Is a penalty sufficiently justified when theadministration makes a calculation error?

A company that acts as a broker in the purchase and sale of real estate was subject to a tax audit, following which the French Tax Authority (administration ) issued it a fine for failing to report the VAT related to fee rebates on a form.

The company challenged the tax assessment all the way to the Administrative Court of Appeals.

In particular, it argued that the procedure followed was improper because the penalties had not been properly justified. In fact, the fine—which is normally equal to 5% of the undeclared amount of VAT—was actually 4.16%. The company was therefore unable to understand the calculation method used to determine the penalty.

The Court will then rule that “the sole calculation error committed by theadministration cannot be regarded as a failure to provide sufficient justification for the fine.” It will also note that the reassessment proposal detailed the method used to calculate the fine and that the response to the taxpayer’s comments acknowledged the error made in the calculation basis.

However, this decision raises questions, given that the Council of State ( Conseil d'Etat ) has ruled, in the context of tax consolidation, that informationregarding “the methods used by the tax office (administration ) […] constitutes a safeguard enabling the parent company to effectively challenge the amounts charged to it” (CE, 3rd and 8th Chambers, June 25, 2020, No. 421095, Lebon T.).

This safeguard, like the requirement to provide a rationale for penalties, is intended to allow taxpayers to submit their comments, which presupposes that they understand how the amount of the penalties is determined. When theadministration makes an error in the determination process, it is difficult to see how the taxpayer could have understood the calculation used by theadministration and, therefore, how the taxpayer was able to submit comments.

CAA Marseille, Sept. 17, 2026, No. 25MA00855

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