TLDR: Cascading deduction is not allowed in case of separate verification of turnover taxes (VAT and similar) and income tax or corporate tax, unless the verification of turnover taxes has been completed before that of income taxes. The taxpayer may request the extension of the verification to all taxes to benefit from it.
General principle of cascading deduction
Cascading deduction allows the offsetting of additional turnover taxes against the results of the verified financial years, as if these taxes had been regularly paid. This mechanism aims to place the taxpayer in the position they would have been in without the infringement.
Cases of separate verifications
In case of separate verification of turnover taxes and income tax or corporate tax, cascading deduction is only allowed if the verification of turnover taxes has been completed before that of income taxes. This restriction is not systematic, but the tax administration may apply it in case of prescription risks.
Possibility of extending the verification
A taxpayer subject to a verification limited to turnover taxes or income taxes may request the extension of this verification to all taxes. This may allow them to benefit from cascading deduction.
Conditions and limits
Cascading deduction does not apply automatically in the absence of a complete and prior verification of turnover taxes. The taxpayer must act proactively to align the verifications and access the benefit.
Exclusions and clarifications
Cascading deduction only concerns additional simple duties, excluding penalties. It is also excluded for VAT reminders relating to self-assessment operations.
Role of the tax administration
The tax administration may refuse cascading deduction if prescription risks prevent drawing consequences for the income tax assessment. However, this restriction should not be applied systematically.