The principle is as follows : it is entirely legal to hold a bank account abroad provided that it is declared to the French tax authorities.
The French General Tax Code (Code général des impôts, CGI) provides that all taxpayers domiciled in France or Monaco are required to declare bank accounts opened, held, used or closed in a foreign country, failing which they risk being charged with tax fraud.
It is important to understand what lies behind the concepts of domicile, bank account and declaration in order to properly understand the legal rule and know whether or not you are concerned.
Be aware that the tax authorities automatically receive information from foreign banks.
This is the myPOS system of the French tax authorities.
Persons subject to this obligation and the concept of domicile
Two types of persons may be subject to the obligation to declare a bank account held abroad :
- Natural persons, or more simply, private individuals
- Certain legal entities such as associations and non-commercial civil companies (SCI – société civile immobilière, de facto partnerships, joint ownership (indivision), etc.)
If you fall into one of these two categories, this is therefore a first indication of whether you must comply with this declaration obligation. It is not, however, sufficient. You must also be domiciled in France.
Generally, when a person is domiciled in France, they must pay tax there. However, if you are in any doubt as to your domicile, here are some factors that will allow you to determine whether or not you are in fact domiciled in France.
Accordingly, any person is considered to be domiciled in France if they :
- Have the centre of their family interests in France (minor children, for example)
- Or carry on a professional activity in France, unless it is merely ancillary
- Or have the centre of their economic interests in France
- Or stay in France for more than half of the year
Does this obligation apply to all accounts, whatever their nature?
Whatever the nature of the account you hold in a foreign country (current account, savings account, securities account, etc.), it must be declared to the tax authorities in France.
If your account is opened with any body other than a bank (notary, bureau de change, etc.), it must also be declared. Our tax law firm regularly assists taxpayers in procedures of this kind and is able to help you.
Please note that declaring an account held abroad is not mandatory if the following conditions are all met :
- The purpose of the account is to make online payments for purchases or to receive payments relating to sales of goods (example :PayPal)
- The account opened in the foreign country is linked to an account opened in France
- The total annual receipts credited to this account do not exceed €10,000. This threshold is assessed by adding together all receipts relating to online payments for purchases or to receipts from sales of goods.
The link between the taxpayer and the foreign bank account
The declaration obligation applies to all accounts that have a link with the French taxpayer. Accordingly, this obligation concerns all account holders, joint holders, beneficial owners, as well as persons who merely hold a power of attorney over the account.
For example, a foreign account held under split ownership (démembrement) must be declared, separately, by both the usufructuary and the bare owner.
It should also be noted that as soon as you have carried out a single credit or debit transaction on the foreign bank account, you will be regarded under French law as a user of the account and must therefore declare its existence to the tax authorities.
The obligation to declare a foreign account has recently been extended to accounts regarded as inactive. These are accounts on which no transaction, no movement, whether debit or credit, takes place during the year in question. The Law of 23 October 2018 extended the obligation to accounts merely held abroad on which no transactions have been carried out (inactive or dormant accounts).
The Decree of 26 December 2018 set the entry into force of the new obligation at 1 January 2019.
How to declare your foreign accounts ?
In principle, this declaration must be made every year when filing the income tax return (for individuals) or the profit return (for companies or associations), using form 3916 " declaration of an account opened outside France (déclaration d'un compte ouvert hors de France) " or on plain paper (including all the information required by the above form). For individuals, box 8UU of return 2042 must also be ticked.
The number of the account or accounts, their characteristics and the opening and closing dates must be stated in this declaration. However, the account balance and the amounts of income received (capital gains, interest, etc.) must not be included.
What should you do if you have not declared your foreign accounts ?
If you have not declared your foreign accounts on time, that is, when filing your income tax or profit return, regularisation is always possible. It seems preferable to use a professional to prepare your regularisation file and assist you with the process.
This will surely spare you back-and-forth exchanges with the authorities and a drawn-out procedure, and therefore possibly additional penalties.
Moreover, in most cases, it seems advisable to regularise your situation voluntarily rather than waiting for the tax authorities to perhaps one day initiate a tax procedure.
Indeed, the tax authorities are generally more lenient when the taxpayer acts in good faith. In particular, this may reduce the risk of criminal prosecution for tax fraud, which carries penalties of up to €3,000,000 (or twice the proceeds of the offence) and 7 years' imprisonment.
As regards tax penalties, they will be applied to you despite your good faith and voluntary regularisation.
They will, however, be reduced, since the surcharges applied to the tax reassessments relating to the foreign account(s) may, depending on the case, be 40% instead of 80% in the event of contentious proceedings initiated by the tax authorities. In addition, the amount of late-payment interest may, subject to conditions, be halved.
However, the fixed fines will remain at the same amount as in contentious proceedings, namely €1,500 per account per year, and €10,000 per account per year if the account was opened in a country that has not concluded an administrative assistance agreement with France.
Our tax law firm can assist you.
