment of lucrative activities, or the use of false invoices are typical examples. The creation of offshore structures with no real economic justification can also be interpreted as an indication of a desire to evade tax.

Jurisprudence has also found deliberate failure to comply in cases of systematic understatement of sales, deduction of fictitious expenses, or failure to declare foreign bank accounts. These situations reveal a conscious organization aimed at evading tax.

The intentional element: the cornerstone

Fraudulent intent is at the heart of deliberate non-compliance. The tax authorities must prove that you were aware of your tax obligations and that you deliberately chose not to comply with them. Mere ignorance of tax law is not sufficient to establish deliberate failure to comply. This burden of proof, which rests with the tax authorities, is an essential protection for the taxpayer against tax penalties.

Revealing behaviors

Case law identifies a number of behaviors that are systematically considered as indicative of deliberate misconduct. The failure to declare substantial income, the concealment of lucrative activities, the use of false invoices or the creation of offshore structures with no real economic justification are all convincing indicators. The systematic under-reporting of sales, the deduction of fictitious expenses necessitating fraudulent bookkeeping, or the failure to declare foreign bank accounts reveal a conscious organization aimed at evading tax. The size of the sums concealed and the repetition of omissions reinforce the presumption of fraudulent intent, and may lead to a tax reassessment with a 40% surcharge.

The financial consequences of wilful default

The 40% surcharge provided for in article 1729 of the French General Tax Code applies to the full amount of the recalled duties. This penalty is in addition to late payment interest of 0.20% per month, i.e. 2.4% per annum. The total cost of a tax reassessment involving penalties can therefore far exceed the initial amount of tax evaded.

To illustrate the financial impact, let’s take the example of a reminder of 100,000 euros over three years: the increase for deliberate failure to pay amounts to 40,000 euros, plus around 7,200 euros in late payment interest. The total amount to be paid is thus 147,200 euros, i.e. almost 50% more than the tax initially due.

How to contest a deliberate breach

The administrative phase

You have 30 days in which to respond to the proposed rectification mentioning the deliberate breach. This response is a crucial step in challenging the tax authorities’ characterization of the situation. You must demonstrate the absence of fraudulent intent by providing precise factual elements.

The burden of proof lies with the tax authorities. You can therefore concentrate on demonstrating that the elements cited by the tax authorities are not sufficient to establish your intention to evade tax. The assistance of a tax lawyer is often decisive at this stage.

Litigation

If the administration maintains the increase after your observations, you can refer the matter to the administrative court. The judge verifies that the administration has provided proof of the deliberate nature of your failure to comply. This verification takes into account all the circumstances of the case.

Administrative jurisprudence offers numerous examples of censure of increases for deliberate failure to provide adequate reasons. Judges require the administration to provide concrete evidence of your fraudulent intent, and not simply the existence of an irregularity.

The administrative phase

You have 30 days in which to respond to the tax reassessment proposal mentioning deliberate tax evasion. Since the burden of proof lies with the tax authorities, your strategy is to demonstrate that the elements cited by the tax authorities are not sufficient to establish your intention to evade tax. You need to provide specific factual evidence to challenge the tax authorities’ characterization. The assistance of a tax lawyer is often decisive at this stage in building a solid argument.

Litigation

If the administration maintains the increase after you have made your observations, you can refer the matter to the administrative court. The judge will then verify that the tax authorities have provided proof of the deliberate nature of your failure to comply. Administrative jurisprudence offers numerous examples of the censure of insufficiently reasoned surcharges: judges require the tax authorities to demonstrate your intention to evade tax, and not simply the existence of material irregularities. This strict evidentiary requirement is an important safeguard for taxpayers contesting the qualification of deliberate failure to comply.

Preventing the risk of deliberate misconduct

If you have any doubts about the tax treatment of a transaction, ask the tax authorities for their opinion by means of a tax rescript. This demonstrates your good faith and protects you from possible sanctions. If you discover an error after filing your tax return, spontaneously file a corrective tax return before any audit: this voluntary initiative generally rules out the application of the surcharge for deliberate failure to file.

Setting up internal tax audit procedures is also an effective safeguard. For companies, documentation of tax choices, rigorous accounting and bookkeeping, and the systematic retention of supporting documents help to demonstrate the absence of fraudulent intent in the event of an audit.

Deliberate default and other tax penalties

Deliberate non-compliance occupies an intermediate position in the scale of tax penalties. Its 40% increase lies between the penalties for simple irregularities (10% for insufficient declaration, 5% for late payment) and the most serious sanctions (80% for abuse of rights or fraudulent maneuvers). This gradation reflects the degree of intentionality: deliberate non-compliance presupposes a conscious intention to evade tax, but without the complex organization characteristic of fraudulent maneuvers. The scale of the sums concealed, the repetition of omissions and the sophistication of the means employed determine the level of penalty applicable.

When the facts are particularly serious, the tax authorities may refer the case to the public prosecutor for criminal tax fraud. Such referral exposes the taxpayer to criminal prosecution in addition to tax penalties, with the risk of imprisonment and criminal fines. Criminal proceedings are generally initiated in the case of large sums of money, organized concealment or repeat offences.

Protect your rights against tax penalties

When faced with a surcharge for wilful misconduct, your responsiveness and the quality of your defense determine the outcome of the case. As soon as you receive the rectification proposal, every argument counts to demonstrate the absence of fraudulent intent and obtain the waiver of this 40% penalty. The considerable financial stakes involved fully justify the intervention of a specialized tax lawyer who masters the subtleties of case law and knows how to build a forceful argument at every stage of the procedure. Don’t wait: deadlines are short, and your rights deserve a defense commensurate with the financial consequences incurred.