The control of high net worth individuals in France

Martine Meunier, FrancePublic Finances General AdministratorTuesday, September 29, 2015

The direct taxation of individuals in France include:

- The Income Tax (IR);

- The Solidarity Tax on Wealth (STF);

- Local Direct Taxes (IDL):

►Tax on residence;

►Land tax;

Individuals are also subject to registration fees:

►Inheritance fees, donation fees;

►Property transfer fees.

Direct taxation of individuals in France

- Income tax (IR);

►Is a tax established on the total income available to a tax household (couple) during one given year

►A progressive rate by income level is applied (5 sections; taxation rate going from 0% to 45%)

Direct taxation of individuals in France

Income tax in numbers (year 2014):

►Number of taxpayers: 37.119.219Taxable taxpayers: 17,621,436 (47,5%)

Non-taxable taxpayers: 10,163,120 (27,3%) Notifications of refunds: 9,334,663 (25,2%)

►Tax Revenues to the benefit of the State: 75,389 Ms €

Direct taxation of individuals in France

- Solidarity Tax on Wealth (STF):

►It is an annual tax which is due by the individuals in proportion of their assets when their net amount, on January 1er  of the tax year of reference exceeds: 1,300,000€

►The declared total net worth is taxed according to a progressive

rate by income level (6 levels; schedule going from 0% to 1,5%)

Direct taxation of individuals in France

- Solidarity Tax on Wealth (STF):

► the Solidarity Tax on Wealth is collected to the benefit of the State

Direct taxation of individuals in France

Direct taxation of individuals in France

- Local Direct Taxes (IDL):

They are collected in benefit of the local authorities

►Residence taxThe tax is due by any individual who is using a residence unit on

January 1 of the tax year.

►The land tax is collected on built properties and undeveloped lands

Direct taxation of individuals in FranceRegistration fees

They are collected at the time of an event affecting the assets:

◘ A transfer subject to payment: sale of a building,…

◘ A transfer on a free basis: donation, succession,…

The registration fees are fixed, proportional or progressive, according to the nature of the acts or the legal operations.

The control of high net worth individuals

Definition of the high net worth cases

►Individuals whose income is > 270 000 €(or 500 000 € if the income is from salaries)

►Individuals holding gross assets for a wealth tax amount higher than > 3.000.000 €

These cases are objects of a mandatory triennial control

The control of the Top Net Worth Individuals

The National Directorate of Tax Verification (DNVSF)

Is in charge of:

► external tax control of individuals whose gross income is > 762 000 €or whose gross worth of assets is > 6,900,000 €

► of desk audits of the top net worth cases (DTFE)I.e. the cases showing a gross income > 2,000,000 €or a wealth tax with gross assets > 15,000,000 €

External control of individuals

A specific procedure: the examination of the personal tax situation (ESFP)

► contradictory examination of the situation of an individual regarding the income tax

► implementation of a consistency check between the declared return/assets situation/element of lifestyle

► cannot normally extend beyond a year and confers rights and guarantees to the taxpayer

►allow to access all the bank accounts of the taxpayer (mixed or private) and to carry out an analysis of the appropriations/flows

Desk audits of HNWI

► Objective : to make of the DNVSF a directorate dedicated to the control of the individuals with very high net worth , both from income and assets

► Missions :

- Knowledge and the follow-up of family groups

- Installation of a total income/assets correlated audit method

► Results 2014 : 1,076 files investigated

90 M€ duties and penalties collected

The control of the high net worth individuals

The control of the HNWI (except top HNWI) is carried out by the Regional Directions of the Public Finances

► A specific structure: the pole of control income/assets (PCRP)

The structure includes specialists of various taxes allowing for a global solution

► an adapted methodology

By using internal databases and external requests, the service gathers all information on real estate and movable goods, occupations and the professional activities and company assets of the taxpayer, brings them closer from the completed returns and sets tables of coherence.

The control of the high net worth cases

Table of coherence:

► Treasury balance: income/expenses

► Coherence balance: incomes/ assetsor assets/income

E.g. : social participations and dividends, buildings and real estate income.

Results : this organization has made possible to bring a better qualitative follow-up for these cases, leading to the increase in administrative sanctions and higher penalties.

Specific procedures

Tax on assets held abroad

►Obligation for individuals domiciled in France to declare the bank accounts opened, used or close abroad and the references, duration, refund of the life insurance contract (s) subscribed to insurances companies established out of France

►As from 2013, the assets figuring on these accounts or life insurance contracts and not declared at least once during ten last years and whose origin is not not justified following a request of the administration are automatically taxed at a rate of 60 % .

The specific procedures

Service for treating corrective statements

►Created on 1st September 2013 within the DNVSF to allow the taxpayers holding undeclared assets to regularize their situation

►Objective : immediate payment of the corresponding taxes with reduced sanctions (transaction on penalties) leading to the absence of criminal prosecution

► Results to the 31/12/2014: on 34,591 received files, 4,037 were treated, which collected 1,9 M €

The specific procedures

Creation of a Tax Criminal Police

► Its scope of application include :(art. 228 of the LPF and 28-2 of the CP):

All individual or legal entity, for any undervalued or omitted tax (VAT, IR, Fee Registration, STF,…) when is detected:

- The direct use of accounts or contracts subscribed abroad

- The interposition of individuals or legal entities established abroad

- the use of a false identity or of false documents

- a fictitious or artificial domicile abroad

The specific procedures

Creation of a Tax Criminal Police

►Scope of intervention:

- A dedicated team: the National Brigade of Tax Crime Repression (BNRDF) made up of police officers and public finances agents.

- Legal means of investigation: seizures, searches, phone-tapping, police custodies…

- Requirement to qualify the fraud presumptions to be allowed to call the BNRDF by submitting a complaint for tax evasion without informing the taxpayer.

Thank you for your attention