A company was subject to a tax audit, specifically for the 2014 fiscal year, during which it had carried forward a loss incurred in the 2005 and subsequent fiscal years.
The taxadministration e determined that, during the audit, the company had failed to substantiate the existence of its deficit prior to 2011 and therefore issued a tax assessment against the company.
The reassessment was challenged all the way to the Administrative Court of Appeals.
This provision will then incorporate the recital from Conseil d'Etat regarding the burden of proof regarding the existence of deficits.
The court had in fact ruled that a company may provide such proof“by submitting accurate and conclusive accounting records or, failing that, by any other non-accounting evidence that is sufficiently conclusive.” When such evidence is provided,“it is then incumbent upon theadministration, if it believes it has grounds to do so, either to challenge the accounting entries that led to the determination of a deficit or to ask the taxpayer to demonstrate the accuracy of those entries. It is then up to the tax judge to assess the merit of the explanations provided to him by the taxpayer and by theadministration, respectively”(CE, 9th and 10th Chambers, Dec. 31, 2020, No. 428297, Lebon T.).
The Court then noted that, in this case, the company had produced “all of the accounting transaction files (FEC) for the fiscal years 2006 through 2014, as well as restatement schedules intended to reconstruct the company’s taxable income based on its accounting income.”
It then notes that theadministration does not dispute the validity of the accounting records. The merely maintains that it is not possible to identify the “track record of accumulated deficits after the 2011 fiscal year, for which the petitioner claims a deficit to be carried forward from the previous fiscal year.”
The Court then noted that the company had not contested, in its brief, the statement in the “ reassessment proposal ” indicating that the company had cleared its deficits since 2008. It further held that“simple typewritten sheets listing the financial results for the relevant fiscal years” cannot be considered tax returns sufficient to justify the deficits.
The judges therefore ruled that the evidence provided by the company was insufficient to prove the deficit and upheld the tax assessment.
It would be interesting to hear the opinion of the Conseil d'Etat , given that the validity of the accounting records was not disputed and that, in accordance with the case law cited above, theadministration should therefore have either challenged the entries or requested that the company justify them. The Court, which finds that the company has not provided sufficient evidence, appears not to have noted any such objections on the part of theadministration.
CAA Bordeaux, Oct. 21, 2026, No. 24BX01593
This legal watch provided by Mispelon Avocat, a law firm specializing in French tax audit and French tax litigation. You can stay legal watch subscribing to the newsletter via this link.