Stay of payment: suspension of tax proceedings
When faced with a disputed tax debt, you have access to an essential legal mechanism for temporarily suspending the tax authorities’ proceedings: deferred payment. This allows you to defer payment of your tax liability while contesting its legitimacy before the competent courts. Whether you’re dealing withdirect taxes or other levies, understanding the conditions for obtaining a deferment and the implications of this procedure is essential to protect your cash flow and ensure optimal taxation.
What is deferred payment?
Deferment of payment is a legal suspension of the collection of a tax debt for the duration of a dispute. When you lodge a complaint against a tax assessment notice, the tax authorities can pursue immediate collection. The stay protects you against these coercive measures by suspending forced collection procedures: seizures, mortgages or third-party notices.
This is a precautionary measure that defers payment until a final decision has been taken, without cancelling the debt. In this way, you retain full disposal of your assets while your dispute is examined by the administrative or judicial courts.
Conditions for granting deferment of payment
Providing sufficient guarantees
Obtaining a deferment of payment generally requires the provision of guarantees. The tax authorities require securities proportionate to the amount in dispute to secure their claim. These guarantees can take a number of forms: bank guarantees, mortgages on real estate, pledges on company shares or the allocation of a deposit account.
The amount of the guarantees usually corresponds to the total amount of the disputed debt, plus any late payment interest and penalties. The administration assesses the financial soundness of the proposed guarantees before granting the deferment.
In certain exceptional situations, you may request a total or partial waiver of cover. This waiver can be obtained if you can demonstrate that the provision of such cover would seriously compromise your financial situation or that of your company, in particular by affecting your profits or your economic activity.
The existence of a serious dispute
Deferment of payment is only granted if your dispute is of a serious nature. You must demonstrate the existence of substantial legal or factual arguments calling into question the legitimacy of the tax assessment. A simple desire to delay payment is not enough.
The tax authorities or a judge will examine the relevance of your arguments. Arguments must have a sound legal basis: calculation error, inappropriate tax classification, procedural error or misapplication of tax law.
Jurisprudence considers a challenge to be serious if it does not appear manifestly doomed to failure. You don’t have to prove that you’ll win your case, but simply that your request merits closer examination.
In order to obtain a deferment of payment, it is generally necessary to provide collateral in proportion to the amount in dispute. These securities take a variety of forms: bank guarantees, real estate mortgages, pledges of company shares or assignment of a deposit account. The amount required corresponds to the total amount of the disputed debt, plus late payment interest and penalties, with the administration assessing the financial soundness of the proposed guarantees before granting the deferment.
In certain exceptional situations, you can apply for a total or partial waiver of cover if providing it would seriously compromise your economic situation or that of your company.
Deferment of payment is only granted if your dispute is serious. Jurisprudence considers a dispute to be serious if it does not appear manifestly doomed to failure. You must demonstrate the existence of substantial legal or factual arguments calling into question the legitimacy of thetax assessment, without having to prove that you will win your case.
The tax authorities or a judge will examine the relevance of your arguments, which must be based on solid legal grounds: calculation error, inappropriate tax classification, procedural error or misapplication of tax law. A simple desire to delay payment is not enough; your claim must merit a thorough examination on its merits.
Procurement procedures by stage of litigation
Automatic suspension
In certain situations, you are automatically entitled to deferment of payment, without having to take any particular steps. This automatic deferral applies in particular when you dispute a tax assessment in accordance with the procedure set out in article L281 of the LPF.
The automatic suspension also applies to certain contradictory rectification procedures, when you have referred your case to the departmental direct tax commission or the tax abuse committee. These advisory bodies automatically suspend collection.
To benefit from this automatic stay, you must scrupulously respect the deadlines and forms of claim laid down by law. Failure to do so will deprive you of this protection and expose your business assets to collection action.
Stay of execution on request
When the automatic stay of execution does not apply, you can expressly request this measure from the authorities or a judge. Your request must be reasoned and accompanied by a proposal for appropriate guarantees.
Before the administrative judge, you submit your request for a stay of execution at the same time as your contentious appeal. The interim relief judge examines your request as a matter of urgency, and generally gives a ruling within a few weeks. His decision is based on the urgency of the situation and the seriousness of your arguments.
If the administration refuses your request for deferment or demands disproportionate guarantees, you can contest this decision before the administrative judge. The judge will check the reasonableness of the administration’s demands in light of your financial situation. The support of a tax lawyer is particularly useful in optimizing this procedure.
In certain situations, you are automatically entitled to deferment of payment, without having to take any particular steps. This automatic deferral applies in particular when you dispute a tax assessment in accordance with the procedure set out in article L281 of the LPF, or when you have referred the matter to certain consultative bodies as part of contradictory rectification procedures: the departmental direct tax commission or the tax abuse committee automatically suspend collection.
To benefit from this automatic protection, you must comply with the time limits and forms of claim stipulated by law, as any procedural failure will deprive you of this right and expose your assets to recovery measures.
When the automatic stay does not apply, you can expressly request this measure from the authorities or a judge. Your request must be reasoned and accompanied by a proposal for appropriate guarantees.
Before the administrative court, you submit your request for a stay of execution at the same time as you lodge your appeal, with the interim relief judge generally ruling within a few weeks. If the administration refuses your request or demands disproportionate guarantees, you can contest this decision before the judge, who will check the reasonableness of the requirements in light of your financial situation.
The legal effects of deferred payment
Once granted, the deferment of payment suspends all enforcement measures (bank seizures, mortgages, lien registrations) and halts the payment of late payment surcharges and interest for the duration of the deferment. This dual protection is a considerable financial advantage, particularly when the dispute extends over several years.
In this way, you retain full control over your business and personal assets, a crucial factor in maintaining your business without major disruption in the face of a major tax reassessment.
Duration and end of deferment of payment
The deferment of payment remains in force until the final decision on your dispute, which can be several years if your case goes through the various levels of jurisdiction (administrative tribunal, administrative court of appeal, Council of State). It ends automatically as soon as the decision becomes final: in the event of success, the tax is cancelled and the guarantees released; in the event of rejection, the administration immediately resumes proceedings.
You can voluntarily waive the stay of execution at any time, in particular to pay off your debt and stop interest on arrears, while continuing your dispute to obtain possible repayment at a later date.
Strategies for optimizing deferral of payment
To make the best use of deferred payment, you need to weigh up the cost of guarantees (bank guarantees, annual fees) against the interest on arrears avoided. You can negotiate alternative, less costly guarantees with the authorities, while ensuring that the public debt is protected. Strategic coordination with other contentious procedures, such as opposition to prosecution or contestation within the L281 complaint period, maximizes your chances of success. The support of a specialized tax litigation lawyer optimizes the structuring of your defense.
Secure your position with regard to tax collection
Deferment of payment is a fundamental legal tool for safeguarding your financial position during a tax dispute. Its effectiveness rests on three essential pillars: providing guarantees adapted to your financial capacity, demonstrating the serious nature of your dispute, and scrupulously respecting procedural deadlines.
Anticipation is the key to a successful deferment strategy. As soon as you receive a disputable debt collection notice, you need to quickly assess whether you should apply for this protection. Timing is crucial: a late application exposes you to the first forced collection measures, and complicates the negotiation of guarantees with the administration.
Deferment of payment is part of an overall litigation strategy that combines challenging the merits of the tax and protecting your cash flow. This combined approach requires in-depth technical analysis of your case and precise knowledge of litigation procedures. The support of a consultant specialized in tax law enables you to optimize this strategy and effectively secure your defense against the administration’s claims.
Frequently asked questions
Deferment of payment is an essential legal mechanism for taxpayers contesting a tax assessment. This section answers the most frequently asked questions about the suspension of tax proceedings and how to obtain a stay of payment.
What is deferred payment in tax disputes?
Deferment of payment is a procedure that allows a taxpayer to temporarily suspend collection of a disputed tax debt. It prevents the tax authorities from initiating legal proceedings and enforcement measures until the tax dispute has been definitively settled. This mechanism protects the taxpayer who contests a tax assessment in good faith, and avoids having to pay potentially undue sums immediately. The deferment applies only for the duration of the contentious proceedings.
What are the conditions for a tax deferral?
To obtain a deferment of payment, the taxpayer must first have lodged a contentious claim or an appeal against the contested taxation. The request for deferment must be made expressly and in writing to the public accountant. The administration may require sufficient guarantees to cover the disputed tax claim. The deferment is granted only for the portion of the tax liability actually contested. The administration retains the power to accept or refuse the request, and its decision may be appealed before a judge.
How do I apply to the tax authorities for deferment of payment?
The request for deferment of payment must be made in writing to the public accountant responsible for collection, ideally at the same time as the contentious claim or appeal is lodged. It should specify the amount of the disputed tax and the grounds for the dispute. It is advisable to send the request by registered letter with acknowledgement of receipt. If guarantees are required, the taxpayer should submit proposals for a surety bond or mortgage. A tax lawyer can assist the taxpayer in this process to optimize his chances of acceptance.
What documents do I need to apply for deferment of payment?
The application file must include a formal letter of request addressed to the public accountant, a copy of the contentious claim or appeal lodged, and a detailed statement of the grounds for contestation. If the administration requires guarantees, documents justifying solvency or the assets offered as security (deeds of ownership, bank certificates, proposed surety) must be provided. Any element demonstrating the validity of the contestation reinforces the request. A complete file makes it easier for the authorities to examine the application.
Does the suspension of payment also suspend penalties and surcharges?
The deferral of payment effectively suspends the recovery of penalties and surcharges associated with the disputed taxation, provided these are also the subject of the dispute. However, during the period of deferment, interest on arrears generally continues to accrue on the sums deferred. If the challenge is ultimately rejected, the taxpayer will have to pay the original tax plus accrued interest. On the other hand, if the challenge is successful, no payment will be required for the portion of the tax assessment cancelled.
What happens if my application for deferred payment is rejected?
In the event of explicit or implicit refusal of the request for deferment, the taxpayer may lodge an appeal with the enforcement judge within two months. This appeal allows the taxpayer to contest the administration’s refusal, and to apply to the courts for a stay of payment. At the same time, the taxpayer can ask the administration for a payment extension or a payment schedule. It is also possible to proceed with payment subject to reserve, which enables the sums paid to be recovered if the dispute is successful. The assistance of a specialist lawyer is strongly recommended for these procedures.
Can companies benefit from deferred payment?
Yes, deferment of payment applies to both individuals and companies contesting a tax assessment. In particular, companies can apply for deferment of payment of corporate tax assessments, whether for corporate income tax, VAT or various other taxes. The same conditions apply: prior claim, express request and, if necessary, provision of guarantees. For companies faced with exceptional transactions giving rise to contested tax assessments, the deferment is a valuable tool for preserving their cash flow during the contentious period.