Authors:
FATCA regulations in France: Your guide to negotiating FATCA while in France.
REF: 043:
In order to open a corporate bank account in France, you must comply with certain rules beforehand. FATCA (Foreign Account Tax Compliance Act) is an American law which was created in 2010 on March 18th. Its aim is to collect and store information in order to combat fraud and tax evasion.
This regulation is an obligation for any foreign financial institution (Institutions Financières Étrangères or IFÉ). Due to it, France must provide all information regarding bank accounts possessed by American Taxpayers (regardless of their place of residence) to the US tax authorities. In case of non-compliance with this obligation, a withholding tax of 30% could be applied.
The G5 states (France, Germany, United Kingdom, Spain and Italy) have negotiated an intergovernmental agreement model that allows for automatic exchange of information with the United States.
Which French financial institutions fall within the scope of the FATCA agreement?
The French financial institutions that are covered by the agreement are banks, insurance companies and undertakings for collective investment (UCI).
According to the FATCA agreement, declarable accounts are the following:
- Any equity or debt security issued by a financial institution
- A deposit account with a balance of more than $ 50,000 (for individuals) or $ 250,000 (for corporations) or whose balance in all aggregate deposit accounts exceeds $ 50,000 (for individuals) or $ 250,000 (for corporations)
- A conservative account, which is a securities account opened for the benefit of another person and which includes financial instruments or contracts for investment purposes (shares or company shares, bonds etc.)
- An insurance contract with a cash value greater than $ 50,000
- An annuity contract
On the other hand, non-declarable accounts pursuant to Annex II of the FATCA Agreement are as follows:
- Retirement accounts or products (popular retirement savings plans (PERP), company retirement savings plans (ERP), ‘Madelin’ contracts etc.)
- Regulated savings accounts (savings books (LEP), housing savings plans (PEL) etc.)
- Employee savings accounts (participation agreements, company savings plans (PEE), inter-company savings plans (PEI), group retirement savings plans (PERCO) etc.)
- Other financial accounts or products (funeral contracts, bank accounts of the syndicates of co-owners etc.)
French financial institutions must identify and report the US accounts. They are subject to due diligence obligations depending on the nature of the account.
An account must be reported if the financial institution identifies US indicators that demonstrate that the account holder is a US national or US resident for the private persons and legal persons.
The financial institution does not state a declarable account when it receives a self-certification from the client that it is neither a US national nor a US resident or obtains any supporting documentation (e.g. non-US passport).
The following are not considered to be US individuals:
- Companies whose securities are regularly traded on one or more regulated market(s)
- Organisations exempt from taxes in the United States
- Real Estate Investment Trusts
- Regulated investment companies or any entity registered with the Securities and Exchange Commission (SEC)
- Tax-exempt trusts
Financial institutions must report declarable accounts to the French Treasury, which transmits the US tax authorities to the Internal Revenue Service (IRS).
In addition, according to their commercial policy, they may not accept a new customer or refuse to retain a customer who does not provide the requested documentation within a 90-day regulatory period.
If you find that this regulation is applicable to you or you are looking to open a bank account in France, we can help you obtain the authorisation to do so without any trouble. Here at Maupard, we would be more than happy to advise you on the next steps and to allow you to make the most of these opportunities.
Do not hesitate to contact us by telephone on +33 (0) 1 53 93 94 20 or by e-mail to [email protected], so we can work out the needs of your business. Our team of experts is here to answer any questions you may have.
