Regularising previously undeclared foreign accounts

The situation

Our support

1. 01

   Reconstructing all the accounts and flows

   We began by drawing up an inventory of the accounts held abroad:

   • institution and country of opening;
   • number and type of account;
   • date of opening or closing;
   • years during which the account had been used;
   • balances and assets held;
   • interest, dividends and capital gains realised;
   • income already reported in France.

   This reconstruction made it possible to distinguish two situations:

   • accounts whose income had already been correctly reported, but for which the specific form had been omitted;
   • accounts for which certain income also had to be regularised.

   This distinction has already been adopted in matters handled by the firm: the omission can sometimes concern only form no. 3916, without correcting income, while discrepancies identified on other accounts must be included in amended returns.

   Point of attention. Reporting the income of a foreign account does not remove the requirement to report the existence of the account itself.
2. 02

   Determining the years and returns to correct

   Individuals domiciled in France must report, with their income tax return, the references of accounts opened, held, used or closed abroad, in accordance with article 1649 A of the CGI.

   We determined, account by account and year by year:

   • the forms no. 3916 to be filed;
   • the income tax returns to be corrected;
   • the foreign-source income to be reported;
   • the tax credits that might apply;
   • the missing supporting documents to request from the financial institutions;
   • the period likely to be examined by the tax authorities.

   Simplified example: five accounts omitted over four years may require up to 20 forms no. 3916, i.e. one form per account and per year concerned.

   Where old statements were no longer all available, we used a cautious, documented method, explaining the assumptions used. This approach was applied, in particular, in a matter where the multiplicity of institutions made it impossible to verify the use of each account over the whole period.

3. 03

   Assessing the taxes, interest and penalties

   We then estimated the financial exposure linked to the regularisation:

   • additional tax on any omitted income;
   • applicable social levies;
   • late-payment interest;
   • surcharges that may be claimed;
   • fines for failure to report the accounts.

   Failure to report is, in principle, penalised by a fine of €1,500 per account and per non-time-barred year. This amount may be raised to €10,000 in certain situations provided for by the legislation.

   Simplified example: for four accounts omitted over three years, the theoretical fine may reach €18,000, on the basis of €1,500 per account and per year, before considering the circumstances and the rules applicable to the matter.

   We presented the client with an estimate clearly separating the tax due on any omitted income from the penalties attached to the mere reporting omission.

4. 04

   Preparing a voluntary, documented disclosure

   We prepared the amended returns and a letter setting out:

   • the origin of the accounts;
   • the reasons for the omission;
   • the client’s voluntary approach;
   • the steps taken to obtain the foreign documents;
   • the income that had already been reported;
   • the further corrections made;
   • the measures taken to ensure compliance in the following years.

   Where the accounts had been opened by the employer under employee share plans, we explained why the client might not have been immediately aware that they personally held them and that a French return was required. This type of circumstance has already been documented in the disclosure matters prepared by the firm.

   Point of attention. A regularisation is not just about filing forms: it must explain the origin of the omission, reconstruct the flows and demonstrate the compliance effort.

   We also sought a measured assessment of the penalties in light of the client’s good faith, the voluntary nature of the approach and the difficulties encountered in identifying the accounts concerned.

5. 05

   Securing future returns

   Finally, we put in place an annual follow-up allowing:

   • accounts opened, held, used or closed to be listed;
   • accounts opened by an employer or a share-plan administrator to be identified;
   • foreign tax statements to be collected;
   • reported income to be reconciled with the movements recorded on each account;
   • the forms no. 3916 to be prepared at the same time as the income tax return.

   In the regularised matter, all the accounts concerned were then reported in the following year’s return to avoid repeating the omission.