Understand your reporting duties to avoid costly mistakes.
In today’s interconnected financial landscape, it is standard practice for high-net-worth and ultra-high-net-worth individuals residing in France to maintain bank or investment accounts abroad, whether for asset diversification, international mobility, or planning. Yet, some overlook a crucial and unforgiving detail: simply holding a foreign account (regardless of its balance or use) triggers mandatory reporting obligations under French tax law. Failure to comply, even unintentionally, can result in substantial financial penalties, aggressive tax reassessments, and potential criminal exposure.
Let’s break down what you need to know to stay compliant and protect yourself.
Two Distinct Obligations – Two Different Purposes
French tax residents are subject to two independent obligations when it comes to foreign financial accounts, each serving a different purpose in the eyes of the tax authorities:
- Obligation to report the existence of the account: This is an informational obligation designed to provide the French tax authorities with full visibility into foreign-held financial assets. It applies regardless of the account’s balance, use, or profitability. Even dormant or inactive accounts must be disclosed. The goal here is transparency and traceability, not direct taxation.
- Obligation to report income earned through the account: This is a taxation obligation. French tax residents are taxed on their worldwide income (subject to applicable double tax treaties), which includes interest, dividends, capital gains, and other returns generated by both domestic and foreign accounts. Any such income must be included in the annual income tax return.
This article focuses on the first obligation: the declaration of foreign accounts as an informational requirement. Though often underestimated, failure to comply can trigger disproportionate consequences, regardless of whether the account generated taxable income.
I. Who Is Required to Declare?
Under Article 1649 A of the French Tax Code (“FTC”), any individual who qualifies as a French tax resident is required to declare all foreign accounts they have opened, held, used, or closed during the relevant tax year. This obligation is broad in scope and goes beyond mere account ownership.
The requirement applies to:
- account holders, regardless of whether the account is actively used;
- individuals with signing authority or power of attorney;
- any member of the tax household, even if the account is not in their name, but they have legal or actual control.
In the case of a joint tax household, both spouses may be held jointly liable if either has a direct or indirect connection to the account, whether as an owner, signatory, or beneficiary.
II. What Types of Accounts Must Be Declared?
Broad Scope
The obligation to declare foreign accounts under French tax law is broad in scope and intentionally comprehensive. It applies not only to traditional banking relationships but also to modern, digital, and investment-focused financial vehicles, including:
- Bank accounts held with foreign institutions, including online banks (e.g., Revolut, N26 if the IBAN doesn’t start with “FR”).
- Investment accounts, such as life insurance policies or securities accounts held abroad.
- Digital asset accounts, including cryptocurrency wallets or platforms that store digital assets like NFTs or tokens.
Since 2019, the legal threshold has been lowered: actual ‘use’ is no longer required for an account to fall within the reporting scope. Mere ownership or access is sufficient, even if the account has been dormant or untouched for years.
Usage, Purpose, and Amounts Are Irrelevant
No distinction is made based on:
- why the account was opened (personal, professional, or mixed use);
- how the account is used (primary banking vs. passive holding);
- what amount is held (even balances under $1 must be reported);
- whether the account generates income.
Furthermore, declaring income earned via the account does not replace the obligation to declare the existence of the account itself. Both requirements are separate and must be fulfilled independently.
📌 Practice note: In recent years, we have observed cases where the French tax authorities imposed penalties on individuals holding passive foreign accounts with no income and balances under $1. This underscores how rigidly the reporting obligation is enforced, even in scenarios that may appear negligible or non-taxable.
Narrow Exception: Low-Use Payment Accounts
A limited exemption is outlined in the official guidelines of the French tax authorities[1] for certain low-use payment accounts, typically used for online purchases or minor transactional activity. To qualify, all of the following conditions must be met:
- the account is linked to a French bank account;
- it is used exclusively for receiving or making payments, not for saving, investing, or holding assets;
- total annual receipts credited to the account do not exceed €10,000, across all similar accounts held by the same taxpayer.
This is a narrow, strictly interpreted exception, originally designed for platforms like PayPal in mind. It does not apply to accounts holding or moving substantial funds, nor does it create any loophole for shielding offshore assets from disclosure obligations.
III. How to Report a Foreign Account
To comply with French reporting obligations, foreign accounts must be declared annually by submitting Form No. 3916 as an appendix to the standard income tax return (Form No. 2042). Filing is done online via the official French tax authorities website impots.gouv.fr
A separate form must be completed for each foreign account. Even accounts that were only open for part of the year must be disclosed.
Each form must include the following details:
- the taxpayer’s full identity: name, date and place of birth, and current address;
- the name and address of the foreign financial institution;
- the nature of the account: current account, savings account, life insurance policy, cryptocurrency wallet, etc.;
- the intended use: personal, professional, or mixed;
- the opening and closing dates, where applicable;
- the type of account: individual, joint, or held in another capacity (e.g., as proxy or legal representative).
All declarations must be completed and filed within the statutory deadline, generally between May and June depending on the taxpayer’s location.
Failure to file accurately and on time may be treated as non-compliance, with all associated penalties applying.
IV. What Happens If You Don’t Comply?
Non-compliance with foreign account reporting obligations is far from a benign oversight. It signals potential opacity and triggers immediate scrutiny from the French tax authorities. In today’s enforcement landscape, failing to report a foreign account is effectively an invitation for a tax audit.
Automatic Exchange of Information: No More Hiding
Under the OECD’s Common Reporting Standard (“CRS”), financial institutions in over 100 jurisdictions now automatically transmit account information to the tax authorities of the account holder’s country of residence.
As a result, the French tax authorities receive detailed data on foreign financial accounts, without needing to initiate an investigation. The notion of “flying under the radar” has become obsolete.
Crucially, some taxpayers still believe that CRS reporting by foreign banks satisfies their personal reporting obligations in France. This is incorrect. Automatic exchange is not a substitute for taxpayer reporting. Even if the tax authorities are already aware of the account, failure to declare it yourself remains a breach of the law, and it is still penalized as such.
📌 Practice note: We have seen multiple cases where taxpayers were penalized despite the fact that the French tax authorities already had full knowledge of the foreign accounts via CRS. The reporting obligation is enforced independently of whether the information is already available to the administration.
Administrative Penalties
The most immediate consequences of non-reporting are financial. Even in the absence of any tax evasion or unreported income, simply failing to declare a foreign account trigger sanctions.
Fixed Fines for Omitted Declarations
Each omitted declaration is subject to:
- a €1,500 fine per undeclared account, per year,
- raised to €10,000 per account, per year for accounts located in jurisdictions that do not have an effective tax information exchange agreement with France.[2]
These fines may be applied retroactively for up to four years, meaning a single undeclared account could expose the taxpayer to €6,000 to €40,000 in penalties, depending on the account’s location.
80% Penalty on Unreported Income
Where the undeclared account has generated income that was also omitted from the tax return (interest, dividends, capital gains, etc.), the reassessed tax is automatically subject to a punitive surcharge of 80%.[3]
This applies even if the failure was unintentional, and there is no need for the tax authority to prove fraud or willful concealment.
Extended Audit Period: 10-Year Statute of Limitations
Unlike ordinary tax matters, where the tax authorities typically has three years to initiate a reassessment, non-reported foreign accounts extend the limitation period to ten years.[4] This allows tax authorities a full decade to investigate, audit, and reassess the taxpayer’s situation.
Presumption of Taxable Income
In certain circumstances, the law allows tax authorities to presume that funds moved into undeclared accounts represent unreported taxable income. The burden of proof is on the taxpayer to demonstrate otherwise.
This presumption shifts the dynamic of a tax audit and often places the taxpayer in a defensive, uphill position, especially when dealing with older accounts or incomplete records.
Criminal Liability
Concealing foreign accounts is not just a regulatory violation, it can constitute criminal tax fraud under French criminal law, with serious consequences in addition to back taxes and administrative penalties.
When a foreign account generates income that is not reported in the taxpayer’s annual return, the case may trigger mandatory criminal referral procedures.
Automatic Referral to the Public Prosecutor
Since the legislative reform introduced by the bill of 23 October 2018, the French tax authorities are legally required to refer cases to the Public Prosecutor’s Office when two conditions are met:
- the tax audit results in additional tax assessments exceeding €100,000, and
- an 80% tax penalty has been applied by the tax authorities, such as for failure to declare a foreign account linked to unreported income.
This threshold can be reached quickly, particularly if:
- the undeclared account has existed over multiple years,
- several accounts are involved, or
- the account holds significant capital generating passive income (interest, dividends, capital gains).
📌 Practice note: In practical terms, any reassessment involving undeclared foreign income tied to non-reported accounts now runs a high risk of automatic criminal prosecution.
Criminal Sanctions
If prosecuted and convicted, taxpayers face:
- up to €500,000 in fines and 5 years’ imprisonment for standard tax fraud;
- up to €3 million in fines and 7 years’ imprisonment in cases involving aggravating circumstances, such as organized fraud, complex concealment structures, or the use of foreign accounts.
Additional sanctions may include:
- disqualification from corporate directorships;
- confiscation of assets;
- public disclosure of the conviction (“name and shame” measures).
V. How to Fix Past Omissions
If you have failed to declare one or more foreign accounts (whether due to oversight, misunderstanding, or structural complexity) it is essential to act promptly. The French tax authorities places a high premium on transparency and voluntary compliance, and proactive steps can significantly reduce consequences.
1. Close Dormant or Legacy Accounts
Begin by reviewing all accounts held abroad. Many undeclared accounts are remnants of:
- studies or employment abroad,
- cross-border business ventures,
- joint family arrangements,
- old fintech or digital wallets.
Accounts that are no longer in use should be formally closed, not just abandoned. While closure does not retroactively resolve past reporting failures, it simplifies future compliance and minimizes ongoing risk.
2. Engage Qualified Legal Counsel
If your situation is complex or involves multiple jurisdictions, it is strongly advised to consult a tax lawyer experienced in international compliance and litigation. Legal counsel can:
- reclassify accounts that may fall outside the reporting scope;
- verify the statute of limitations;
- advise on and execute voluntary disclosures, including preparing supporting documentation and communicating with the tax authorities;
- negotiating penalty reductions and defending against disproportionate reassessments or procedural errors.
Engaging professional counsel is especially critical if an audit is underway or appears imminent.
3. Voluntary Disclosure Before an Audit
Voluntarily disclosing undeclared foreign accounts before the tax authorities take action is often the most effective way to manage risk. It allows the taxpayer to present facts clearly and coherently, on their own terms, rather than reacting to the tax authorities’ assumptions, which are rarely favorable.
This proactive approach provides several key advantages:
- control over how the situation is framed, with the opportunity to submit supporting explanations and context that may be overlooked or dismissed during an audit;
- reduction in financial penalties, particularly when the omission is corrected before any inquiry has begun;
- no automatic referral to the Public Prosecutor.
While penalties may still apply, the consequences are usually far less severe than if the undeclared account is discovered through automatic exchange of information (CRS) or during a tax audit.
Importantly, this option is only effective before the tax authorities initiate a review. Once an audit has been launched or data has been matched internally, the opportunity to disclose proactively, and to negotiate from a position of strength, diminishes significantly.
References
[1] BOI-CF-CPF-30-20
[2] Article 1736 of the FTC
[3] Article 1729-0 A of the FTC
[4] Article L.169 of the French Tax Procedure Code
