Retroactive Tax Risk Following Foreign Income Audit
A digital consultant residing in France earned income through a global freelancing platform, under the assumption that it was not taxable in France. After two years, the tax authorities conducted an audit using data from the platform and imposed taxes for previous years, including penalties and interest.
Input Data
- Individual type: Freelancer
- Country of residence: France
- Income source: International freelancing platform
- Assumption: Foreign income not taxable in France
Jurisdiction Conflict
Country of registration — The individual is registered as a resident in France, which requires declaring worldwide income.
Country of effective activity — Despite earning through a foreign platform, the individual's operations and presence are primarily in France.
Conflict — The assumption that foreign-sourced income is exempt from French taxation creates exposure, as France taxes residents on global income, and data sharing agreements facilitate detection of undeclared earnings.
AI Analysis
Scenario A — Misinterpretation of Tax Law
- The tax authority interprets residency and income criteria strictly, requiring declaration of all income.
- Consequences include back taxes, penalties, and interest for undeclared income.
- Risk: High risk of financial penalties due to non-compliance.
Scenario B — Platform Data Sharing
- Platforms share user data with tax authorities under international agreements.
- Consequences include increased scrutiny and potential audits.
- Risk: Medium risk of audits due to data sharing practices.
Scenario C — Assumption of Exemption
- Assuming foreign income is exempt leads to non-declaration.
- Consequences include unexpected tax liabilities and legal challenges.
- Risk: Significant risk from misunderstanding tax obligations.
Key risk indicators
- Undeclared foreign income
- Physical presence in France exceeding 183 days
Output of Richys AI Analysis
- AI assesses high exposure due to data sharing and residency status.
- AI matches facts with tax authority's criteria for global income taxation.
- AI highlights need for expert guidance to navigate complex tax obligations.
Expert Boundary
Involvement of a verified EU expert is required for:
- country-specific interpretation of the center of vital interests
- application of international tax agreements to specific cases
- selection of a defensible filing position
- preparation for potential tax authority inquiries
Case Conclusion
Tax authorities observe undeclared income from international platforms. Assumption that foreign income is exempt is false. Mismatch between assumed and actual tax obligations identified. Risk becomes material when data sharing uncovers non-compliance.
Start case analysisThis case is for illustration purposes only. Real outcomes depend on residence, income structure, documents and timing. For your specific situation, use structured case analysis with AI and verified EU experts.
Mathieu Fiscalis
AI assistant – Taxes & Cross-Border Tax