FEC instructions for use: never fear a tax audit again!

As part of the digitalisation of practices, there is the issue of tax audits. Companies have various obligations to fulfil. One of these is the generation of an FEC, a computerised file listing all accounting entries, to be sent to the tax authorities in the event of an audit.

But what exactly is the FEC, what is it used for and how can it be generated in full compliance? When and how should it be submitted to the tax authorities?

We answer all your questions to make the FEC a simple formality.

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What is the FEC?

What is the FEC used for?

The FEC, or accounting entries file, is a computer document containing all the records in your company's accounting system relating to its commercial activity.

As part of your dematerialised bookkeeping, you may be subject to an audit by the tax authorities. The Directorate General of Public Finances (DGFiP) is likely to send you :

• a notice of accounting verification (check on your company's website),
• or a notice of accounting examination (remote control),

to which you must respond with the FEC. This file must transcribe all the journal entries for the financial years indicated in the notice you received.

☝️ It must also comply with specific standards, in force since 1 January 2014 and updated on 1 January 2017.

Information to be included in the FEC

The accounting entries file must show all existing journals, including retained earnings and inventories, i.e. :

• depreciation entries
• entries for the disposal of fixed assets
• depreciation entries
• inventory entries
• provision entries,
• adjustment transactions.

To help you understand better, here is a list of the specific, standardised fields that must appear in your accounting entries file:

Other fields can be added, such as the payment date and payment method, for example.

💡 Good to know: In the event of unknown data, it is important to leave the fields empty in your accounting entries file (FEC). Do not fill them with zeros or spaces.

Example of an FEC file

Here is an example of an accounting entries file:

FEC: the accounting requirements for compliance

Which companies are affected by the FEC?

The FEC concerns all companies subject to a real tax regime, i.e. those :

• subject to corporation tax (IS) or income tax (IR),
• BIC (Industrial and Commercial Profits),
• BNC (non-trading profits),
• or agricultural.

☝️ Micro-entrepreneurs are the only people who are exempt from the requirement to keep accounting records.

What are the penalties?

If a company fails to submit its FEC, it is liable to a €5,000 fine.

And if the company submits a non-compliant FEC, it is liable to pay 10% of the duties payable by the taxpayer. This 10% is reduced to a minimum of €5,000.

When and how should the accounting records file be submitted?

• In the case of an on-site audit, the accounting records file must be provided to the auditor during the on-site visit in electronic format, on a physical medium: USB key, external hard drive, DVD or CD.
  
• In the case of a remote audit, the company sends the FEC to the auditor within 15 days of receiving the notice of examination by electronic means or by registered post, on a USB key for example.

ℹ️️ The tax authorities have a period of three months in which to carry out the examination, and decide whether or not an adjustment is necessary. If an adjustment is made, the fine is collected.

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Tips for producing a standard FEC

• Generate the FEC at the end of each financial year, at the same time as you file your tax return, whether you are asked to do so or not. As the deadlines in the event of an audit are fairly short, you'll have less stress.
  
  
• Test the conformity of your FEC, i.e. analyse your file before the audit or examination by the auditor. There are tools available for this purpose:
• The DGFiP offers a free software download, Test Compta Demat, to check the validity of your FEC and its compliance with the standards codified in Article A.47 A-1 of the Book of Tax Procedures.
  
  
• The FEC can also be scanned using accounting control software such as Alto 2 to highlight any anomalies. It is important to comply strictly with the format requested, to avoid any risk of a fine for non-compliance of the file.
  
  
• Some accounting and ERP software packages allow you to use a " fog mode" for internal checks. How does this work? Produce "provisional" accounts by entering "provisional" records (and therefore extracting an FEC). This is a good way for the company to check accounting anomalies in advance and correct them.
  
• Make sure you comply with all the possible requirements inherent in the CFCI (tax inspection of computerised accounting):
  • documentation of the information system
  • identification of critical flows
  • data retention, etc.
    
• If you do your own bookkeeping, make sure that your accounting tool is capable of generating the FEC on first request, or that your chartered accountant generates it if necessary. Suitable solutions include:
  • Sage 50cloud Ciel, which complies with legal requirements, is dedicated to VSEs and SMEs. The solution enables computerised accounting to be controlled, the FEC to be generated and the VAT anti-fraud law to be complied with.
  
  
  

To err is human, so entrust your accounting to the right software!

And spend the time you save developing your business, meeting your customers and using the potential of your employees for tasks that generate added value.