Everything You Need to Know About Holding Foreign Accounts

The obligation to declare foreign accounts has existed for a long time.

Income from accounts opened, held, used or closed abroad is, moreover, in principle taxable in France.

However, the obligations associated with holding foreign accounts are not always obvious to taxpayers, who are very often unaware of their obligations, at their own risk and peril…

It may therefore be useful to have your tax situation analysed by a lawyer, all the more so if you notice that box 8UU on your tax return form is pre-ticked.

When the French tax authorities (administration fiscale) have received information revealing that you hold one or more foreign accounts, this box is in principle automatically ticked by the tax authorities.

In principle, and subject to exceptions, you then use form no. 3916 3916-bis to declare the foreign accounts, and form 2047 to declare taxable foreign income.

This article sets out the legal obligations and the steps that may be needed to declare accounts abroad.

It also sets out the risks incurred in the event of non-declaration and the penalties provided for.

Finally, it discusses the solutions that may, depending on the case, make it possible to regularise the situation with the tax authorities.

Focus on the Regulations Governing the Holding of Foreign Accounts

As part of the fight against tax fraud, the public authorities have put in place numerous rules. This effort began with the circular of 21 June 2013, and it continues to intensify. Today, more and more foreign countries are transmitting and sharing banking information with the French tax authorities (on this subject, several are very active in this respect, in particular: Portugal, Israel, Spain, the United Kingdom, Switzerland, Luxembourg). The data shared generally indicates the account opening dates, the account balances, the account numbers, any income generated, etc.

French tax residents are in principle required to declare accounts opened, held, used or closed outside France.

Article 4 B of the French General Tax Code specifies which persons are regarded as tax residents in France. They include in particular:

• Those whose household (spouse, children…) is in France;
• Those whose economic interests are mainly located in France;
• Those who carry on their main professional activity in France, whether salaried or not;
• Those whose main place of stay is in France.

Reporting Obligation: Which Foreign Accounts Are Concerned?

First of all, only French tax residents are in principle concerned by the declaration of foreign accounts. Since 1 January 2019 (Law no. 2018-898 of 23 October 2018), even unused accounts are in principle to be declared every year: the obligation applies even where there has been no banking transaction on the accounts.

The reporting obligation, which applies first and foremost to the account holder, also concerns, as a general rule, the persons to whom they have given a power of attorney over the foreign account. The beneficial owners of these accounts are also, in principle, concerned.

The reporting obligation in principle covers bank accounts, capitalisation contracts, various investments, but also savings products, life insurance contracts taken out abroad, trading accounts, and accounts on foreign cryptocurrency platforms…

The declaration of each account includes in particular the following information: the account or contract number, the name of the financial institution with which the account was opened, its address, the opening date and, where applicable, the closing date if the account was closed during the year.

The obligation to declare foreign accounts is not a new rule. It is in fact very old.

Inactive and dormant accounts have, in principle, had to be declared since 1 January 2019.

Note: some accounts opened from France may in fact be located abroad. Many taxpayers thus hold foreign accounts without knowing it, for example with neobanks that offer apps and online management solutions.

Thus, an account opened, held, used or closed with N26, Monese, Bunq or Revolut, for example, is in principle, depending on the case, to be declared on form no. 3916 (for example, an account opened in 2025 in principle appears on the return filed in 2026).

PayPal accounts are also in principle covered by the obligations to declare foreign accounts, as this institution’s registered office is in Luxembourg. A reporting exemption is, however, provided where three conditions are met: the account is used only to pay for online purchases and to collect receipts from the sale of goods; it is linked to an account opened in France; and the total amounts received during the year do not exceed €10,000.

Accounts opened on trading platforms specialising in crypto-asset exchanges are in principle among the foreign accounts to be declared. Form no. 3916 Bis is in principle used to declare foreign cryptocurrency accounts. As with form no. 3916, it requires the account name, the name of the exchange platform, the address, the number and any other information about the account (opening date or closing date, if applicable).

Understanding the Taxation of Foreign Accounts to Be Declared

Declaring foreign accounts in accordance with the legislation in force does not mean that they will all systematically be taxed. Indeed, only certain categories of income from your accounts are in principle taxable: mainly dividends, interest, capital gains and rents generated in a foreign country, as well as salaries and other professional income.

Depending on the treaties signed between France and the foreign country concerned, other types of income may also be taxed. This income is less common; omitting it may nevertheless expose the taxpayer to penalties that can sometimes be heavy. A tax lawyer can help analyse the situation in the light of the applicable tax treaty.

Income from foreign bank accounts is in principle declared on form no. 2047 and/or form no. 2074 (for capital gains). Form no. 2074 is used to calculate the taxable capital gains and losses for the reference year; it makes it possible to determine the overall capital gain, and therefore the tax. Form 2074 ABT may also be used to calculate any applicable allowance. Furthermore, in certain cases, in particular where the capital gains have been calculated by the financial institution (single tax form, IFU), filing form 2074 may not be required (exemption), the taxable gain then being carried directly to returns 2042 / 2042 C.

Regularising Your Situation in the Event of Non-Declaration

If you have not declared your foreign accounts within the deadlines set by the tax authorities, it is in principle still possible to carry out a voluntary regularisation of your situation. Most of the time, preparing a regularisation file in the event of non-declaration of foreign accounts is a tedious, complex and time-consuming process. It also requires sound technical knowledge of French tax mechanisms in an international context.

In particular, it may be necessary to analyse the following key points, ideally with a lawyer:

1- Which Taxes Need to Be Regularised?

Where income has been received, income tax is in principle due (subject to international tax treaties, which may, in some cases, reduce or eliminate it). Only an analysis of the situation by a lawyer can determine whether or not a treaty allows this.

If the value of your assets exceeds the taxation threshold, it may also be necessary to take into account the wealth tax (Impôt sur la Fortune, ISF), replaced by the property wealth tax (Impôt sur la Fortune Immobilière, IFI).

It is also important to take into account the origin of the funds and, where applicable, any gift duties or inheritance duties that were "forgotten" (when the funds originate from a gift or a foreign inheritance, French tax residents very often fail to declare it in France, even though the gift or inheritance could in fact be taxable in France).

2- Taxation Arrangements in the Event of Regularisation

The period to be regularised and the taxation arrangements vary in particular according to the total balance of the accounts concerned:

• Where the total credit balances of the accounts did not exceed €50,000 at any time during the year, the reassessment period for income tax in principle remains 3 years; otherwise, it is in principle 10 years;
• For IFI (property wealth tax), an 80% surcharge may apply in the event of failure to meet reporting obligations. However, subject to a sincere and well-constructed regularisation file, the rate of this surcharge may, depending on the case, be reduced to 40%;
• Failing to declare accounts holding substantial assets in principle exposes the taxpayer to heavy penalties in the event of a tax audit. In the case of a voluntary regularisation, the tax authorities may, depending on the case, substantially reduce the penalties incurred.

Today, the tax authorities have modern and more effective means of detecting accounts held abroad by French tax residents. Careful compliance with the rules on reporting obligations and the payment of tax is therefore all the more important.

If you have made a mistake or omitted information in your returns, it is advisable to consult a lawyer to analyse your situation: depending on the case, a regularisation may be an appropriate solution, including where foreign accounts were not declared at the same time as your income. A tax lawyer can assist you with the procedures and the application of the rules; their involvement often helps limit the risk of heavy penalties in the event of a tax reassessment and, very often, reduce the penalties.

3- How Do You Know Whether a Regularisation May Be Considered?

Since 2018, the French tax unit dedicated to the voluntary regularisation of accounts abroad has no longer been in operation. Nevertheless, taxpayers can still carry out a voluntary regularisation of their undeclared foreign accounts.

As a reminder, audits carried out by the tax authorities are increasingly frequent owing to the volume of banking data automatically received. Indeed, more and more information is being transmitted by foreign countries. In general, tax officials contact taxpayers to remind them of their obligations concerning their foreign accounts. At this stage, this is not yet an audit strictly speaking, but a kind of warning to encourage them to carry out a voluntary regularisation.

Taxpayers then receive one or more letters bearing the number 751-SD from an income and wealth audit unit (Pôle de Contrôle des Revenus et du Patrimoine, PCRP). This information appears at the top right and left of the page on the letter received.

If you receive this type of letter, it seems very strongly advisable to seek the assistance of a tax lawyer from the very start of the procedure. The file to be put together is indeed often heavy and complex, and numerous pitfalls must be avoided.

4- What Does the Regularisation of Foreign Accounts Actually Involve?

Regularising undeclared foreign accounts consists, for the taxpayer, in bringing themselves into line with their tax obligations in respect of past returns. Past returns are then corrected to include the foreign accounts and income. To qualify as a voluntary regularisation, the process is in principle initiated by the taxpayer themselves, before any tax audit: it is the taxpayer who approaches the tax authorities to declare the assets held abroad. Receipt of a 751-SD letter does not mark the start of a tax audit in the legal sense: the regularisation therefore remains, in principle, legally voluntary.

The process in principle involves putting together a sincere, complete and properly constructed regularisation file. The finalised file is then filed with or sent to the tax office responsible for the taxpayer (in the case of an entirely spontaneous approach) or to the office that sent the 751-SD letter (where a letter has been received). It should be remembered that receipt of a 751-SD letter does not yet constitute, in legal terms, a tax audit: if the regularisation is undertaken after receipt of this letter, it in principle legally retains its voluntary character. In practice, receipt of this letter is often regarded as the last chance to carry out a voluntary regularisation. In the absence of regularisation, heavy penalties may be incurred: the tax authorities generally contact the foreign bank directly to obtain all the statements, then correct the returns themselves, often with very heavy consequences in terms of reassessments.

The regularisation file in principle mentions all bank accounts and insurance contracts held abroad, as the sincerity of the file is essential: even accounts not mentioned in the 751-SD letter are in principle concerned.

The regularisation procedure will, however, be very complicated, or rather very risky, in the - relatively rare - case where the taxpayer holds assets or funds generated by concealed or illegal activities. In such a case, there will indeed be a risk that the situation is characterised by the tax authorities as tax fraud, with all the possible criminal and tax consequences.

Once the regularisation has been completed, the taxpayer in principle remains required to file forms 3916-3916-bis and the foreign income returns every year. French tax residents with accounts opened, held, used or closed abroad are indeed in principle required to complete these forms every year, at the same time as their income tax return, even if they have done so in the past (this may be surprising, but these forms are in principle to be redone every year).

5- How to Regularise Accounts Abroad

The difficulties encountered in completing the regularisation formalities often discourage the taxpayers concerned. It is indeed often difficult to find the supporting documents needed for the file. The penalties provided for in the event of a tax reassessment can, however, be very heavy.

This effort may therefore be in the taxpayer’s own interest. The documents can also be requested from the foreign banks, which are very often able to provide them for a 10-year period, even if fees, sometimes quite high, are charged for retrieving them.

This is why, as soon as one becomes aware of a failure to declare one or more foreign accounts, it may be useful to consult a lawyer promptly to analyse the situation: depending on the case, a regularisation may be an appropriate solution. The assistance of a tax lawyer can make it possible to benefit from favourable measures (tax credits, etc.), to put together a precise and complete file and to avoid sometimes costly pitfalls, as well as to limit the risk of errors that are difficult to correct later.

Thanks to their knowledge of French and international taxation, the tax lawyer aims, in this particular type of case, to ensure that the regularisation file complies with rules that are often complex. Their assistance may also make it possible to claim the advantages to which you might be entitled, in particular the tax credit for foreign tax, if their analysis of the tax treaty and of the situation confirms that it applies, and, depending on the case, a reduction in penalties (fines, surcharges, late-payment interest), where the file is sincere and complete.

The involvement of a tax lawyer is not, however, mandatory. You can perfectly well work alone, or with a chartered accountant, for example, or any other professional who seems to you to be competent in this type of matter.

Indeed, for small accounts, the formalities are generally relatively simple and accessible where the origin of the assets held abroad can be justified. The involvement of a tax lawyer can nevertheless make the formalities considerably easier and help to benefit from the applicable provisions.

6- A Procedure Applicable, Subject to Exceptions, to the Ten Years Preceding the Date of Regularisation

Where a taxpayer begins regularising accounts abroad, the process in principle covers the preceding decade. It requires a precise analysis of the situation, listing the accounts opened, held, used or closed for each year of that period.

For example, for a regularisation begun in 2026, the process in principle covers the accounts opened, held, used or closed since 2016: income tax from 2016 to 2025 inclusive, ISF from 2016 to 2017 inclusive, IFI from 2018 to 2026 inclusive. The year 2015 and earlier years therefore do not, in principle, need to be included: the limitation rule applies to those years, which can in principle no longer be reassessed.

A point to watch: the tax authorities may ask about the origin of the funds, even for old assets, and the statute of limitations does not always protect on this point. In other words, where the origin of the funds held in an account cannot be proven, punitive reassessments may, depending on the case, cover all the assets, even if they are income received more than a decade ago.

Substantiating the origin of the funds does not simply mean providing explanations about the origin of the assets (a gift from an aunt, an inheritance from a parent, a capital gain on a foreign asset, etc.) but first and foremost being able to provide supporting documents: documents that back up your explanations (deed of gift, deed of succession, deed of sale, etc.). Of course, in cases where the origin of the funds is very old, the tax authorities will in principle be rather flexible regarding supporting documents, but a total absence of documents is in principle hardly accepted by the tax authorities. It is generally useful to have at the very least, if not perfectly conclusive documents, a body of documents corroborating your statements: the foreign death certificate of the parent whose estate is claimed, a record of a transfer on a bank statement from the deceased parent's account, an official document, even a very basic one, referring to the foreign inheritance, etc. Each case is specific.

When the tax authorities step in to initiate a regularisation tax reassessment, several parameters are taken into account. They check whether the taxpayer is liable to ISF or IFI. They also examine the income generated abroad. The origin of all the funds is carefully checked in order to determine whether it consists of professional income, rental income, an inheritance, a gift…

Where the regularisation file for foreign accounts is well prepared, the penalties may, depending on the case, be reduced. The surcharges applied in a tax audit are in principle 80%; with a solid regularisation file, they may, depending on the case, be lowered to 40%.

Note: the regularisation file for foreign accounts may concern a wide range of taxes: wealth tax (ISF), property wealth tax (IFI), income tax, social security contributions, inheritance tax, gift tax…

The surcharge is in principle calculated on the total amount of the tax reassessment. Thus, if after correction of the returns the taxpayer has to pay, for example, additional wealth tax of €300,000, the total amount payable will be €300,000 of tax + 40% surcharge = €300,000 + €120,000 = €420,000. Late-payment interest will, as a general rule, be added to this (at a rate of 2.40% per year since 1 January 2018, i.e. 0.20% per month; 4.80% per year for earlier periods).

What If the Taxpayer Does Not Regularise Their Situation?

Where the taxpayer still does not declare their accounts and does not regularise their foreign accounts despite the 751-SD letter, the first action of the tax authorities will generally be to request the taxpayer's bank statements for the last 10 years directly from the foreign bank. On the basis of these documents, the tax authorities may issue tax reassessments, which are often heavier than in the case of regularisation.

It should be remembered that all countries that are signatories to the convention facilitating access to banking data are required to comply with the terms of this agreement. Once the tax authorities have gathered the necessary evidence, they send a request for explanations and justifications to the taxpayer. A detailed and clear response, within the stated time limit, is in principle expected; a lawyer's help can be valuable at this stage. The tax authorities may also launch a more intrusive tax audit through lengthier procedures. It may then be useful to consult a lawyer promptly.

1- Documents to Be Provided to Present a Complete File

The tax authorities request specific information and documents relating to undeclared accounts. In particular, they ask for the account number, the financial institution and its address, an explanation of the situation (error, omission, etc.) and specific documents listed in the request for information letter. These include, among others:

• Documents substantiating the origin of the assets: all documents supporting your explanations as to where the assets came from (notarial deed, bank certificate, bank statement showing the origin of the transfer, etc.);
• A written statement setting out precisely and in detail where the assets you hold abroad come from;
• Regarding income tax, the following are in principle requested:
• Amended income tax returns, in principle dated and signed;
• Returns no. 2047 for income received abroad;
• Returns no. 3916 for each account opened abroad;
• Where the wealth tax was due (Impôt de solidarité sur la fortune):
• Initial or amended ISF and/or IFI returns, in principle dated and signed.
• All supporting documents relating to the assets held abroad and to the income making up those assets over the period covered by the filing of amended returns:
• A certificate proving that you are the holder of the account, or the account opening agreement;
• In the event of closure, any document showing a closing financial flow;
• Statements of assets or wealth statements as at 1 January of each reference year or as at 31 December of the preceding year (these documents are in principle requested for the 10 years covered by the regularisation);
• Annual statements of income provided by the foreign bank or financial institution in order to prove the existence of gains, whether interest, dividends, capital gains or capital losses;
• Bank account statements for the 10 years covered by the regularisation (bearing in mind, however, that they are not systematically requested in 751-SD letters).

If no response is recorded after receipt of this request for explanations, the competent authorities will in principle initiate a tax audit. This procedure is arduous, lengthy and generally results in much larger reassessments.

Where the supporting documents needed to prove the origin of the funds held in the accounts cannot be produced, the tax authorities may, in certain cases, apply 60% taxation to the assets. This means that the tax authorities may claim 60% of the highest amount of assets held in the accounts over the last 10 years. If, for example, 5 years ago the highest level of assets held in foreign accounts was €300,000, the tax authorities could claim €180,000, even though current assets may be much lower because of spending in recent years.

As soon as you receive a request for information, it may therefore be useful to consult a lawyer promptly in order to analyse your situation: depending on the case, this is an opportunity to initiate a regularisation process, which may make it possible to avoid heavier penalties. Where appropriate, the regularisation file gathers the supporting documents requested by the tax authorities.

Once the regularisation request file has been put together, it is in principle filed with the department that sent the request for information.

2- The Forms to Complete to Declare Income and Accounts Abroad

After this regularisation, the taxpayer in principle remains required to declare these foreign accounts every year, at the same time as their income. The relevant forms are in principle the following:

• Form no. 3916 for foreign accounts;
• Form no. 3916 Bis for crypto-assets (cryptocurrencies) on foreign platforms;
• Form no. 2047 for foreign income;
• Form no. 2074 for capital gains;
• Form no. 2042 for annual income;
• Form no. 2042 C for certain tax credits
• ISF and IFI returns, if you are liable to them

What Are the Penalties for Non-Declaration?

Whether or not the omission was deliberate, penalties are provided for and may be applied, in principle a fine of €1,500 per year for each account. This fine is in principle time-barred at the end of the fourth year following the year in which the omission was committed (article L188 of the LPF): for an account that has never been declared, it may therefore cover, depending on the date of the audit, 4 or 5 returns, i.e. €6,000 or €7,500 per account.

Where the failure to declare concerns several accounts, the fines can be very high. Where these accounts are opened, held, used or closed in a State or territory that has not concluded an agreement with France allowing access to banking information, this fine is in principle increased to €10,000 per year for each account.

If the taxpayer has really done everything possible to conceal their foreign accounts in order to avoid paying tax (a genuinely fraudulent intent), the tax authorities may refer the matter to the public prosecutor (criminal court) to bring proceedings against them. In such a case, they may indeed be charged with tax fraud. Where it is proven that the taxpayer did engage in unlawful conduct, they are liable to very severe penalties. Article 1741 of the French General Tax Code (CGI) provides that the fine payable may be as high as 3,000,000 euros (or even up to twice the proceeds derived from the offence). The criminal court hearing the case may also impose a prison sentence of up to 7 years.

This is also why timely compliance with the reporting obligations relating to foreign bank accounts is important. In the event of a failure to declare, it is advisable to consult a tax lawyer to analyse the situation: depending on the case, a regularisation may be an appropriate solution to limit the risk of heavy penalties. This professional can assess and define the various possible courses of action; their involvement may also, depending on the case, help to reduce fines and surcharges.

The Amended Declaration of Foreign Accounts in Detail

An amended return should only be considered after the situation has been analysed, ideally with a lawyer. Where it is chosen, it generally starts from the returns already filed in the past, in order to supplement them, and takes into account the information provided by the bank abroad, so that each form is completed in compliance with the regulations in force.

The annual income statements provided by the bank show the different types of income received: interest, dividends, capital gains or losses. This income is in principle to be declared on forms 2047, 2042, 2074 and 2042 C.

Where the foreign bank has withheld tax at source, this may, depending on the case and within the limits set by the applicable tax treaty, give entitlement to a tax credit deductible from the tax due in France, which only an analysis of the situation by a lawyer can confirm or rule out. Declaring this foreign income and the corresponding tax credits follows specific rules.

Where the tax authorities request "amended income tax returns", the income tax returns are in principle amended to include the foreign income and the tax credits. This generally involves a new form no. 2042 (the usual blue form) and, depending on the foreign accounts and the types of income, other forms.

1- Form No. 2047 for Income Received Abroad

In principle, return form no. 2047 is used to declare income received abroad. Foreign income, as a general rule, appears both on form no. 2042 and on the return made on form no. 2047. This is in principle done every year, unless you do not receive any foreign income during the entire year concerned. However, this is an exceptional situation insofar as the contracts signed or accounts opened often generate annual interest. The bank or financial institution pays it into the account or into the life insurance contract.

2- Form No. 3916 3916-bis to Declare Each Foreign Account

For each foreign account opened, held, used or not, or closed, a form no. 3916 3916-bis is in principle to be completed. It includes in particular the following information: surname, first names, date of birth, address, details of the bank, the account number, etc. It also specifies the date the account was opened and, where applicable, the closing date. However, there is in principle no need to enter the account balance. In principle, a declaration is made for each account.

An important question then arises before declaring the foreign accounts: since a form is in principle filed for each account, what about sub-accounts? Can failure to declare them on a separate form be penalised?

As the fine is in principle €1,500 per year for each account, it can be tempting to complete a single form no. 3916 for all accounts in order to reduce the total amount of fines. The concept of a sub-account then needs to be properly understood.

Where the following conditions are met, it would seem that, in most cases, the account can be regarded as a sub-account: it has the same number root as the main account, and its opening date should in principle be the same as that of the main account. If these criteria are not met, a case-by-case analysis is then needed. The involvement of a tax lawyer can help clarify matters and better assess the situation, as well as the context of the regularisation file.

Note: a form 3916-3916-bis is in principle completed for each year of holding, including for the year of closure.

For example, with a current account and a savings account at the same institution: if, after analysis, the savings account cannot be regarded as a sub-account, two forms no. 3916-3916-bis are in principle to be completed every year. As the fine is in principle time-barred after 4 years, the total fine incurred could reach [(€1,500 × 2 accounts) × 4] = €12,000.

Note: for years before 2019, an account that remained unused (no debit or credit transaction during the year, mere receipt of interest not in principle being taken into account) could escape the fine. Since 2019, accounts that are held but unused are in principle to be declared; given the limitation period for the fine, this exception is now of little practical relevance.

3- Declaring life insurance contracts taken out abroad

For insurance contracts taken out with an institution established abroad, the declaration was made on plain paper for years before 2020; since 2020, form 3916-3916-bis has in principle been used.

4- The written statement on the origin of the assets

The written statement on the origin of the assets is one of the most important documents in the foreign account regularisation file. The origin of the assets indeed enables the tax authorities to determine:

• What your profile is: the tax authorities' classification grid uses the notions of active fraudster and passive fraudster. The term fraudster may seem somewhat shocking, but this is indeed the terminology that was used by the regularisation unit;
• The extent to which the tax authorities will take an interest in your case: the tax authorities will generally monitor much more closely a taxpayer who has received undeclared sums from concealed activities. People who have concealed a distant inheritance will in principle be less troubled;
• The question of the double penalty of tax reassessments combined with criminal penalties (a fine only, or with a prison sentence): with the concealment of an inheritance, the risk of receiving a criminal penalty is much lower than in the case of unlawful activities that have generated substantial income over a long period;
• The total amount of the tax reassessments where the taxpayer received concealed income during the assessment period (in principle, the decade preceding the regularisation or the tax audit).

This written statement should be sincere: an inaccurate statement may make the situation worse.

Of course, while sincerity is essential, the truth is best presented with subtlety, without “shooting oneself in the foot”.

This written statement is the most important document in the regularisation file, and its drafting deserves particular care. The statement on the origin of the assets is in principle supported by documents confirming your account. If the tax authorities consider the supporting documents provided to be insufficient, they may request further documents, in principle to be submitted to the department requesting them.

5- How to Substantiate the Origin of the Assets?

The tax authorities are in principle entitled to ask taxpayers who have opened undeclared foreign accounts for a written statement substantiating the origin of the assets: this means the assets that are still in those accounts or that were held in them over the last 10 years.

If no supporting documents are submitted, or if they are insufficient to prove the origin of the assets, the tax authorities may claim a 60% tax. This is by virtue of Article 755 of the French General Tax Code (CGI). These duties are, as a general rule, calculated on the highest value, known to the tax authorities, of the assets held in the account or life insurance contract during the ten years preceding the sending of the request for information or justifications.

Indeed, Article 755 of the CGI provides that assets held in a foreign account whose origin and terms of acquisition are not substantiated constitute, until proven otherwise, assets acquired free of charge. These assets are in principle subject to gift and inheritance duties (droits de mutation à titre gratuit) at the highest rate (60%) upon expiry of the time limits specified in Article L23 C of the Tax Procedure Code (Livre des procédures fiscales, LPF).

The tax authorities in principle use the highest value recorded in the accounts over the 10-year period preceding the sending of the prescribed request to calculate the amount of these duties. The same Article L23 C specifies that in the event of non-declaration of a foreign account (at least once in respect of the 10 years), the tax authorities are entitled to request justification of the origin and terms of acquisition of the assets held in the account. Where the justifications are insufficient or non-existent, the 60% tax rate may be applied, by way of a presumption of a transfer free of charge.

The financial burden on the taxpayer can therefore be very heavy. This is why it can be very useful to keep carefully all documents that make it possible to substantiate the origin of the assets.

• Where the assets derive from an inheritance, you can in principle substantiate them with the following documents: death certificate, deeds issued by foreign professionals, a copy of the will, if any, bank statements showing the origin of the financial flows, bank certificates, etc.
• If these assets come from a gift, the following documents may in principle be used to substantiate them: foreign deeds, bank certificates, private deeds (actes sous seing privé), bank statements proving the origin of the financial flows, etc.
• Where an activity was carried on abroad, it is in principle useful to produce copies of all documents relating to that activity. Payslips, foreign tax assessment notices, certificate of professional registration with the local authorities, tax returns filed abroad…

6- The sworn statement

This document is not always requested in the 751-SD letter.

Where this document is requested, it is in principle a matter of certifying on your honour that the account or accounts you are now declaring in response to the tax authorities' request for explanations is or are the only ones you have opened abroad. This means that you are no longer concealing any other accounts abroad.

The following documents, requested from the foreign bank, generally form the basis of the file: annual statements of assets, wealth statements, annual income statements with statements of gains and losses. An opening certificate for each account may also be useful, as well as, for accounts closed in the meantime, the closure certificates.

A summary document obtained from the bank, setting out the annual movements for each year, may also be useful; it in principle shows the balance as at 31 December, the annual amount of each type of income, and its nature: interest, capital gains or losses, dividends, etc.

These documents make it possible to produce the amended returns, in particular the income tax returns on forms no. 2047 and no. 2042, and, where applicable, the ISF or IFI returns (since 2018), where these taxes are due.

7- Bercy Handles Files Involving Assets Above a Certain Amount

Where the assets held in the foreign account exceed a certain threshold, the Ministry of the Economy and Finance (Bercy) takes over. The letter received shows this: the department that drafted and sent it is indicated at the top left.

In general, it is the local tax office that contacts you. But where your assets are very significant, the Ministry of the Economy and Finance may sometimes take charge of handling your file.

How to Respond to the 751-SD Letter?

When you receive a letter from the tax authorities, there is no point in panicking. On the other hand, "burying your head in the sand" can be risky: consulting a lawyer promptly makes it possible to analyse the situation and choose the most appropriate response.

1- What steps can be considered?

It is generally useful to take the time to respond to the letters received, ideally with the help of a lawyer. The response file in principle gathers the supporting documents requested; it benefits from being well presented, with documents that are clear in both substance and form.

Authentic documents signed and stamped by the bank or financial institution, or by the authorities of the foreign country, generally carry more weight. The information requested is in principle to be provided in detail.

2- What attitudes can make the situation worse?

Leaving letters unanswered or producing an incomplete file may make the situation worse. Likewise, sending information whose accuracy is not certain, or incomplete or inaccurate returns, can be risky. Depending on the case, it may be possible to request an extension of time to respond, allowing time to put the file together; a lawyer can help assess whether this step is appropriate.

From a legal standpoint, holding undeclared assets abroad in principle constitutes an offence under tax law. But the public authorities have, for the time being, still given taxpayers holding undeclared foreign accounts the possibility of carrying out a voluntary regularisation in order to benefit from more favourable conditions.

It is, however, very often a last helping hand from the tax authorities. The regularisation unit operated for almost 5 years, a relatively long period that gave taxpayers a window for voluntary regularisation. Some taxpayers did not seize this opportunity; their image with the tax authorities is therefore rather tarnished and, depending on the case, it may then be appropriate to examine promptly with a lawyer whether a regularisation is worthwhile.

In any event, the tax authorities are, for the time being, still trying to settle the situation amicably by sending out the 751-SD letter. It should be remembered that, at the time this letter is received, the tax audit has not yet been launched from a legal point of view. Through this approach, the tax authorities give the taxpayer one last chance to regularise their situation amicably.

If the reply to this letter is unsatisfactory, or if the taxpayer persists in not replying or produces very incomplete documents, the inspector generally opens a genuine tax audit, with heavier consequences. The tax authorities may also bring the matter before the competent courts. Very high fines may then be incurred and, in certain cases of serious and established fraud, a prison sentence. At this stage, the defence may become much more difficult.

Thus, even though the regularisation procedure is tedious and time-consuming, neglecting it can have heavy tax and sometimes criminal consequences. As the file and the follow-up of the procedure require advanced skills and experience, it may be useful to entrust this analysis to a tax lawyer, who can assess the most appropriate course of action for your situation and help avoid the errors or pitfalls that would complicate it.

FAQ

Read more

• Which Foreign Bank Accounts Must Be Declared in France?
• For Which Foreign Accounts Do You Have to Pay Tax?
• What Fines Apply for Failing to Declare an Account Abroad?
• Undeclared Foreign Account: Limitation Periods
• Request to Regularise an Undeclared Foreign Account: What to Do and What to Expect