Depression, CESDH, and opposition to tax audits
administration attempted to audit two real estate investment companies (SCIs) that were owned by a single single-member limited liability company (EURL). The tax authorities sent notices of audit, but these were not received by the SCIs. No representative appeared on the day of the first audit visit. Following two formal notices of objection to the tax audit, no representative appeared during the second audit visit.
administration then determined that this constituted an objection to a tax audit and initiated the procedure for assessing the tax bases ex officio. They also applied the 100% surcharges provided for in cases of objection to a tax audit.
The manager then tried to defend himself by claiming that he was suffering from a depressive disorder that prevented him from responding toadministration requests. He then submitted two medical certificates dated after the tax bill an attempt to prove his case.
The Court will find that this does not justify "the inaction displayed by the [companies] during the audit period." It also notes that this does not justify the failure to appoint a representative to act on behalf of the manager during the tax audit.
With regard to the 100% penalties for opposing a tax audit, the EURL argued that applying these penalties in connection with an opposition to an audit conducted by the SCIs violates the ECHR.
The Court will nevertheless reject the argument, holding that:
The EURL held virtually all of the shares in the SCIs
the companies had the same executive
This executive has been involved in real estate development for many years
he could not have been unaware of the obligation to comply with the audit
The Court then ruled that the EURL had participated in the challenge to the tax audit. It subsequently dismissed the petition and upheld the tax assessment against the company.