Regularization of foreign bank accounts

Regularisation of financial assets held abroad

Pursuant to the provisions of French domestic law, any taxpayer domiciled in France for tax purposes who has bank accounts abroad or who has taken out a life insurance or capitalization contract with an institution located abroad is required to declare its opening, existence or closure each year to the Tax Administration.

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These provisions apply not only to ordinary savings and securities accounts, but also to the salary accounts of cross-border workers as well as those relating to a 3rd pillar.

Administrators of trust or foundation-type structures wwhere one of the beneficiaries is domiciled in France or where certain assets are located in France, are also subject to specific annual reporting obligations.

Each violation of these reporting obligations is punishable by a fine.

Furthermore, subject to the provisions of tax treatiess, taxpayers domiciled in France for tax purposes who receive interest, dividends or capital gains on the sale of securities from foreign sources are taxable in France on those incomes. Consequently, the income recorded by a French taxpayer on his foreign accounts and contracts is in principle taxable in France.

The time available to the tax authorities to rectify the omissions and insufficiencies relating to such incomes may be considerably extended when the taxpayer has not complied with the reporting obligations relating to the existence of his foreign assets.

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Specific penalties may also be applied to the corresponding tax reminders and fines of a specific nature may be imposed by the Tax Administration when proof of the origin of foreign assets is not sufficiently provided.

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The global standard for the automatic exchange of financial account information (EAR) provides for the mutual exchange of financial account information between states and territories that have agreed to apply it.

Under the impetus of the OECD, more than 100 States, including Switzerland, France and all major financial centres, have adopted this standard. In Switzerland, the legal bases necessary for the EAR entered into force on January 1, 2017.

From a practical point of view, the financial institutions of a State having taken up this standard must identify each year a certain amount of information relating to the accounts and contracts held by taxpayers who are not tax domiciled in that State.

Those informations are transmitted to the competent authorities of that State.

These authorities automatically transmit those informations to the competent administration of the State in which the account holder or the beneficiary of the contract has his tax residence.

In order to avoid the consequences linked to the discovery by the Tax Administration of the irregularity of a taxpayer's tax situation with regard to his foreign assets, it is strongly recommended to consult a tax lawyer in order to regularize the situation.

Whether it results from an initiative of our clients or is part of an audit procedure, regularizing the tax situation of a taxpayer regarding his foreign assets requires the use of specific tax rules provided in internal law, as well as certain provisions contained in international conventions and treaties.

Given their stakes and their complexity, these procedures are particularly anxiety-provoking for the taxpayers concerned.

Therefore, our tax law firm advises, assists and represents its clients throughout these procedures, to defend their interests as best as possible.

After analyzing the situation of our client regarding his foreign assets, our mission is to identify the irregularities and omissions committed as well as the applicable tax provisions, and thereafter to evaluate the financial consequences linked to the procedure.

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As a second step, our mission then consists of contacting the tax authorities to determine the terms and tax consequences of the procedure, under conditions that ensure the respect of our client's rights.

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We then assist our clients in drawing up the certificates and corrective tax returns necessary to regularize their tax situation.

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Throughout the procedure, we represent our clients in all their relations with the agents of the Tax Administration in order to limit their relations with them to what is strictly necessary.

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Bound by a duty of loyalty and dedication, we involve our clients in the procedure by keeping them informed, at each stage, of all our exchanges with the tax authorities and of the solutions envisaged.