The First Amending Finance Bill for 2012 strengthens the sanctions in the case of non-disclosure by French tax residents to the French tax authorities with regards to their bank accounts and life insurance contracts held outside of France.
French tax residents must declare with their taxable income for the year the details of accounts opened, used or closed by them outside of France.
Breach of this obligation is subject to a minimum penalty of EUR 1,500 per undisclosed account or EUR 10,000 in a case where the account is held in a state or territory which has not concluded a tax treaty or administrative agreement allowing access to bank information.
The new law provides that when the total amount of the credit balance of the undisclosed foreign bank accounts equals or exceeds EUR 50,000 as at 31 December of the year for which the declaration is to be completed, the penalty is equal to 5% of the balance credit of each account, with a minimum of EUR 1,500 or EUR 10,000 in the above mentioned cases.
Life insurance contracts
French tax residents who subscribed to life insurance contracts with companies established outside of France have to declare each year the details of such contracts, together with their effective dates, their duration and any withdrawals made during the year. Non-disclosure of any contract leads to a penalty being imposed equivalent to 25% of the payments made on such contract. However penalties may be reduced to 5% (capped at EUR 1,500) provided that the taxpayer proves that the Treasury did not suffer any damage as a consequence.
The new law aligns the sanctions for non-disclosure of life insurance contracts with sanctions for non disclosure of bank accounts. These new provisions are effective as from 1 January 2013.
Finally, with regard to 2012 income, the new law stipulates that payments made or coming from outside of France through undisclosed life insurance contracts are presumed to be taxable income, unless the taxpayer proves otherwise. Any personal income tax levied on such amounts is also subject to a 40% increase (classic bad faith increased rate applied in the event of tax reassessment) plus interest.
First Amending Finances Bill for 2012 (Loi de finances rectificative pour 2012)
For further information or to discuss any of the issues raised, please contact Stéphanie Le Men-Tenailleau on +33 142 563 845.