A French tax resident who holds accounts, life insurance contracts or interests in a trust abroad is in principle subject to specific reporting obligations, separate from the taxation of the income these assets generate. Failure to comply may be heavily penalised.
This article presents these obligations and the penalties incurred. As every situation is different, the assistance of a lawyer may be useful to prepare these returns, which remain technical, or to consider regularisation.
In brief
- Accounts opened, held, used or closed abroad are in principle declared every year on form 3916-3916-bis, with box 8UU of the income tax return.
- Life insurance and capitalisation contracts taken out outside France are in principle declared on the same form, with box 8TT.
- The fine is in principle €1,500 per undeclared account or contract (€10,000 for certain States), replaced by an 80% surcharge where tax is reassessed.
- The trustee of a trust linked to France must in principle declare its creation, its modifications and, every year, the value of its assets; failing that, a €20,000 fine is incurred.
- In the event of non-declaration, the limitation period is extended and the tax authorities may ask for the origin of the assets, failing which a 60% tax may apply.
Contents
Declaring accounts held abroad
Individuals, associations and non-commercial companies domiciled or established in France are in principle required to declare, together with their income or profit tax return, the details of accounts opened, held, used or closed abroad (article 1649 A of the French Tax Code, CGI). Since 1 January 2019, the obligation also covers, as a general rule, accounts that are merely held, on which no transaction has been carried out (inactive or dormant accounts).
Each account is in principle the subject of a separate declaration, on form no. 3916-3916-bis, and box 8UU of the income tax return is ticked. An account is deemed to be held abroad where the person is its holder, joint holder, beneficial owner or economic beneficiary; merely having used it, for example under a power of attorney, is in principle also sufficient. The accounts concerned are detailed in a specific article, as are digital asset accounts.
By way of exception, accounts held abroad that are linked to an account opened in France and used for online transactions do not have to be declared, unless receipts from sales exceed €10,000 per year.
Declaring life insurance contracts taken out abroad
Individuals domiciled in France who take out capitalisation contracts or similar investments, in particular life insurance contracts, with bodies established outside France also declare, in principle, on form no. 3916-3916-bis, the details of these contracts, their effective date and term, the payments and redemptions of the previous year and, where applicable, their surrender value or the guaranteed capital at 1 January. Box 8TT of the income tax return is also ticked.
Penalties for non-declaration
Failure to declare an account or contract held abroad exposes the taxpayer in particular to the following consequences:
| Failure or consequence | Penalty in principle |
|---|---|
| Undeclared account or contract | Fine of €1,500 per account or contract and per year; €10,000 if the State or territory has not concluded with France an administrative assistance agreement allowing access to bank information |
| Tax reassessed in connection with an undeclared account or contract | 80% surcharge, to the exclusion of any other surcharge or fine, and not less than the fine that would have been due |
| Sums transferred through an undeclared account | Presumed to be taxable income, unless proven otherwise |
| Assets whose origin has not been justified | Gift and inheritance tax at the rate of 60% (procedure of article L23 C of the LPF) |
| Limitation period | In principle extended to ten years for income tax |
These penalties are detailed in the article on fines for failing to declare an account abroad.
Request for justification of the origin of assets
Where the reporting obligation has not been complied with at least once in the previous ten years, the tax authorities may request, within a period of sixty days, information or justification on the origin and method of acquisition of the assets. Where the reply is insufficient, they send a formal notice to supplement it within thirty days. In the absence of a sufficient reply, unjustified assets may be assessed ex officio to gift and inheritance tax at the rate of 60%, on the decision of an officer of at least the rank of divisional inspector.
This tax is in principle calculated on the highest value of the assets known to the tax authorities during the ten years preceding the request, less the value of the assets whose origin has been justified.
Statements transmitted by third parties
The tax authorities may ask third parties, under their right of disclosure, for statements of undeclared accounts or contracts, and examine them in a simple desk audit. They may do the same with statements transmitted to them spontaneously, in particular under the automatic exchange of information.
Declaring trusts
The trustee of a trust must declare its creation, modification or termination, as well as the content of its terms, within one month of the event, where the settlor or at least one beneficiary is tax-domiciled in France, where the trust includes an asset or right located in France, or where the trustee is himself or herself domiciled in France (article 1649 AB of the CGI).
He or she also declares, by 15 June of each year at the latest, the market value at 1 January of the assets, rights and capitalised income making up the trust: all assets where the settlor or a beneficiary is domiciled in France, only assets located in France in other cases. In particular, this annual declaration is in principle a condition for the exemption from the specific levy on trusts for persons not liable to IFI.
The returns are filed in French on forms no. 2181-TRUST1 (event-driven return) and no. 2181-TRUST2 (annual return), filed with the tax office for foreign companies (service des impôts des entreprises étrangères).
Failure to comply with these obligations is in principle penalised by a €20,000 fine, for which the settlor and the beneficiaries subject to the levy are jointly and severally liable with the trustee. An 80% surcharge applies, as a general rule, to tax reassessed as a result of the non-declaration of assets placed in a trust, to the exclusion of any other surcharge or fine, and a special limitation period applies. The tax rules applicable to trusts are presented on the pages dedicated to UK trusts and US trusts. The penalties for an undeclared trust are explained in detail, with diagrams and worked examples, in the article undeclared trust: what penalties in France?.
Regularisation
A voluntary regularisation generally remains possible as long as no procedure has been initiated. Depending on the case, and after analysis with a lawyer, it may be a solution; the firm can also take care of preparing these returns.
FAQ
Must an inactive foreign account be declared?
In principle yes: since 1 January 2019, the obligation also covers accounts that are merely held abroad, even if no transaction has been carried out on them.
What is the fine for an undeclared foreign account?
In principle €1,500 per account and per year, or €10,000 where the account is located in a State or territory that has not concluded with France an administrative assistance agreement allowing access to bank information. Where tax is reassessed, an 80% surcharge applies instead.
Who must declare a trust?
The trustee, where the settlor or a beneficiary is domiciled in France, where the trust holds an asset or right located in France, or where the trustee is himself or herself domiciled in France. The settlor and the beneficiaries subject to the levy are, however, jointly and severally liable for the fine in the event of failure.
