Foreign bank accounts: top French court clarifies rules after US account case

A widow living in France who inherited her husband’s US bank account has lost a case in France’s top court over her failure to declare it to the French tax authorities, leaving her liable to pay back taxes and a fine.

French taxpayers must declare the existence of foreign bank accounts they use during a given tax year. The obligation also extends to accounts opened, closed or (now) simply held in the relevant tax year.

The extent of this rule was again affirmed in a ruling by France's top administrative court, the Conseil d’Etat, on October 14.

The court heard an appeal by a widow and French tax resident - known in court filings as Ms D.A - who, following her husband’s death, had, in 2012, liquidated US stock options that had been held in a US account in his name. 

The money was received into the account, and she was later found not to have declared its existence in her French tax return for the year. 

What is more, the sums were not declared, and there is a presumption that sums transferred abroad via an undeclared foreign bank account are assessable for tax in France. 

In 2017 the French tax authorities invoked a ten-year statute of limitations to tax the profits from the liquidation of the stock options and to fine Ms D.A. for non-declaration of the account. The ten-year statute of limitations would have otherwise not applied had the account been adequately disclosed. 

She twice appealed on the grounds that she had not opened it in her name.

Nonetheless, the Conseil d’Etat, in its role as the appeal court for administrative matters, ruled that she was indeed liable for both back tax and fines on the grounds that she had been aware of the account’s existence before the end of 2012 and she had instructed a US-based company to pay her deceased husband’s stock options into it.

She had therefore ‘used’ it, even if it was not in her name.

Read more: Key errors foreigners may make with French tax declarations

Declaring foreign bank accounts

Typically, foreign accounts are declared on an annual basis along with the income tax declaration by completing the form 3916 - 3916 bis. Once the form has been completed, it is automatically carried over to the next year’s declaration.

Under the latest rules, this includes accounts opened, closed, used - or (now) simply held in the relevant tax year.

However, there is an exemption if the account is adossé à (linked to) a French bank account and you use it for online purchases or to receive money from selling goods, and the latter does not exceed €10,000/year.

Failure to declare a foreign bank account can result in penalties of €1,500 per account and per year of non-declaration.

Furthermore, if the account is located in a country without a tax avoidance and evasion agreement with France, the fine rises to €10,000 per account.

If you have not declared an overseas account it is advisable to do so as tax offices may make allowance for genuine mistakes. 

Since the 2024 income tax declaration period for 2023 taxes is closed, in order to declare a foreign bank account open in 2023 (or prior) you would need to contact your tax office directly, which you can do via your personal space on impots.gouv.fr.

They will require details of these foreign accounts, including the type of account, where they are located and how long they have been open.

Nonetheless, you can still correct some parts of your declaration until December 4, including adding certain kinds of income or rectifying a mistake in some figures.

Read more: How to correct your 2024 French tax declaration

The deadline under which changes to your 2024 tax declaration (2023 income) is looming. Not everything can be changed including the declaration of any forgotten foreign bank accounts. We are interested to know if any readers have received penalties for not declaring a foreign account - and if they forgot one and later declared it - how it was treated. Any replies will be confidential. If this concerns you, contact us at news@connexionfrance.com