Can the tax authorities search your home?

A tax search is one of the most intrusive procedures available to the tax authorities.

Provided for in Article L. 16 B of the French Tax Procedures Code (Livre des procédures fiscales, LPF), it allows tax officials, with the prior authorisation of the liberty and custody judge (juge des libertés et de la détention), to enter business or private premises without warning in order to search for and seize evidence capable of revealing tax fraud.

It may concern the taxpayer suspected of fraud directly, but also third parties where the tax authorities consider that documents useful to their investigation are likely to be held on their premises.

In practice, the intervention is often particularly unsettling: several officials may arrive at the same time, accompanied by a judicial police officer, without the taxpayer having been informed in advance. The operations may last several hours and cover a large volume of documents, computers, email accounts or remotely accessible data.

Faced with such an intervention, the first reactions are decisive.

1. Tax searches: a procedure strictly governed by law

In what cases can the tax authorities carry out a search?

A tax search cannot be used to look for any irregularity whatsoever.

Article L. 16 B of the LPF applies exclusively to offences relating to income tax, corporation tax and turnover taxes.

By contrast, this procedure cannot be used, in particular, to investigate offences relating to inheritance tax, gift duties or the real estate wealth tax.

The tax authorities must also put forward presumptions of fraud falling within the cases provided for by law: purchases or sales without invoices, the use of invoices or documents not corresponding to real transactions, deliberate omissions of accounting entries or the recording of inaccurate or fictitious entries in the accounting records.

The case law nevertheless accepts that mere presumptions may be sufficient to justify judicial authorisation. The tax authorities therefore do not have to prove the fraud conclusively before the search: the very purpose of the search is to look for the evidence.

A tax search must be authorised by the liberty and custody judge

The tax authorities cannot decide on their own to carry out a home search.

Each operation must first be authorised by an order of the liberty and custody judge of the court within whose jurisdiction the premises concerned are located.

The order must in particular identify the premises to be searched and the official authorised to carry out the operations, and remind the taxpayer of their right to call on an adviser of their choice.

The judge must give reasons for the decision, setting out the factual and legal elements from which the existence of the fraudulent conduct sought may be presumed.

Examining this order is therefore essential. An irregularity affecting the judicial authorisation may call into question the validity of all the operations carried out on its basis.

2. Tax search at home: how does it unfold and what are your rights?

A surprise intervention that remains subject to precise rules

The search may not begin before 6 a.m. or after 9 p.m. It may, however, continue beyond 9 p.m., as the law sets no maximum duration for the operations.

It begins with the notification of the order to the occupant of the premises or their representative.

The operations take place under the authority and supervision of the liberty and custody judge, who may give any useful instructions, attend in person and, where appropriate, decide to suspend or stop the search.

The occupant of the premises or their representative is in principle present during the operations. If this is not possible, the judicial police officer calls on two witnesses chosen from persons who are not under their authority or that of the tax authorities.

At the end of the operations, the tax authorities must draw up an official report describing how they were conducted, together with an inventory of the documents seized.

These documents must be examined carefully, as they make it possible to check precisely what was seized and under what conditions.

Electronic devices, email accounts, documents on remote servers: the tax authorities have very broad powers of seizure

The tax authorities’ right of seizure is not limited to paper documents.

Officials may seize computer data accessible from the premises searched, including where it is stored on servers located on other premises or abroad.

The items seized do not have to belong to the suspected taxpayer. They may also concern third parties, provided that they are connected with the fraudulent conduct being investigated.

Determining the exact scope of the seizures then becomes a key issue.

Some documents may have been seized even though they are unrelated to the facts covered by the order. Others may be protected by professional secrecy. In such cases, the validity of their seizure may be challenged.

It is, however, strongly inadvisable to obstruct the operations physically.

Obstructing access to computer data may in particular lead to an ex officio assessment of the tax bases for obstruction of a tax audit, under Article L. 74 of the LPF. It also exposes the taxpayer to the fine provided for in Article 1735 quater of the French General Tax Code, equal to 50,000 euros or, if higher, 5% of the additional tax.

The aim is therefore not to oppose the search physically, but to scrutinise the lawfulness of the search as it proceeds and to preserve one’s rights immediately.

3. Challenging a tax search: act quickly

Two distinct remedies are available

Article L. 16 B of the LPF makes it possible to challenge, on the one hand, the order of the liberty and custody judge authorising the search and, on the other hand, the conduct of the search and seizure operations.

These challenges are brought before the first president of the court of appeal and must, in both cases, be lodged within fifteen days. They do not have suspensive effect.

The procedure must therefore be analysed without delay in order to identify any irregularities and preserve the available remedies.

An irregularity may render the items seized unusable

Annulment of the order authorising the search entails the annulment of the operations carried out on its basis. The tax authorities can then no longer use the information gathered to justify reassessments.

Likewise, documents seized that are unrelated to the facts under investigation or in breach of professional secrecy may be excluded and cannot then be relied on against the taxpayer.

A search is, however, only an investigative measure: it does not in itself result in a tax reassessment. That requires a subsequent audit procedure and, where applicable, a reassessment procedure.

The involvement of a tax lawyer makes it possible to examine immediately the validity of the order and of the seizures, to bring the necessary challenges and to anticipate the tax audit likely to follow.

Based in Nice, the Valenor firm assists taxpayers facing a tax search in order to preserve their rights, challenge any irregularities found and prepare their defence against the action the tax authorities may take next.

Our objective is to ensure that the strict framework of the search is respected, to exclude items irregularly seized and to prepare, as soon as the operations end, the taxpayer’s defence against the audit that may follow.

Bruno Gherardi
Tax lawyer in Nice - Cabinet Valenor