In a recent instruction dated November 29, 1995, the French Tax Authorities have given some precisions regarding the obligations of credit institutions linked to capital transfer operations.

Indeed, according to article 1643 A of the French General Tax Code, individuals, associations, non-commercial companies (silent partnerships, economic interest grouping, foreign companies establishments, non-trading companies) domiciled or set up in France, must file, at the same time as their tax return, the references of the accounts open, used or closed abroad.

Credit institutions must transmit to the Tax Authorities, upon request by the latter, the date and amount of sums transferred abroad by the aforesaid people, the identification of the creditor and the beneficiary as well as the references of the involved accounts in France and abroad.

These provisions also apply to operations realised on behalf of these persons on the accounts of non residents.

Upon request by the Tax Authorities, the credit institutions must communicate:

- the date and amount of the sums transferred in French francs or in foreign currency,
- the identification (name or business name and address) of the individual, the association or the non-commercial company, the author of the transfer and the references of its account (account number and references of the account agency),
- the identification (name or business name and address) of the beneficiary of the transfer and references of its account (account number and references of the institution or account agency).

Concerning cheques, the credit institution must communicate to the Tax Authorities the name of the beneficiary written on the cheque by the drawer, as well as the references of the foreign credit institution which presented the cheque for clearance.

Failing to this right of communication triggers the application of a particular penalty as provided for by Article 1740 bis of the French General Tax Code.

The penalty is applied to any failing to the obligations provided for by article L. 96 A of the French Tax Procedures Book. Thus it especially applies to the lack of communication of an information necessary to the precise identification of a transfer operation, the undisclosure of a transfer operation, the lack of communication of justifying elements regarding a transfer operation or the refusal of communication.

The fine is equal to 50% of the amount of the sums not communicated.

When the author of the transfer proves that the Tax Authorities did not bear any damage owing to the failing of the credit institution regarding the communication right, the rate of the fine applied against the latter is decreased to 5%. The amount of this fine may in this case be ceiled at FF 5,000 if it is a first offence of the institution involved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances.

For additional information contact Claire Acard on 33/(1)/55 61 10 10, Lionel Benant on 33/78.63.72.35 or Joel Fischer on 33/78.63.72.58 or enter text search: "ARCHIBALD ANDERSEN Profile". The members of ARCHIBALD ANDERSEN Association d'Avocats (S.G. Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.