France to more than double penalties for non-reporting of trusts

Monday, 11 November 2013
Penalties imposed by the French government for non-declaration of a trust in any jurisdiction are to increase sharply to 12.5 per cent of the trust assets.

The duty on trust administrators to report details of trusts anywhere in the world with some connection with France was enacted in 2011 and came into full force last year. Currently the penalty for failing to disclose is 5 per cent of the trust assets, or a minimum of EUR10,000, whichever is larger.

The tough new penalties were overwhelmingly passed by the National Assembly last week, as part of a comprehensive new law that also imposes even more stringent reporting obligations on trustees.

The bill contains 58 separate measures, many aimed at residents who have concealed assets abroad. These measures are intended to reinforce the government's voluntary disclosure opportunity under which French taxpayers are urged to declare their hidden overseas assets ion return for limited penalties. Budget minister Bernard Cazeneuve expects the new campaign to bring in EUR2 billion of additional revenue next year.

Other measures include an increase in the penalty for failing to declare overseas assets for purposes of the ISF wealth tax. This is to be increased from 10 to 40 per cent. Also, foreign jurisdictions that have not 'embarked on the road' to automatic exchange of tax information by 1 January 2016 will be blacklisted.

Undeclared assets held abroad, and which cannot be proved to be of legitimate origin, are to be taxed at 60 per cent. Recovery times are to be extended from six years to ten years on goods or unregistered rights in a bank account, a life insurance contract or a foreign trust.

The statute of limitations for criminal tax offences is to be increased from three to six years, and the limitation period for recovery action against taxpayers living abroad will also be extended. Maximum jail sentences for 'aggravated' tax evasion are to rise from five to seven years, along with fines of up to EUR2 million. 'Aggravating' factors include using bank accounts or entities held abroad, or through falsification, the use of intermediate entities, or the dishonest use of offshore accounts or falsely claiming to be domiciled abroad.

Tax evaders will be given the chance to halve their sentences by informing on their accomplices or other perpetrators.

The new bill also grants the tax authorities powers to use any information they receive regardless of origin. This includes illegally obtained information communicated by a judicial authority or under an international administrative assistance request. The purpose of this measure is probably to neutralise a decision of France's Supreme Court, which in early 2012 ruled that information on 15,000 HSBC Private Bank clients stolen from the bank's Geneva branch could not be used in tax evasion prosecutions.

'With these measures and the development of international cooperation, fraudsters need to know that they can not escape punishment for very long', noted Cazeneuve, whose predecessor in the finance ministry, Jerome Cahuzac, was prosecuted this year for operating an undeclared EUR600,000 Swiss bank account.


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