Tracking down French taxpayers who have seen it acceptable to not declare references of their bank accounts and similar accounts outside of France, continue to persist. To follow the rules put in place many years ago, legislation has added a new article to the Book on Tax Procedures (LPF). This article L. 10-0 A. allows the tax administration to examine all of the movements of these accounts for all of the years under which reporting requirements have not been met.
These particularly draconian arrangements apply if the taxpayer has not respected reporting requirements for accounts opened, used or closed abroad (article 1649 of General Code of Taxation) and those inherent in life insurance contracts underwritten by a body established outside of France (article 1649 AA of said Code).
The review provided by article L. 10-0 A of L.P.F. covers all financial accounts concerned, located in France or abroad, open in the name of the defaulting taxpayer and the members of his taxed household. These are therefore accounts of every nature, notably of course banking accounts, postal checking accounts, securities and savings accounts, but also joint accounts (and those in which the taxpayer or the member of the tax paying household have power of attorney) and current accounts owned a company.
Application of facts
Recall the initial principal
The summary of financial accounts is not likely to fall into the taxpayer’s favor during the external tax audit, an audit of accounting and of the personal fiscal situation. Therefore, the Income Tax Revenue Service does not have the ability to build on the findings from this analysis of financial movements in order to make corrections to income taxes.
Exceptions resulting from new arrangements
The organization of the article L. 10-0 A of L.P.F. gets around the obstacle “brilliantly”
Now, the statements of the relevant accounts can be against you on the occasion of “controle sur pièces.” It is known that these procedures offer less of a guarantee compared to those provided in accounting audits and examinations of conflicting personal tax situations. The Income Tax Revenue Service does not have the obligation, before the outbreak of hostilities, to inform you in advance of an audit, accompanied by the chart of rights and obligations of a verified taxpayer.
This exception applies exclusively to presumption of revenue, on the one hand, in the case of the transfer of sums or securities abroad or in coming via a non-declared account, and on the other hand, in the case of payments made abroad or in a foreign provenance through unregistered life insurance contracts.
As evidence, the risk of being caught augments over time, due to the proliferation of agreements signed between the states exchanging information (including some which were surprisingly “falling into line” nearly five or six years ago) and of the passive complicity of certain financial establishments desperate to save their brand image.
What to do?
In case it is you facing similar problems, there is no need to panic. It is best to face the situation with the help of an experienced tax lawyer. This professional practiced in negotiation with inspectors of public finances has the duty to use the legal defense methods at their disposal to minimize the financial repercussions resulting from the discovery of your undeclared accounts.
More specifically, the primary goal of the tax lawyer is to demonstrate that certain amounts attributed to the incriminating accounts are not actually considered taxable income. At the very least, it is the mission of the tax lawyer to gather the the amount of various tax penalties you have been charged (and in addition the additional tax assessments) and to reduce them to manageable amounts.