Paypal Accounts are Taxable in France
Got a Paypal account and resident in France? Better remember to declare it on your next tax return or face a 1500 euro fine — even if its empty.
Anyone who is French resident for tax purposes and has a Paypal account used say, for online shopping, and who fails to declare it on their annual tax return will effectively be treated in the same way as former budget minister Jérôme Cahuzac over his Swiss bank account.
This is the view of French tax lawyers following a decision by the Pau Administrative Court. The court took the view (see: TA Pau, 1re ch., 25 avr. 2013, n° 1101426, M. Charobert : JurisData n° 2013-018120) that accounts with Paypal Europe — headquartered in Luxembourg — are foreign accounts subject to the French reporting requirements, given that the account allows holders to shop on-line using funds held in that account, says French tax lawyer Maître Catherine Taurand writing on her blog.
Separately she told Slate’s Cécile Dehesdin she felt the decision was “a very wide interpretation indeed of the concept of an offshore account”. However following this finding French tax authorities can theoretically use the Pau decision to tackle Paypal account holders if they fail to declare any Paypal account they hold (French law requires taxpayers to declare any offshore account opened, used or closed in each tax year).
However even if the decision is considered as final in law, in the sense that those involved do not appeal, it remains “eminently debatable and could be challenged. If for instance someone else took up the matter another court might decide differently,” Maître Taurand added.
In particular she felt that this would be the case because often “the balance on such accounts is only a few euros, and more unfairly the fine is immutable — 1,500 euros for individual taxpayers who overlook a few euros in a (non-interest bearing) Paypal account”.
The difference between the behaviour of a Paypal account holder and say Jérôme Cahuzac (the disgraced ex-Socialist minister who resigned from government March 19 amid embarrassing investigations into allegations he stashed money away in a Swiss account. France 24, citing a judicial source, said Jérôme Cahuzac hit more trouble Sept 12 after he was placed under formal investigation for allegedly failing fully to disclose his financial holdings to the state) is that he was accused of opening an account abroad for the express purpose of tax evasion, whereas a Paypal account is in all probability opened to buy a book on Amazon or some similar consumer transaction.
As explained in the Cahuzac case having a bank account abroad is neither illegal nor curtailed provided it is declared to the French tax authorities. Anyone can open an account outside France, without limitation, but they are required to check appropriate boxes on their annual tax return and to complete form CERFA 11916 reporting any income from such account or accounts, even when ‘there is no money in the account’ adds Maître Eolas, a well known French lawyer:
NB :le compte Paypal doit être déclaré même s’il y a 0 euro. Sanction = 1500 euros d’amende. #NousSommesTousDesCahuzac
— Maitre Eolas (@Maitre_Eolas) October 4, 2013
Story: Ken Pottinger
A BMF TV report of October 8 updates this information as follows: “Maître Catherine Taurand noted that ‘a great many technical accounts are opened with foreign operators, whose nationality is often ignored by those opening them, and this suggests the French tax authorities will be able to impose thousands of fines’.”
However those same authorities appear to see it differently. The TV report says an (unnamed) tax department source told the broadcaster: “any French resident using paperless payment solutions (PayPal or other) for purchases or transactions involved in everyday living, need have no concern, they will not be pursued by the taxman. The only time a French resident may have a liability is when, as an individual taxpayer, they make regular sales through the Internet which comprise the majority of their time and their income. In such cases these activities and accounts should be declared.” However the source added: “In any event, if you are in any doubt, declaring the account is a simple formality and doing so will save you from any later problems”.
In other words, as a French tax adviser once told this writer: “Unless you have it to the contrary and in writing from a properly identified tax inspector, better play safe and follow all the legal requirements to the letter”!
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