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March 24, 2020 French Tax Authorities release guidance on new reporting of recalcitrant account holders for CRS purposes Executive summary France has introduced a new reporting requirement, to be filed in 2020, for French Financial Institutions (FIs) with respect to the Common Reporting Standard (CRS) and “recalcitrant account holders.” For background on the new reporting requirements, see EY Global Tax Alerts:
In addition, the French Tax Authorities most recently have:
FIs should report all account holders who have not provided the FI with the relevant information regarding their tax residence(s) and, where applicable, the related Tax Identification Number(s) (TIN) of the account holder (or the controlling person, if needed) after the expiration of the period of 30 days following the receipt of the reminder sent by the FI. These defaulting account holders constitute “recalcitrant account holders” for CRS purposes. It is important to note that such concept is different from the “undocumented account.” The due date of the first reporting of “recalcitrant account holders” is scheduled on 30 March 2020. Nevertheless, the French tax authorities have introduced a measure of tolerance for the first year of reporting by authorizing the FIs to submit the return on 3 June 2020, at the latest. Applicable penalties are:
This Alert addresses the new requirements published by the French Tax Authorities to highlight the main areas for FIs to identify and report the “recalcitrant account holders” for CRS purposes. Detailed discussion The status of account holders who can be classified as “recalcitrant account holders” for CRS purposes
All pre-existing account holders and new accounts of pre-existing account holders are excluded from this new reporting requirement and cannot be classified as “recalcitrant account holders” for CRS purposes.
New entity accounts who have not provided the FI with the relevant information regarding their classification status only (Passive or active Non-Financial Entity) are excluded from this new reporting requirement. In this case, the FI must assume that the NFE is passive and must report the controlling persons as “recalcitrant account holders” if no information regarding their tax residence(s) and, where applicable, the related TIN (if any) of the controlling persons are available.
New account holders identified as being tax resident in any of non-reportable jurisdictions (including any account holder located in United States) are excluded from this new reporting requirement and cannot be classified as “recalcitrant account holders” for CRS purposes. Please note that the list of the reportable jurisdictions has been updated in the article 2 of the decree issued by the French Government on 10 February 2020.
Closed accounts are included in the reporting of “recalcitrant account holders.” However, this rule is not applied to all the new accounts closed between 1 January 2016 and 26 February 2020. In practice, for the 2020 “recalcitrant account holders” reporting campaign, all closed accounts are therefore excluded from this new reporting requirement and cannot be classified as “recalcitrant account holders” for CRS purposes.
As soon as the account holder has not replied to at least one self-certification request, he must be included in the list for this account; it is therefore not necessary to declare all the accounts held by the “recalcitrant account holder.” The steps to be considered by FIs to correctly complete the reporting of the “recalcitrant account holders” in time FIs must send the complete list of the “recalcitrant account holders” before 30 March 2020 to the French Tax Authorities. The French tax authorities have introduced a measure of tolerance for the first year of reporting by authorizing the FIs to submit the return by 3 June 2020, at the latest. This list includes all the accounts holders who have not responded to the reminder of the FIs within 30 calendar days (article L.102 AG of the French Procedure Code). The process to be followed is detailed below and should be duly applied by each FI to determine the accurate list of the “recalcitrant account holders”:
Requests must be sent by post or e-mail to the account holder’s last known address, but FIs should keep an audit trail of the submission or, where applicable, of the receipt by the account holder. For additional information with respect to this Alert, please contact the following: Ernst & Young Société d’Avocats, Financial Services Office, Paris
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