New control and penalty provisions against fraud have been introduced by the Amended Finance Bill for 2012 as enacted on March 14, 2012

Reporting of Foreign Bank Accounts

Foreign bank accounts (including foreign life insurance contracts) have to be declared on a yearly basis subject to a minimal €1,500 penalty (increased up to €10,000 for accounts opened in a Non-Cooperative Jurisdiction).

The amended bill supplements this legislation by providing that, when the total of credit balances of the unreported accounts located abroad is equal to or greater than €50,000 on December 31 of the year under which the reporting statement should have been made, the penalty is 5 percent of the credit balance of each undeclared account, but cannot be less than €1,500 or €10,000 as mentioned above.

Absent any evidence to the contrary, the amounts received on or transferred out of undeclared foreign accounts (including life insurance accounts) of French residents are deemed to constitute French taxable income. A 40 percent penalty shall apply on the related income tax and such income is also subject to social contributions (CSG, CRDS).

Prohibition of the Offset of Tax Reductions Against Taxes That Have Been Subject to a 40 percent (or Higher) Penalty.

The bill strengthens some tax penalties for offenses constituting serious breaches: it removes the option to benefit from tax reductions in income tax or the wealth tax on the additional tax resulting from the amounts not declared spontaneously and, as such, giving rise to a 40 percent increase.

  • Covered offenses

These offenses are:

  • Failure or delay of reporting despite a formal notice or in case of occult activity (40 percent or 80 percent increase)
  • Insufficient reporting in case of willful neglect, abuse of rights or fraud (40 percent or 80 percent increase)
  • Opposition to tax audit resulting in an estimated assessment of tax bases (100 percent increase)
  • Scope of the device  

Impact on personal income taxation

  • The amended bill prohibits the allocation of tax reductions on the rights resulting from the application of one of the increases referred above. Similarly, losses cannot be charged on the amounts affected by these increases.

Impact on wealth tax

  • The amended bill prohibits the allocation of tax reductions or refunds for investments in SMEs and in respect of gifts in case of application of increases.

Tightening of Fight Against Tax Fraud

The amended bill provides several measures to improve the fight against tax evasion, strengthening the applicable tax penalties in case of concealment of bank accounts or life insurance contracts held abroad. As noted by the preparatory work, the amount of the fine had not been updated since 1977, making them particularly unsuitable for fighting fraud effectively. Thus, the amount of the fine sanctioning criminal tax evasion is thus increased from €37,500 to €500,000 and €75,000 to €750,000 when the offences are made or facilitated by means of either buying or selling without invoice or by billing without being related to real operations, or that the intension was to get unwarranted reimbursements from the State administration. Finally, for international tax evasion performed or facilitated by accounts or contracts located in a Non-Cooperative Jurisdiction, the exposure shall increase up to seven years and €1,000,000.