Criminal tax law

Understanding the tax. Mastering the investigation. Defending intent.

A tax reassessment concerns the tax.

A prosecution for tax fraud concerns a behaviour.

The distinction is essential. A reporting error, a difference of interpretation or a reassessment, even a large one, is not enough to establish criminal fraud. There must also be proof of an intention to evade the assessment or payment of tax.

Yet the two procedures are closely linked.

Documents handed over during a tax audit can feed into the criminal investigation. Answers given to the tax inspector can later be used against the director. Penalties applied by the tax authorities can trigger a referral to the public prosecutor. Finally, an investigation for tax fraud can extend to money laundering, forgery, misuse of corporate assets or other related offences.

Vouland Avocats assists companies, their directors and private individuals at every stage of this criminal exposure: sensitive tax audits, referral to the public prosecutor, tax searches, interviews, police searches, investigations, judicial investigations and trials.

The reassessment looks at what should have been declared. The criminal trial must still determine who knew, who decided and who intended to defraud.

Two procedures. One strategy.

Tax litigation and criminal litigation each retain their own rules, courts and purposes.

The tax judge determines in particular:

• the existence and amount of the tax;
• whether it was lawfully assessed;
• whether the reassessments are well founded;
• the application of late-payment interest and tax penalties.

The criminal judge, for their part, must determine:

• whether the constituent elements of an offence are present;
• whether the conduct alleged was intentional;
• to whom the facts can be attributed;
• whether the fraud is serious enough to justify a criminal conviction;
• what penalties, confiscations and additional measures, if any, should be imposed.

These two sets of proceedings must not be conducted separately.

A position taken before the tax authorities can have criminal consequences. Conversely, a tax challenge based on a mere discussion of the tax base does not necessarily answer an accusation concerning the methods used or the taxpayer’s intent.

Our role is to build a joint defence, in coordination, where necessary, with the tax adviser, the chartered accountant and the company’s other professionals.

When a tax audit becomes a criminal matter

Since the Law of 23 October 2018 on combating fraud, certain cases meeting the criteria of Article L. 228 of the Book of Tax Procedures (LPF) must be reported to the public prosecutor.

This referral depends in particular on the amount of tax reassessed and the application of certain tax surcharges. For cases not subject to mandatory referral, the tax authorities may still file a complaint after a favourable opinion from the Tax Offences Commission, under the conditions set out in the same article.

A referral is not a finding of guilt.

It opens a new phase in which the public prosecutor decides what action to take and investigators look for the material and intentional elements of any offences that may be prosecuted.

This development makes criminal anticipation necessary from the audit stage onwards when several indicators appear:

• proposed application of a 40%, 80% or 100% surcharge;
• a high amount of tax reassessed;
• suspicion of an undeclared business or a concealed permanent establishment;
• repeated failure to file returns;
• accounts, structures or flows located abroad;
• use of intermediary companies or persons;
• fictitious invoices or irregular accounts;
• alleged organisation of insolvency;
• questions about the beneficial owner of the transactions.

Criminal risk therefore does not always begin when investigators issue a summons. It can appear much earlier, in the proposed reassessment and in the exchanges that precede it.

Tax fraud: a deliberate act

Article 1741 of the French General Tax Code (CGI) punishes fraudulently evading, or attempting to evade, the assessment or payment of tax.

The provision covers in particular:

• deliberately failing to file a return;
• deliberately concealing sums subject to tax;
• organising insolvency;
• manoeuvres designed to prevent collection;
• any other fraudulent means of evading tax.

In its currently applicable version, the offence is punishable by five years’ imprisonment and a fine of €500,000, which may be increased to twice the proceeds of the offence. Penalties are increased in certain circumstances, in particular in the case of an organised gang or the use of foreign accounts, intermediary structures, false identities or fictitious tax domiciliation. Article 1741 CGI, version in force since 15 June 2025.

But the existence of evaded tax is not enough.

The prosecution must also show that the omission, concealment or manoeuvre was deliberate.

The defence then focuses on concrete questions:

• who held the tax information?
• who was responsible for preparing or approving the return?
• what information was passed on to the chartered accountant?
• what interpretation was adopted at the time?
• was the director aware of the obligation that was breached?
• was there a genuine and sufficiently precise delegation?
• was the error repeated, concealed or corrected?
• were the disputed flows identified in the accounts?
• what warnings were given, and to whom?

The criminal case is therefore not just about the amount of the reassessment. It must reconstruct the flow of information and decision-making.

The chartered accountant does not make liability disappear

Bookkeeping or the preparation of returns may be entrusted to a professional.

However, this does not automatically exonerate the taxpayer or the director from liability.

In a judgment of 13 March 2024, the Criminal Chamber of the Court of Cassation held that awareness of not filing the required returns could establish the intentional element. It also required the judges to examine the existence, validity and scope of the delegation of responsibility relied on by the defendant. Cass. crim., 13 March 2024, no. 23-80.255.

The question is therefore not just whether a chartered accountant was involved.

It is necessary to examine:

• the exact scope of their engagement;
• the documents provided to them;
• any information withheld or incomplete;
• requests for approval sent to the client;
• anomalies reported;
• the role retained by the director;
• the decisions taken after an irregularity was discovered.

The delegation must be proven. Its scope must be assessed concretely.

Tax fraud and money laundering: two separate charges

Tax fraud is frequently accompanied by prosecution for money laundering.

Money laundering may be alleged where a person facilitates the false justification of the origin of assets or income derived from an offence, or takes part in an operation to invest, conceal or convert its proceeds.

The perpetrator of tax fraud may also be prosecuted for laundering their own proceeds where separate acts of concealment, investment or conversion are established.

A money-laundering charge profoundly changes the case:

• it broadens the acts and periods examined;
• it may concern other persons or companies;
• it exposes the defendant to asset investigations;
• it increases the risk of seizure and confiscation;
• it may open the door to more intrusive investigative techniques;
• it allows a fine of up to half the value of the assets or funds concerned.

Simple money laundering is punishable by five years’ imprisonment and a fine of €375,000. Aggravated money laundering is punishable by ten years’ imprisonment and a fine of €750,000, in particular when committed habitually, by using the facilities provided by a profession or as part of an organised gang. Articles 324-1 to 324-3 of the French Criminal Code.

The defence must then distinguish between:

• the amount of tax allegedly evaded;
• the proceeds that may have been derived from the fraud;
• the assets or funds involved in the alleged laundering operations;
• the acts constituting the fraud;
• subsequent transactions that may be classified as a separate offence.

Tax search and criminal search: do not confuse the remedies

The tax authorities may, under certain conditions, carry out a search and seizures on the basis of Article L. 16 B of the Book of Tax Procedures.

This operation must be authorised by the liberty and custody judge. The authorisation order and the conduct of the operations may be challenged before the first president of the Court of Appeal under the conditions and within the time limit laid down by the provision. Article L. 16 B LPF.

This tax search must not be confused with a search carried out as part of a criminal investigation.

The authorities, legal bases, powers and remedies are not the same.

It is necessary to identify immediately:

• the provision on which the operation is based;
• the authority that authorised it;
• the premises and documents targeted;
• the persons authorised to take part;
• the time limits for challenging it;
• the documents and data seized;
• the conditions under which the operations were carried out.

Certain challenges relating to a tax search fall exclusively within the jurisdiction of the first president of the Court of Appeal. They cannot be postponed until the criminal trial.

Irregularities in the tax audit before the criminal court

Not all irregularities that may affect the tax procedure lead to the annulment of the criminal proceedings.

The criminal court’s review of the preliminary administrative operations is limited. Case law distinguishes in particular between irregularities that affect the very possibility of bringing a prosecution and those that concern only the tax assessment procedure.

The strategy must therefore avoid two mistakes:

• abandoning a tax challenge in the belief that the criminal court will necessarily be able to take it up;
• raising before the criminal court an argument that should have been brought before another court or within a specific time limit.

The available remedies must be mapped out from the outset:

• tax claims and tax litigation;
• appeals against a tax search;
• challenges to acts of the criminal investigation;
• applications for annulment during the judicial investigation;
• substantive arguments before the criminal court.

Can a tax discharge prevent a criminal conviction?

In principle, the criminal court is not bound by every decision taken in the course of tax litigation.

Case law nevertheless recognises a particular consequence of a final decision discharging the taxpayer from the tax on substantive grounds: in certain configurations, a criminal conviction for concealing the same sums in respect of the same tax can no longer be handed down.

This rule must be applied with precision.

A discharge relating to another tax, another person, another period or a mere procedural ground does not necessarily have the same effect. Nor are omissions to file and concealments always subject to the same reasoning.

Each correspondence must therefore be checked:

• identity of the taxpayer;
• tax concerned;
• tax period;
• sums concerned;
• grounds for the discharge;
• facts prosecuted under criminal law.

Tax penalties and criminal sentences: a regulated combination

The same situation may lead to the application of tax penalties and to a criminal conviction.

Under French law, the ne bis in idem principle does not prohibit every combination of these two categories of sanctions. The Constitutional Council and the Court of Cassation have, however, placed limits on such combinations.

Criminal prosecution must be reserved for the most serious cases. This seriousness may result in particular from:

• the amount of tax evaded;
• the nature of the conduct;
• its repetition;
• the circumstances in which it occurred;
• the use of particularly elaborate methods.

The criminal court must give reasons for this seriousness when it is disputed. It must also ensure, under the conditions laid down by case law, that the overall tax and criminal sanctions are proportionate.

The Court of Cassation clarified these requirements in several judgments of 11 September 2019, including appeal no. 18-81.067. Court of Cassation, 11 September 2019, no. 18-81.067.

This discussion therefore concerns not only guilt.

It also concerns the necessity and proportionality of the criminal response.

Seizures, confiscations and consequences for assets

Tax fraud and money-laundering investigations frequently have an asset-related component.

Seizures may concern:

• bank accounts;
• real estate;
• company shares;
• vehicles;
• receivables;
• life insurance policies;
• crypto-assets;
• assets freely available to the person being prosecuted.

The defence must act quickly to check:

• the legal basis for the seizure;
• the link between the asset and the offence;
• the valuation of the alleged proceeds;
• the rights of third-party owners;
• the proportionality of the measure;
• the time limits and procedures for appeal;
• the consequences of the seizure for the company’s business.

A criminal tax case is therefore not only about a future sentence. It can immediately affect cash flow, assets and business continuity.

The State as civil party and compensation for loss

The tax authorities may take part in criminal proceedings under the conditions laid down in the Book of Tax Procedures.

However, the loss corresponding to the evaded tax is not intended to be compensated a second time through an award of damages: recovery of the tax, late-payment interest and surcharges fall under the tax regime.

Where there are joint prosecutions for tax fraud and money laundering, a separate loss resulting from the laundering may be claimed. The judges must then take care not to include in the compensation the loss corresponding to the tax fraud alone.

The Criminal Chamber reiterated this in its judgment of 29 January 2020, no. 17-83.577.

How we can help

Vouland Avocats acts in particular in cases concerning:

• failure to file VAT, corporation tax or income tax returns;
• concealment of revenue or business activity;
• fictitious expenses and irregular invoicing;
• disputed permanent establishment or tax residence;
• accounts, companies or flows located abroad;
• alleged organisation of insolvency;
• aggravated tax fraud;
• laundering or self-laundering of tax fraud proceeds;
• criminal liability of the director, de facto manager or legal entity;
• proceedings against advisers or professionals involved in the transactions;
• tax searches, police searches and asset seizures;
• the combination of tax and criminal penalties.

Where the case so requires, we coordinate the criminal defence with the tax lawyers, chartered accountants and financial specialists handling the tax litigation.

A criminal lawyer’s method

1. Understand the tax

Identify the reporting obligation, the calculation method, the sums in dispute and the exact nature of the reassessment.

2. Reconstruct the decision

Determine who held the information, who prepared the returns, who approved them and what warnings had been given.

3. Separate error from fraud

Compare the tax interpretation, accounting practices and decisions taken with the elements relied on to establish intent.

4. Review the procedure

Identify the remedies specific to the tax audit, the tax search, the criminal investigation and seizures.

5. Manage the risk to assets

Assess the penalties already imposed, the seizures, the confiscations incurred and the proportionality of the combined sanctions.

Criminal tax law is not just a law of figures. It is a law of decisions, intent and evidence.

Criminal tax law — Marseille and Paris

Vouland Avocats has offices in Marseille and Paris and acts throughout France.

Are you facing a tax audit that may lead to criminal proceedings, a referral to the public prosecutor, a tax search, an interview or a prosecution for tax fraud or money laundering?

Frequently asked questions

Does a tax reassessment automatically lead to criminal prosecution?

No. Certain cases meeting the criteria of Article L. 228 of the Book of Tax Procedures must be reported to the public prosecutor. In other cases, the tax authorities may file a complaint under the conditions laid down by that provision. It is then for the public prosecutor to decide what criminal action to take.

Does a 40% penalty always lead to referral to the public prosecutor?

No. Article L. 228 combines several criteria, relating in particular to the amount of tax and the nature of the surcharges. The 40% surcharge is not always sufficient on its own. Article L. 228 LPF.

Does entrusting one’s returns to a chartered accountant rule out tax fraud?

No. The chartered accountant’s involvement must be examined concretely: the content of their engagement, the information received, the warnings given and the decision-making power retained by the taxpayer or director.

Can one be penalised under both tax law and criminal law for the same facts?

Yes, under certain conditions. Combining tax penalties and criminal sentences is permitted, but regulated by the requirements of seriousness and proportionality laid down by the Constitutional Council and the Court of Cassation.

Can tax fraud be combined with money laundering?

Yes, where separate operations to invest, conceal or convert the proceeds of the fraud are established. The perpetrator of the fraud may, under certain conditions, be prosecuted for laundering their own proceeds.

Can a tax search be challenged before the criminal court?

Appeals against the authorisation and conduct of a search based on Article L. 16 B LPF fall within the jurisdiction of the first president of the Court of Appeal, under the conditions and within the time limits laid down by that provision. There is therefore no point in waiting for a possible criminal trial.

Does the cancellation of a tax reassessment automatically lead to an acquittal?

No. Everything depends on the grounds for the decision, the tax, the period, the taxpayer and the facts prosecuted. A final discharge granted on substantive grounds may have particular consequences, but not every tax annulment automatically puts an end to the criminal prosecution.