For several months, the firm has been contacted by Portuguese people who are French tax residents facing reassessments because they did not report bank accounts opened in Portugal.
The French tax authorities appear to be conducting a campaign to check declarations, or their absence, concerning accounts opened by Portuguese people living and reporting their income in France.
Taxpayers must report foreign bank accounts under the second paragraph of Article 1649 A of the French General Tax Code:
“Individuals, associations and companies not having a commercial form, domiciled or established in France, must declare, together with their income or profit return, details of accounts opened, held, used or closed abroad. The implementing arrangements are determined by decree.”
Articles 344 A and 344 B of annex III provide the implementing rules. In practice, bank details are reported in annex no. 3916 to income tax return no. 2042. Annex no. 3916 BIS covers digital asset accounts opened, held, used or closed abroad. Account balances are not among the information to disclose.
An account is considered held by someone who is its holder, joint holder, economic beneficiary or person entitled to its economic benefits.
Penalties may grow exponentially: a fine of 1500 € applies per account for each undeclared year. According to the authorities, reassessment can extend back ten years because they regard the omission as a failure to declare.
Amounts, securities or assets transferred abroad or from abroad through accounts not declared under the second paragraph of Article 1649 A of the CGI are also treated as taxable income unless proved otherwise.
Beyond substantial penalties, taxpayers can therefore be reassessed on sums passing through their Portuguese account if they cannot establish their lawful origin and rebut the presumption.
The French tax authorities have information-gathering rights with Portuguese banks concerning accounts held in Portugal by French tax residents. Their campaign appears substantial given the reassessments made and the concern caused within the French community in France.
Portuguese people who are French tax residents are therefore strongly advised to pay attention to account reporting and spontaneously correct omissions or oversights in order to rely on good faith.
This tax obligation is still little known among Portuguese taxpayers living in France, and in most cases the omission was made in good faith.
Although the authorities contest correction without penalties, a good-faith correction may fall within the right to make a mistake confirmed notably by Law no. 2018-727 of 10 August 2018 for a State serving a society of trust, known as the ESSOC law. It established a right to correct good-faith mistakes without sanctions.
It may fall to the administrative courts to recognise this right, which seems entirely relevant in this case.
Administrative guidance (BOI-DAE-10-02/10/2019 no. 10) expressly states that the right predates ESSOC: under the CGI and tax procedures code, someone who spontaneously files an amended return to correct a good-faith error faces no surcharge or fine in the vast majority of cases.
Another debate concerns whether failure to file annex no. 3916 by a taxpayer who has reported their income is a failure to declare or an error in the return. The answer will have consequences for the right to make a mistake and penalties.
In conclusion, the Portuguese community should be alerted and encouraged to correct matters promptly. Portuguese banks opening accounts in Portugal for non-residents could also usefully remind clients of this French reporting obligation as part of their duty to advise.
Pierre Emmanuel de OLIVEIRA
Doctor of Law
Lawyer (Bordeaux Bar)
Advogado (Porto Regional Council)