A VAT audit is a review, done on your own initiative, of how your business applies VAT in France: classification of transactions, invoicing, returns and deductions. It answers one practical question: would your current practices stand up to a tax inspection?
Carried out before an inspector does it for you, a VAT audit lets you fix errors under good conditions, recover VAT you may have missed and build a prioritised action plan. This article explains when to do one, what it covers, how it runs and what it should deliver.
When should you run a VAT audit?
There is no mandatory calendar: a VAT audit is a voluntary exercise. Some moments call for one more than others, because the risk of error is higher or because the consequences of an anomaly are heavier.
- after a first year of activity in France, to validate the choices made at start-up;
- before a restructuring, sale or acquisition, where VAT is often a point of attention for the buyer;
- when you change invoicing tool or ERP, a classic source of set-up errors;
- when recurring VAT credits appear without a clear explanation;
- after a request for information from the tax authorities.
What the audit looks at
A serious audit goes beyond the returns you filed. It follows each transaction from customer set-up through the invoice to the return.
| Area | Questions asked | Common anomaly |
|---|---|---|
| Transaction flows | Is each type of transaction correctly classified and located (B2B, B2C, goods, services, France, EU, non-EU)? | French VAT charged wrongly, or no VAT without justification |
| Invoices | Do invoices carry the mandatory and specific mentions (exemption, reverse charge)? | Missing exemption wording or customer VAT number |
| Returns | Do reported amounts match the accounts and the EU recapitulative statements? | Gaps between the VAT return, the ledger and EU filings |
| Deductions | Is deducted VAT supported by a compliant invoice and recoverable? | Deduction without a document, or non-recoverable VAT deducted |
| Procedures | Who does what, with which controls? | Reliance on a single person, no review step |
An audit can also pay for itself
Beyond the risks, an audit often brings to light VAT that was never recovered: forgotten deductions, unclaimed credits, refundable foreign VAT. These amounts can be claimed within the legal time limits, so there is little point in waiting.
How a VAT audit runs
Methods differ between firms, but most follow four stages. Sampling keeps the work proportionate: not every invoice is reviewed, but a representative set of your transactions and returns.
The risks of an unexpected inspection
When the tax authorities spot an anomaly, several consequences can follow: a VAT assessment, late-payment interest and, depending on the case, penalties. A few general benchmarks frame the picture.
These benchmarks vary with the nature of the anomaly and the taxpayer’s conduct. Above all they are a reason not to let an error repeat period after period, because it is multiplied by every invoice.
The deliverable: a prioritised action plan
A useful audit is more than a list of anomalies. It should end with an action plan, ranked by priority and risk level, that covers:
- the corrections to make, with their estimated cost;
- the amounts to recover and the steps to obtain them;
- process fixes and changes to system settings;
- the training needed so the error does not come back, for instance by training your teams on VAT.
For the correction itself, the route is often a set of corrective VAT returns filed under good conditions.
How Hanoutax can help
Hanoutax, a French VAT agent (mandataire fiscal) for foreign companies, scopes the review with you, analyses a sample of your transactions and returns, then presents its conclusions and the related action plan. We can then handle the corrections.
Discover our VAT and tax audit and diagnostic service, or start with our quick check. If an inspection is already under way, see our tax audit assistance. For foreign companies, VAT registration in France and VAT returns are two other entry points.
FAQ
Is a VAT audit mandatory?
No. It is a voluntary exercise, separate from a tax inspection carried out by the authorities. It is recommended when your activity changes, after a tool change or when anomalies are suspected, so that errors are fixed before an inspector finds them.
How is it different from a tax inspection?
A tax inspection is started by the authorities, with its own procedures and consequences. A VAT audit is carried out on your initiative by a third party, to shed light on your practices and prepare corrections at your own pace, without the authorities being involved.
Does everything have to be reviewed?
No. The audit relies on a representative sample of your transactions, invoices and returns. If the sample reveals a systemic problem, the scope can be widened on the flows concerned, to measure the extent of the anomaly and estimate the correction.
Can an audit help recover VAT?
Yes. It sometimes uncovers forgotten deductible VAT, unclaimed credits or refundable foreign VAT. These amounts must be claimed within the legal time limits, which is a good reason not to wait too long before running the review.
What does the action plan contain?
It lists the corrections to make and their estimated cost, the amounts to recover, and the process and system fixes, ranked by priority and risk level. It serves as a roadmap for your accounting team, finance department or advisers.
Take stock of your VAT position in France
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Informational content, not legal advice. The rules that apply depend on your situation.
