Statute of limitations on the filing of claims to obtain the CIMR for 2019 income, justified by a one-time increase in business activity.

At the end of each calendar year, we at invite our clients to file claims to obtain a refund of taxes wrongfully assessed before they become time-barred. The statute of limitations for tax matters is, in most cases, set for December 31.

The filing of a claim regarding a dispute by executives and independent contractors who were unable to take full advantage of the “blank year” for their 2018 income due to a surge in business activity for that year alone is relevant.

As a reminder, the “tax-free year” or CIMR ( ) was intended to waive the tax on non-exceptional income for taxpayers in the “ ” category. To prevent potential abuse, the CIMR applicable for the 2018 tax year was capped at the higher of the incomes reported for the years 2015, 2016, and 2017. A supplemental CIMR was then automatically applied to income for 2019 if that income was higher than the income reported in 2018 (total supplemental CIMR) or, conversely, more higher than the income for 2015, 2016, and 2017 (partial supplemental CIMR).

In the absence of an additional CIMR for 2019, the taxpayer has the option to file a contentious claim regarding 2018 income by proving that the one-time increase in their reported net income for 2018 was related to an increase in business activity.

In the absence of specific provisions regarding the procedures governing this claim, we consider that it should be filed for the 2018 tax year, since it was for that year that the tax assessment was issued and not rescinded by the CIMR, and also because the evidence of the increase in business activity pertains solely to that year.

Consequently, pursuant t , the general statutory time limits (Art. R*196-1 of the Book of Tax Procedures) apply, the deadline for filing a claim expires on December 31, 2021 (i.e., December 31 of the second year following the collection notice issued in September 2019 regarding the 2018 income tax). This position is also shared in specialized tax law journals (see Feuillet Rapide Fiscal Social 50/21—published on December 2, 2021).

However, the tax administration—and in particular the National Directorate for Tax Audits (DNVSF), considers that disputed claims regarding the granting of a tax credit for the year 208 based on a one-time increase in business activity must be filed in connection with 2019 income (2020 tax assessment notice). Consequently, according to the tax authorities, the statute of limitations for these claims would be December 31, 2022 (decision in the link)

From a technical and legislative- perspective, we do not agree with this analysis, since the 2020 notice of assessment for tax collection based on 2019 income was issued in accordance with the law and the taxpayer was not eligible for a partial or full additional tax credit.

This position would, by , also have adverse consequences for the taxpayer, particularly in the event that the tax authorities challenge the CIMR for the year 2018. The taxpayer would then have to pay the assessment for the year 2018 and then file a claim for the year 2019. Any potential offset would be ruled out since these are two separate tax years ; the taxpayer would therefore risk incurring a tax burden , particularly due to the penalties and late payment interest applied.

In any case, as a precautionary measure, we believe these claims should be filed by December 31, 2021, especially since the tax authority’s position has not been officially published in a manner that is legally binding.