Foreign Bank Accounts Must be Declared
Tuesday 01 February 2011
The obligation to declare foreign bank accounts is not contrary to EU law, a French court has ruled.
Under the French code général des impôts all residents are obliged to declare any bank accounts they hold abroad.
The declaration need only be made once, using 'Form 3916', obtainable from your local tax office, or via the internet.
There is no requirement to say how much you hold in these bank accounts; you simply need to declare the existence of the account.
In a recent case before the French Conseil d'État (supreme court for administrative law matters) a couple facing a tax investigation argued that this requirement was incompatible with Article 56 of the European Community, which states than any restrictions on the free movement of capital were illegal.
The couple held a bank account in Belgium, which they had not declared to the French authorities, but which was discovered in the course of the investigation.
As a result, the couple were obliged to pay income tax relating to funds held in the account, together with a 40% penalty. The couple objected on the basis of European law.
In its ruling the French court stated that the requirement under French law was merely declarative, and that it imposed no restriction on the movement of capital.
No transfers of capital between accounts in a different country required the prior authorisation of the tax authority, albeit there were notification procedures with which banks were required to comply on sums above a certain level.
Nevertheless, if the bank account was not declared, then any sums credited to the account were liable for income tax, as well as any penalties that may apply for the non-declaration of the account.
In short, the court argued that the free movement of capital within Europe did not prevent member states taking such measures as they considered appropriate to counter tax evasion, provided they did not infringe the free movement of capital.
In recent years the French government have substantially increased the fines for non-declaration of foreign bank accounts, notably offshore accounts, where the penalties are very severe. Banks also have stronger reporting requirements imposed upon them.
This article was featured in our Newsletter dated 01/02/2011