Should the cumulative effect of surcharges and penalties for undeclared work result in an adjustment to the 80% penalty?
An individual who resided in the United Kingdom owned a villa in the south of France. The individual was subject to a tax audit, following whichadministration that the rental of the villa constituted a non-professional furnished rental business.
Since this activity was not reported,administration a tax assessment, treating it as unreported income. They therefore applied the extended 10-year statute of limitations and imposed an 80% penalty.
The Administrative Court of Appeals, to which the case was referred, first ruled that, contrary to the taxpayer’s contention, the failure to report her business activity did not constitute an error.
The taxpayer claimed to have paid, in 2014 in the United Kingdom, income tax on rental income for the years 2008 through 2013. The Court, however, found that she had not provided evidence to support this claim.
The taxpayer also argued that the 80% penalty imposed for unreported income should be adjusted by the Court. In this regard, she claimed that she had cooperated during the tax audit and that, as a result of the unreported income, she was unable to deduct unrecorded depreciation and faced a 1.25-fold increase in her tax base.
The Court will then uphold the long-standing position of the tax administrative judge, according to which the judge has no authority to adjust the penalty rate.
It goes on to note that "no particular circumstances specific to a taxpayer's situation could lead to the conclusion that the application of these provisions constitutes an excessive interference with the rights and freedoms protected by Article 1 of the First Additional Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms."
The taxpayer's tax assessment is therefore upheld.
CAA Paris, April 3, 2026, No. 24PA03534
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