Often cited, these three terms are often considered equivalent, even though they cover very different behaviors.
Tax Optimization
It should not raise any difficulties as long as it is essentially a legal mechanism, encouraged by the public authorities, intended to guide the investment of individuals and businesses in exchange for a reduction in their tax burden. Regarding individuals, income tax reductions granted under the Pinel or Malraux schemes perfectly fit this definition. By investing in real estate and increasing the number of housing units in the rental market, taxpayers benefit from a tax reduction.
Tax optimization also involves a taxpayer choosing, between two authorized tax options, the one that will prevent them from paying the most tax. However, this second form of tax optimization must be used with caution to avoid falling into the realm of abuse of rights. This would be the case of a gift disguised as a sale aimed at unduly reducing registration fees.
Tax Fraud
It is of a completely different nature. It involves knowingly violating tax law. It constitutes a criminal offense subject to legal proceedings. The most blatant case would be the failure of an individual to file their income tax return or a business to file its profit or VAT return, or, in the case of filing, the deliberate understatement of their income, profits, or VAT owed. Tax fraud requires the presence of two elements: a material element – the offense – and an intentional element – the intent to commit the offense.
Tax Evasion
It is just as illegal but is likely more subtle than tax fraud. It can involve engaging in complex tax schemes solely aimed at avoiding all or part of the tax liability, or establishing one’s business in a tax haven, which is a country offering more favorable tax conditions than France.
