Tax Reassessment Notice: What to Do when Facing a Tax Adjustment?

Understand, Respond to, and Effectively Challenge a Tax Adjustment Notice

Receiving a notice of tax adjustment from the French tax authorities is unsettling. It marks the start of a tax reassessment procedure, whether the audit concerns your income tax, your VAT, or your wealth taxation or real estate taxation.
Individuals and businesses alike need to know their rights, the response deadlines and the available remedies.
This article, written by a tax lawyer in Toulouse, walks you through the procedure step by step so that you can respond effectively.

What is a Notice of Tax Adjustment?

A notice of tax adjustment is the formal document in which the French tax authority tells a taxpayer which changes it intends to make to their tax returns. In French it is called a proposition de rectification (or, informally, a proposition de redressement); it is also referred to in English as a proposed reassessment.
It follows a desk audit, an accounting audit or a review of an individual’s personal tax situation (ESFP).

The desk audit (contrôle sur pièces) is the most common form of tax audit. The tax authority reviews your returns against the information and documents already in its files. Be aware that taxpayers are not told when a desk audit is under way. Most only find out when they receive a request for information or a notice of tax adjustment.

The notice is sent by registered letter with acknowledgment of receipt and sets out:

• the taxes concerned (income tax, VAT, real estate wealth tax (IFI), capital gains, etc.);

• the tax years covered;

• the legal and factual grounds for the adjustment;

• the amount of the adjustments, penalties and late payment interest.

From receipt, the taxpayer has 30 days to respond (article R.* 57-1 LPF). This period is extended by 30 days if the taxpayer asks for it and the request reaches the tax authority before the first period expires (article L. 57 LPF), giving 60 days in total. The period applies to the adversarial reassessment procedure (procédure de rectification contradictoire), whether it follows a desk audit, an accounting audit or a review of personal tax situation (ESFP). If you do not reply within this period, you are deemed to have tacitly accepted the reassessment.

Stages of the Reassessment Procedure, from the Notice to the Court

A notice of tax adjustment usually follows an audit: either a desk audit carried out from the tax office, or an on-site audit announced by a notice of accounting audit or of a review of your personal tax situation. From the day you receive the notice, the procedure generally runs as follows:

1. Receipt of the notice. It interrupts the limitation period and starts your response period (articles L. 189 and R.* 57-1 LPF).

2. Your observations or your acceptance, within 30 days, which can be extended by 30 days on request (article L. 57 LPF). You may accept some adjustments and dispute others.

3. The tax authority’s reply to your observations. If it rejects them, even in part, it must give reasons. After an accounting audit or review of a small business (turnover thresholds set by article L. 57 A LPF), it has 60 days to reply; failing that, your observations are deemed accepted.

4. Referral to a commission, where available (the departmental commission for direct taxes and turnover taxes, or the departmental conciliation commission, depending on the nature of the disagreement). The request must be made within 30 days of receiving the tax authority’s reply (article R.* 59-1 LPF). The commission’s opinion is advisory only.

5. Collection of the taxes that are maintained, through a tax roll (avis d’impôt) or a notice of collection (avis de mise en recouvrement), depending on the tax.

6. The formal tax claim (réclamation contentieuse) addressed to the tax authority, which must precede any court action (articles R.* 196-1 and R.* 196-3 LPF).

7. The court, within two months of notification that the claim has been rejected, or once six months have passed without a decision (article R.* 199-1 LPF).

Key Time Limits After a Notice of Tax Adjustment

Standard time limits under the French Tax Procedure Code (Livre des procédures fiscales, LPF), as commented in the official tax doctrine (BOFiP); exceptions exist depending on the tax and the procedure.

The time limits of the audit itself (audit notice, length of the audit, the tax authority’s limitation period) are set out in the full table of French tax audit time limits, on our page dedicated to tax audits and litigation.

How Is the Response Period Calculated?

A few practical rules from the official tax doctrine (BOFiP, effects of the notice of tax adjustment):

• the period starts on the day you collect the registered letter or, if you do not collect it, the day it is presented at your home;

• it is a clear period (délai franc): neither the day of receipt nor the last day counts, and a period that ends on a Saturday, Sunday or public holiday is extended to the next working day;

• what counts is the date you send your reply, not the date the tax office receives it (article L. 286 LPF);

• the 30-day extension must be requested expressly before the initial period ends; a request for an extension on its own does not count as observations;

• a request for information sent to the tax office does not suspend the response period.

Example taken from the official tax doctrine: for a notice received on 2 April, a reply sent to the tax office on 3 May, the thirty-first day after receipt, is still valid because the period is a clear period. An extension request sent within that period brings the response period to sixty days.

Mandatory Elements of a Notice of Tax Adjustment

The statement of reasons in the notice is governed by article L. 57 of the French Tax Procedure Code (LPF), which requires the tax authority to explain the notice in enough detail for the taxpayer to make observations or accept it. Insufficient reasons are a procedural irregularity that can lead to the tax being discharged.

Mandatory elements include:

• the identity of the issuing tax office and the signature of the authorized official;

• a clear and detailed statement of the facts relied on and the legal basis invoked;

• the details of the proposed additional taxes;

• the tax years concerned;

• the response deadline and the available remedies;

• a statement of your right to be assisted by a tax lawyer or another adviser of your choice.

A notice with insufficient reasons can be challenged for a formal defect.

Formal and Procedural Defects: Which Irregularities Matter?

“Formal defect” (vice de forme) and “procedural defect” (vice de procédure) are the everyday terms for an irregularity committed by the tax authority during the assessment procedure. They do not all carry the same weight:

• if the notice does not tell the taxpayer that they may be assisted by an adviser of their choice, the procedure is void (article L. 54 B LPF);

• reasons that do not explain the nature, grounds and amount of the adjustments, or the penalties proposed, are a procedural irregularity (article L. 57 LPF);

• failing to leave the taxpayer 30 days to refer the matter to the commission, where referral is available, makes the procedure defective;

• by contrast, a mere clerical error in the form used does not taint the procedure if it caused the taxpayer no harm and all safeguards were granted.

A procedural irregularity does not settle the substance on its own: the merits of each adjustment are reviewed in parallel.

How to Respond to a Notice of Tax Adjustment?

Act quickly once you receive it. You have two options:

1. Accept the notice of tax adjustment, if you agree with the errors the tax authority has identified.
   You confirm your agreement in writing, and the tax authority then collects the amounts due.

2. Dispute the notice, if you consider the reassessment unjustified.
   You then have 30 days (or 60 if extended) to submit your written observations.

It is strongly advised to consult a tax lawyer at this stage.
A lawyer can analyze the reasons given for the reassessment, identify procedural flaws and prepare a legally sound response.

Effectively Challenging a Notice of Tax Adjustment

Responding to a notice of tax adjustment requires rigor and strategy.
An effective challenge relies on:

• a complete review of your tax file;

• checking the legal basis of the reassessment;

• looking for calculation or procedural errors;

• drafting reasoned observations based on the French Tax Code (CGI) and case law.

Sample Structure of a Reply to a Notice of Tax Adjustment

The notice itself is issued on form no. 2120 (audit carried out from the tax office) or no. 3924 (after an accounting audit or a review of personal tax situation); the tax authority replies to your observations on form no. 3926. There is no one-size-fits-all reply: its content depends on the adjustments and on the evidence available. For illustration only, a structured reply often follows this outline:

1. references: tax office, date of the notice, date of receipt, taxes and years covered, and any extension request already made;

2. your position on each adjustment, taken separately: accepted, or disputed in full or in part;

3. procedural arguments, if any: mandatory statements, reasons, time limits, conduct of the audit;

4. substantive arguments: applicable law, official tax doctrine, documented facts and figures;

5. challenge to the penalties, which must also be reasoned;

6. numbered list of enclosures;

7. next steps requested: referral to the competent commission, meeting with the auditor’s superior or the departmental liaison officer;

8. date and signature of the taxpayer or of the person authorized to reply on their behalf.

The law imposes no particular form, but the date of sending is what counts: sending your reply by registered letter with acknowledgment of receipt, before the deadline, and keeping a full copy lets you prove it.

The tax lawyer can also pursue internal appeals within the tax authority and request a commission’s opinion:

• appeal to the auditor’s superior;

• appeal to the departmental liaison officer (interlocuteur départemental);

• referral to the departmental commission for direct taxes and turnover taxes or to the departmental conciliation commission, depending on the nature of the disagreement, within 30 days of the tax authority’s reply (article R.* 59-1 LPF).

These appeals do not bind the tax authority, but they are a key step before litigation.

Collection Phase and Litigation

If the tax authority maintains its position, it puts the taxes into collection, through a tax roll (avis d’impôt, the tax notice) or a notice of collection (avis de mise en recouvrement, AMR), depending on the tax.
This formalizes the tax debt and makes the taxes, penalties and interest payable.

The taxpayer may still:

• file a formal tax claim with the tax authority;

• within two months of notification of a rejection, or if no decision is made within six months, bring the case before the Administrative Court (income tax, corporate income tax, VAT) or the Judicial Court (registration duties, real estate wealth tax), depending on the tax (article L. 199 LPF);

• if unsuccessful, appeal to the Administrative Court of Appeal (or the Court of Appeal for judicial disputes), and possibly take the case to the Conseil d’État (Council of State) or the Cour de cassation.

An experienced tax lawyer can assist you through these steps and defend your interests at every stage.

Specific Cases and Common Errors

Some notices of tax adjustment contain errors that can work in your favor:

• missing or insufficient legal reasons;

• incorrect calculation of the tax base;

• failure to observe the statute of limitations;

• missing signature or no mention of the competent tax office;

• unlawful cumulation of penalties;

• confusion between business income and investment income.

Depending on the case, these errors concern the procedure (reasons, mandatory statements, time limits) or the merits (calculation, classification of income, limitation period); where they are established, they may justify the discharge of all or part of the reassessment, after review of the file.

Collection Deadline After a Notice of Tax Adjustment

The notice of tax adjustment interrupts the limitation period (article L. 189 LPF). It starts a new period, of the same nature and length as the interrupted limitation period (délai de reprise), running from the year of the notice. The tax authority must put the taxes into collection before that period ends; otherwise, the tax becomes time-barred.

Example taken from the official tax doctrine: a notice of tax adjustment issued on 15 March of year N for income tax, covering year N-2, opens a new period that expires on 31 December N+3. Collection must take place by that date at the latest.

Two further points. Where several notices are sent one after the other, the period runs from the last one. And the interruption only applies up to the amounts notified: once the initial limitation period has expired, the tax authority cannot collect more than the notice stated. Once the tax has been put into collection, the commission can no longer be consulted: the dispute then goes through the formal tax claim.

“Annule et remplace”: When a New Notice Replaces the First One

The tax authority may send a new notice that cancels and replaces (annule et remplace) the previous one, for example to correct a calculation, complete the statement of reasons or change the legal basis of an adjustment. Check three points:

• the date: within the limitation period, the tax authority may notify several successive adjustments, and a first notice received before that period expired keeps its interruptive effect even if it is later replaced;

• the amounts: a replacement notice sent after the initial limitation period has expired cannot go beyond the adjustments notified in the first one;

• the response period: the new notice in turn invites you to reply within 30 days; you must reply, even if you had already disputed the first one.

A change of grounds does not deprive the first notice of its interruptive effect. The validity of the new notice (reasons, mandatory statements, time limit) is also assessed on its own.