The fight against tax fraud remains a priority for the administration. Among its most powerful tools is the qualification of "occult activity," which allows for the taxation of a taxpayer even if they have not declared any income. This concept, often misunderstood, is of great importance for start-up leaders, entrepreneurs, and investors: its application is not limited to professionals operating in the underground economy but can target anyone who has received undeclared sums, even outside of a structured commercial activity.

In a recent case judged by the Bordeaux Administrative Court of Appeal (CAA) on April 23, 2026 (n° 24BX00010), the administrative justice firmly reminded of the very broad scope of this notion. This decision provides an opportunity to assess the risks associated with the qualification of "occult activity" and the best practices to adopt to protect oneself from it.

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Recent Jurisprudence Expanding the Notion of Occult Activity

In this case, the tax administration applied an ex officio taxation to a taxpayer who had received significant sums from an elderly and dependent couple: designated as the beneficiary of a life insurance policy, sale in life annuity without a bouquet or rent, etc.

In total, the adjustment amounted to €452,997 in rights and penalties, with an 80% increase for occult activity.

Notably, the individual concerned did not engage in any declared professional activity, neither commercial nor liberal. However, the court ruled that these sums could be considered as income from an occult activity, even if no criminal offense (embezzlement, fraud, theft) was established.

In other words, the mere fact of not declaring received income can be sufficient to characterize an occult activity.

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Legal Foundations of Ex Officio Taxation

Legal Framework

Article L. 169 of the Tax Procedure Book (LPF): it provides for a ten-year recovery period for occult activities, compared to three years in principle.

Article 1728 c of the General Tax Code (CGI): allows for the application of an 80% increase when the taxpayer has not declared an activity revealed later.

This severity is explained by the legislator's desire to sanction the lack of tax transparency, regardless of the cause.

An Extensive Interpretation by Jurisprudence

Jurisprudence has consistently broadened the scope of the notion.

In a landmark ruling (CE, December 7, 2015, n° 368227), the Council of State clarified that occult activity does not require a professional character: it is sufficient that the taxpayer has not declared anything to the business formalities center or the commercial court registry, and that they have derived income from an economic activity, even occasional or atypical.

Administrative courts of appeal have confirmed this approach (notably Nantes, March 14, 2024, n° 22NT01546), considering that sums received under abnormal conditions — even comparable to forced gifts — could be linked to an occult activity.

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Occult Activity or Deliberate Default: An Essential Distinction

The administration distinguishes two levels of severity:

Deliberate default, sanctioned by a 40% increase, applies when the taxpayer has intentionally omitted a known income declaration.

Occult activity, sanctioned by 80%, implies a total absence of declaration and a concealment of the very existence of the activity.

The case of Lyon (CAA, April 23, 2026, n° 24LY02697) illustrates this distinction: sums received by checks under €5,000 resulted in only a 40% increase, as the administration did not demonstrate a true occult activity.

For entrepreneurs, this difference is crucial: in the event of a control, the line between a simple declarative error and concealment of activity can double the penalties.

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Combined Fiscal and Criminal Risks

Fiscal Consequences

The qualification of occult activity leads to:

ex officio taxation without prior formal notice;

an extension of the recovery period to ten years;

an 80% increase on evaded rights;

and possibly late payment interest.

Such a situation can jeopardize the cash flow of a young company or compromise an entrepreneurial project, especially when a restatement of accounts is required for several fiscal years.

Criminal Risks

In parallel, certain situations may fall under abuse of weakness (Article 223-15-2 of the Penal Code), punishable by three years of imprisonment and a €375,000 fine.

Again, the accumulation of fiscal and criminal prosecutions remains possible, hence the necessity for legal support from the first exchanges with the administration.

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Preventing the Risk of Occult Activity for Innovative Companies

For start-ups and growing companies, several precautions are essential:

1. Declare any economic activity, even ancillary: a simple omission of declaration to the Business Formalities Center can suffice to characterize an offense.

2. Trace incoming financial flows: subsidies, partner contributions, advances, or donations must be justified and documented.

3. Secure intragroup agreements: in a context of internal financing or cross-service provision, the absence of formal invoicing can be interpreted as concealment.

4. Engage a dedicated legal advisor: a business law attorney or corporate tax expert can audit the compliance of operations and anticipate risks during a control.

Good fiscal governance is a real asset for investors and a strong signal of transparency and maturity of the company.

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Legal Support, a Lever for Security and Performance

At PRAX Avocats, we support start-ups, SMEs, and leaders in the preventive management of fiscal and legal risks: compliance of structures, securing flows, reviewing agreements, or preparing for tax audits.

Our approach is based on five pillars: expertise, innovation, proximity, tailored support, and pragmatism.

We also work with partner firms ("Best Friends") in social law, intellectual property, and complex contracts, to provide comprehensive coverage of our clients' legal issues.

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In Conclusion

Recent jurisprudence reminds us that an undeclared activity — even outside any professional framework — can be requalified as occult activity, with considerable financial consequences.

For leaders and founders of start-ups, this is a warning signal: knowledge of tax rules and rigorous declaration are not mere formalities, but a strategic protection.

Contact PRAX Avocats, specialists in French and international taxation as well as business law, to assess your risks, anticipate a control, and build a solid compliance strategy.

On the aspects of social law, intellectual property, or complex contracts, we collaborate with our "Best Friends" partner firms to offer comprehensive and tailored support to our entrepreneurial clients.

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Article written on May 6, 2026, by PRAX Avocats — your legal partner for safe innovation.

Occult activity and taxation: understanding the risks of an automatic tax assessment.