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6.1.1. General

It is important to point out the specific tax accounting rules which must be followed in connection with the determination of the net taxable income of companies subject to French corporate income tax. Companies engaged in commercial activities in France are required to keep a journal ("livre journal") in which all transactions are posted on a daily basis.

Each year, the company must also prepare an inventory of its assets and liabilities, close its accounts as well as prepare a balance sheet ("bilan"), income statement ("compte de résultats") and various exhibits ( "annexes") providing additional information.

The balance sheet and income statement must be entered in the company’s balance sheet book ("livre d’inventaire") and general ledger ("grand livre"). The balance sheet book must be kept chronologically without blanks or erasures on special paper which is numbered and initialed by a judge or other government official; such records must be retained for ten years.

The corporate taxpayer must file a corporate income tax return each year based on its balance sheet and income statement (Arts. 53A and 223 of the CGI). Such tax return must be accompanied by a copy of its balance sheet, income statement and, in addition, a detailed statement of the deductions, exemptions and adjustments claimed in calculating net taxable income. Supporting documents such as invoices, receipts and the payroll register ( "livre de paie") on the basis of which net taxable income is calculated need not be filed with the tax return, but must be preserved; in the event of an audit, they must be submitted to the tax administration.

In the event that a corporate taxpayer fails to keep or produce the aforesaid accounting records, or where such records contain gross and repeated inaccuracies, errors or omissions, the tax administration is entitled to recalculate the amount of the taxpayers’ profits or annual turnover and assess tax thereon. Listed corporations must, under certain conditions, prepare their consolidated accounts in conformity with International Accounting Standards.