France’s Fight Against Tax Evasion
As part of France’s continuing efforts to combat fiscal fraud, a new piece of legislation was enacted into law on 6th December 2013. This has far-reaching effects, including:
Criminal sanctions for serious cases of fiscal fraud are to be increased to a maximum of seven years imprisonment and a fine of €2 million, when the fiscal fraud is facilitated by:
- the use of foreign bank accounts or foreign life assurance policies;
- foreign entities, including trusts, set up outside of France;
- the use of false identity or false documents; or
- artificial or fictitious tax residency.
Undeclared monies held outside of France, whereby the taxpayer cannot prove the provenance, to be taxed at 60%.
If, as a result of failing to declare assets outside of France, a taxpayer does not make a wealth tax return because the ‘none inclusion’ of the assets indicates that they are under the wealth tax threshold limit (currently €1.3 million), the penalty is to be increased from 10% to 40% of the tax due.
The period during which the tax authority can take action to prosecute is to be increased from three years to six years.
As concerns trusts, legislation was already introduced in 2011, which has required the trustees to declare to the French tax authorities the existence of the trust with at least one of the following:
- French resident settlor;
- French resident beneficiary; or
- French situated assets – even if the settlor/beneficiaries are not living in France.
Since 2011, failure to declare the existence of a trust has resulted in a penalty of the greater of 5% of the value of the total assets of the trust, or €10,000. The new law increases the fine to 12.5% of the value of the total trust assets or if greater, €20,000.
In addition, a public register of trusts is to be established by the Minister of Finance. This will require full details of the trust to be published, including the name(s) of the trustees, the settlor and all of the beneficiaries, as well as the date of establishment of the trust. Therefore, the text of the law is wide and in effect, requires information concerning non-resident beneficiaries to be made public and may also require the names of potential beneficiaries to be published.
France, like many other countries, is targeting tax evasion more and more. Banks and insurance companies are required to report information to tax authorities about their clients and tax authorities around the world are exchanging information. The EU is also proposing to amend EU Directive 2011/16 to expand the field of the mandatory automatic exchange of information between tax authorities to include capital gains, dividends, bank account balances. Banking secrecy will clearly become a thing of the past!
It’s a fool’s game to try to hide assets and pretending not to be resident is not a good idea. One way or another, the taxman always finds out and the penalties can be very costly. It is much better to seek regulated advice from professionals who are registered here in France.
Does any of this concern you? Would you like to ensure that you and your potential beneficiaries do not pay any more tax on your financial capital and investment income than is necessary? If the answer to either of these questions is yes, then please contact me for a confidential discussion.
We are also now planning for our Spring Client Seminars. As always, there is no charge for any of our seminars and the speakers’ presentations are followed by a buffet lunch, so places must be booked in advance. The planned dates for the next local events are:
- 21st May at Castelnaudary
- 22nd May at Perpignan
- 23rd May at Montpellier
As the seminars are always very popular, early booking is recommended.
If you would like to discuss your financial situation, in confidence, or if you or you wish to attend one of the seminars, please contact me or by e-mail at firstname.lastname@example.org or by telephone on 04 68 20 30 17.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at www.spectrum-ifa.com/spectrum-ifa-client-charter/.