The accounting obligations derive from French company law. Their application is also made compulsory by the French fiscal regulations. Thus, according to the French Tax Code, if the accounting rules are not respected the accounts may be considered as having no probative value and the amount of tax payable recalculated by the French tax authorities.
Under the French Penal and Commercial Code, there are significant consequences for business entities who do not comply with the accounting obligations. Both the managers and the legal auditors may be sued in a Court of Law. Sanctions and penalties may also be imposed on these persons. All French business entities (companies and branches) must carry out their bookkeeping according to French accounting principles and methods. Accounting principles are set forth in the Commercial Code pursuant to laws and decrees issued in compliance with the Fourth and Seventh Directives of the EU.
French business entities must keep the following compulsory accounting documents: - A Journal which records all day to day entries during the year, - A General Ledger, showing the detailed entries appearing in each account, - An Annual Accounts Ledger showing annual financial statements and explanatory notes to the balance sheet accounts.
It is permissible to maintain the accounting records by use of computerised systems when this maintenance is in accordance with the legislation in force. According to the Commercial Code (Art. 16), the books of account and the statutory accounts have to be carried out in French, in the language and according to the French Chart of Accounts.
According to the French Tax Code (Art. 54 al. 2), if the books are maintained in a foreign language, a certified translation by a qualified translator must be available on tax authorities request. There is no legal obligation under French law to keep the books in France. Therefore, it is possible to carry out the bookkeeping in a foreign country.
However, in the case of a tax audit, the checks would be performed by the French tax authorities at the headquarters of the company which is where the documents should be kept. Each entry must be supported by a voucher and the link must be easy to make between the entry and the related supporting documentation, i.e. there must be a clear "audit trail". All the entries relating to the cut-off (accrued expenses , bad debt provisions, asset depreciation...) must be justified. They must be listed in a Journal of Sundry operations. According to the legal statutes of limitation, all documents and vouchers must be retained for 10 years. The statute of limitation is reduced to 6 years from a fiscal standpoint.
