TLDR: Yes, the cascade deduction can apply in case of correction resulting from desk audits, provided that the correction arises from a documentary check and that the taxpayer submits an explicit request for the allocation of the additional tax.
General principle
The cascade deduction is a mechanism that places the taxpayer in the position they would have been in had they committed no offence. It applies in particular in cases of correction of the company's declarations.
Application to desk audits
The cascade deduction can be applied when the correction results from desk audits, i.e., a documentary check. This includes the examination of the declaration and supporting documents, possibly supplemented by information obtained from the taxpayer.
Specific conditions
For the cascade deduction to apply in this context, two conditions must be met:
- The correction must arise from a documentary check.
- The taxpayer must submit an explicit request aimed at obtaining the allocation of the additional corporate tax for the assessment of taxes due as a result of the distribution.
Concrete example
A typical case is when the examination of the declaration and supporting documents leads to the reinstatement in the results subject to corporate tax of expenses considered as distributed income. In this case, the cascade deduction can be applied subject to the conditions provided for in Article L. 77 of the Book of Tax Procedures (LPF).
Legal framework
Article L. 77 of the LPF governs the conditions for payment and the taxpayer's request for the allocation of the additional tax. This framework is essential to ensure the validity of the cascade deduction.
Compatible procedures
The cascade deduction is compatible with correction procedures resulting from desk audits, provided that the additional taxes have been assessed following an effective verification.
Limits and precautions
The cascade deduction does not apply automatically. It requires an explicit request from the taxpayer and compliance with legal conditions. Furthermore, it can only be applied if the corrections are based on concrete elements arising from the documentary check.