The Anti Tax Evasion Changes


A closer look at the anti tax evasion changes introduced by the Loi de Finances Rectificative pour 2011, published on 28 December 2011.

The three year income and corporation tax “enquiry window” in respect of income or profits arising on undeclared accounts and life insurance policies held outside France, and profits from structures established in certain territories by French taxpayers, has been extended to ten years through Article 58 of the Loi de Finances. The new extended period is now in line with the present wealth tax back-assessment period and allows the French tax authorities a more joined approach as often back-assessment of wealth tax exposes undeclared income.

The extended time- frame for enquiry is no longer restricted to assets held in uncooperative territories. As such, French tax enquiries and penalties may apply in respect of any non French accounts or policies, even if these are held in an EU country or non- EU territories which have signed a double tax treaty or a Tax Information Exchange Agreement (TIEA).

By exception, the ten year tax enquiry window does not apply if the aggregate funds held in unreported accounts do not exceed €50,000.

It is specified that the enquiry period also applies to trustees’ disclosure obligations in respect of trusts which own French assets or which have French resident settlors or beneficiaries (see also our July 2011 and January 2012 bulletins).

This new measure applies from 30 December 2011 so tax years up to 2008 inclusive are “closed” in terms of any enquiries. However, tax year 2009 which would have been closed at 31 December 2012, will now remain open for enquiries up to 2019, in the circumstances described above. Going forward, the ten year period applies for all tax years post 2009.

This new measure, when combined with the recent spree of TIEAs, the newly added clauses relating to assistance in tax recovery contained within traditional double tax treaties, and the new trust reporting requirements is, no doubt, designed to provide an extended period during which the French tax authorities will be able to deal with any lengthy enquiries with other jurisdictions, and to generally counter perceived tax evasion.

Article 58 has also introduced a new accelerated enquiry procedure in order to “test” the goodwill of territories which have signed a TIEA or an assistance agreement with France within the last three years. In certain cases, this process may even be conducted without the targeted taxpayer’s knowledge. According to the French Government figures, out of the 230 requests for information issued to date by the French authorities to territories such as Andorra, Switzerland, Malta and Jersey, only 30% produced responses as at 31 August 2011. The French authorities had already announced, two years ago, that territories may find themselves on the French list of uncooperative territories if the assistance agreement was deemed ineffective.

To find out more please contact

PKF (Channel Islands) Limited
PO Box 296, Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA
Tel: + 44 (0)1481 727927
Fax: + 44 (0)1481 710511
Email: french.tax@pkfci.com
Internet: www.pkfci.com.
This document has been prepared as a general guide. It is not a substitute for professional advice. Neither PKF (Channel Islands) Limited nor its directors or employees accept any responsibility for loss or damage incurred as a result of acting or refraining to act upon anything contained in or omitted from this document. PKF (Channel Islands) Limited is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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The Anti Tax Evasion Changes
A closer look at the anti tax evasion changes introduced by the Loi de Finances Rectificative pour 2011, published on 28 December 2011. The three year income and corporation...

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