Review of an individual’s overall tax position: a more tightly regulated procedure

The review of an individual’s overall tax position (examen de l’ensemble de la situation fiscale, EESF) lets the tax authorities check whether declared income is consistent with the taxpayer’s spending and cash holdings. The Finance Act (Loi de Finances) 2024 rewrote the procedure (articles 29 and 216 of the General Tax Code, CGI). The new rules apply to reviews opened since 1 January 2024.

What the tax authorities can examine

The authorities can assess an individual’s overall annual income on the basis of:

• the cash held in their bank accounts, or in the accounts of a connected person where they are the beneficial owner;
• their spending, as defined in article 29 of the CGI. This includes purchases of non-business movable or immovable property, personal expenses of all kinds, and expenses paid on behalf of ascendants or descendants, a spouse or other relatives.

They can also automatically assign a tax identifier to an unregistered person and assess their income. The place of taxation is then the address on their identity card or residence permit.

The procedure, step by step

1. Notice of review. The tax authorities serve a notice stating the period under review, together with the taxpayers’ charter. If the notice or the charter is missing, the reassessment procedure is void.
2. Request for explanations. You have 30 days to explain the discrepancies identified and provide supporting documents.
3. Maximum duration. The review cannot last more than six months from the notice. Suspensions linked to information requests sent to foreign tax authorities are not counted, up to 180 days. You must be informed within 15 days.
4. Oral, adversarial discussion. Before closing the review, the authorities hold a discussion on the comparison data. Any well-founded observations are taken into account.
5. Notification. Within three months of closing the review, the authorities notify the items they have retained. This letter is the only document that sets the reassessments.
6. Reply. You have 30 days to reply. If you agree, the tax is issued by assessment roll. If you disagree, the procedure continues under the usual rules, with the option of referring the case to the appeal commissions.

Once a period has been reviewed, it cannot be reviewed a second time. Serving the notice does, however, interrupt the limitation period.

How it fits with a tax audit of the accounts

For a professional, an EESF can run alongside a tax audit of the accounts. The CGI makes clear that analysing returns, or information obtained under the right of disclosure, does not mark the start of a review. The authorities can examine financial accounts used for private or business purposes without this amounting to an audit of the accounts, and each procedure can draw on the findings of the other.

Assessed income of unexplained origin is subject to personal income tax (IR) as business income (article 30-4° of the CGI). It gives rise to neither VAT (TVA) nor professional tax (taxe professionnelle).

An example

An executive declares an annual salary of MAD 300,000. He buys a flat for MAD 2.5 million paid in cash and makes substantial transfers to relatives. The tax authorities serve him a notice of review covering three years.

He accounts for part of the funds with a registered family gift and an inheritance, and produces the deeds. The rest of the gap, which remains unexplained, can be assessed as taxable income. Preparing your supporting documents carefully as soon as you receive the notice greatly reduces the risk.

How to prepare

• Keep evidence of where your money comes from: deeds of gift or inheritance, loan agreements, asset sales, old bank statements.
• Document significant family transfers, in both directions.
• Reply on time, in writing, with reasoned arguments and the supporting documents attached.
• Prepare for the oral discussion: this is your chance to raise the points the authorities have not taken into account.
• Consider the 2024 voluntary disclosure scheme: until 31 December 2024, it allows assets and spending to be regularised for a 5% contribution, even during a review already under way, subject to conditions.

Our Tax & legal team supports individuals and business owners at every stage of a review, from replying to the notice through to appeals. To discuss your situation, contact us.