Tougher sanctions for non-disclosure of non-French bank accounts and insurance policies

Are you correctly declaring your non-French bank accounts and insurance policies? The penalties for non-disclosure have been reinforced.

Under French law, residents of France have been obliged to disclose details of all foreign bank accounts opened, closed or used during the year.

This is done when you submit your annual tax return, using a separate declaration form. There are penalties for failure to do this. There are similar rules and penalties for non-French life insurance policies.

The French government has recently taken steps to further strengthen its fight against tax fraud. Its new anti-fraud act (loi relative à la lutte contre la fraude – Act no 2018-898) was published in the Official Journal on 24th October 2018.

It extends the disclosure regulations to also cover non-active accounts. You must now declare all non-French bank accounts and life insurance policies, even if you have not deposited any funds, earned any interest/gains or made any withdrawals. The penalties for failing to declare a foreign account are the same whether it is active or not.

The French tax penalties and fines for non-disclosure were also strengthened in 2018, and are now as follows:

• The fine for each undisclosed non-French bank account and/or life insurance policy is €1,500, with no maximum. The statute of limitations is three years.
• If the account is held in a country which has not concluded a tax treaty with France for the purposes of combating tax evasion, the fine increases to €10,000.
• If you cannot provide information on the source of the funds and prove that the funds have already been taxed or were exempt from taxation, they will be considered taxable in France and subject to income tax.
• Any income deriving from the accounts/policies will be taxable in France.
• The tax penalty for late filing, which is assessed on the income, increased from 40% to 80% in 2018. The 80% penalty can normally be avoided if you make a voluntary disclosure.
• Interest for late payment of tax is also imposed at a rate of 0.40% per month (based on income and wealth tax), with no maximum.
• If it is proved that the bank account or life insurance policy was intentionally not-disclosed, the French tax authorities can impose criminal sanctions of €500,000 and five years’ imprisonment.
• The statute of limitations for enquiries into income and wealth tax returns is 10 years (starting in 2009 for bank accounts held in European countries).

The Common Reporting Standard and exchange of information

It is important to double check that you have correctly declared all your overseas accounts and assets as required by French law, and that you have not left any out. International automatic exchange of information is now in full swing under the Common Reporting Standard, with 100 countries around the world participating.

This means that the French tax authorities do not need to have suspicions of non-disclosure and/or to request information – they will automatically receive it each year. With today’s technology it will not take them long to find out about undisclosed assets and income.

Under the Common Reporting Standard, the information being shared about the financial assets you own outside your country of residence includes your name and address, country of tax residence and tax identification number.

The information to be reported about your accounts includes the investment income you earned over the year (interest, dividends, income from certain insurance contracts, annuities etc.), account balances and gross proceeds from the sale of financial assets.

Reporting financial institutions include banks, custodians, certain investment entities, certain insurance companies, trusts and foundations.

Anyone who lives in one country and has assets or earns income in another needs to take care with their tax planning and ensure they are declaring income as required by both country’s laws and paying tax correctly. This can vary from country to country, depending on the particular double tax treaty. Blevins Franks has an in depth understanding of both the French and UK tax laws and the interaction between them, and can help you with your tax planning, using fully compliant arrangements so that you do not pay any more tax than necessary.

Contact us for personalised advice about compliant, effective tax planning in France

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.