Roche & Cie

Is it illegal to own a bank account abroad ?

18 Feb 2016

Holding a bank account abroad is not illegal in itself: it is possible to place money outside France, with certain conditions. It is the concealment of assets to the tax authorities that constitutes fraud.

When an account is declared, the tax authority is aware of the situation of the taxpayer, and the tax is calculated based on it. But if it is not declared,  we enter the field of tax evasion. In this case, the fraudster faces a penalty and a fine.

Criminal penalties are also possible, but they are reserved for the most serious cases, at the discretion of Bercy. The services of the Ministry may also pass transactions with fraudsters wanting to regularize their situation. The cost of tax evasion is estimated at over 30 billion euros per year, according to a Senate report.

What to declare

Article 1649 A of the General Tax Code (CGI) stipulates the obligation to declare a foreign account for individuals, associations and non-commercial companies. These provisions apply only to persons resident in France. This is an annual statement  and takes place at the same time as that on income and earnings.

What are the penalties for not reporting ?

The penalties for fraudsters are on a tax and criminal level.

Tax penalties

A tax penalty for inaccuracies or omissions EUR 1 500 in general cases and EUR 10 000 if the account is held in a state that has not signed an agreement with France to fight against the tax evasion. For accounts whose balance equals or exceeds EUR 50 000, the fine is higher. It amounts to 5% of the amount and applies for each year in which the offense is proved.

The tax due is increased by 40%. For example, if a taxpayer within the rules, had to pay 1000 euros on undeclared assets, it will have to pay 1400 euros in case of proven fraud.

Interest of 0.4% per month of delay, calculated on the amount due, as mentioned in Article 1727 of the CGI.

The taxpayer will have to pay taxes and penalties for each year experiencing fraud to a maximum of ten years. This is what is called the recovery time.

Penal sanctions

The fraudster is liable to seven years imprisonment and 2 million euro fine. These proceedings require a deposit of complaint administration after assent of the Tax Offences (this is called the “lock Bercy”). About a thousand complaints for the most serious cases are filed each year since 2012.

Is regularization possible without penalties ?

Yes, when it is committed by the heirs of a dead person. But if – and when – a tax evader is to repent before the tax authorities discovered his situation, he does not escape the penalties. These can however be mitigated. This is what happens in the context of the “drunk tank” set up at the Ministry of Finance in recent years.

The operating rules were set by a circular Bernard Cazeneuve 21 June 2013. In this case, the administration considers the spontaneous nature of the process and pass a transaction with the person concerned. The rate of increase of 40% is reduced and the fine is capped.

The administration distinguishes between two situations:

Said fraudsters assets (assets consist residing in France), for which the rate of increase is 30% and the fine capped at 3% of the value of assets;

Said fraudsters liabilities (assets received as part of a legacy assets consist residing outside France), for which the rate of increase will be 15% and the fine capped at 1.5% of the value of assets.

Fraudsters wish to be regularized also have a criminal amnesty. The administration undertakes no prosecution is brought against them.

These corrective statements constitute a windfall of money for the state: he has recovered 1.9 billion euros in 2014 and 2.6 billion in 2015, tax revenues from these adjustments have yet to reach 2.4 billion.

For more information : Cabinet Roche & Cie, Chartered Accountant in Lyon, France.