Guide to Banking in France

9. French Bank Savings Accounts

1. European Savings Tax Directive/Exchange of Information
2. Regulated Savings Accounts
3. Standard Savings Accounts
4. Home Buyers Savings Accounts

The term most generally used for a bank savings account in France is compte d'épargne. It may also be called compte sur livret.

We do not review investment based savings schemes here, but we hope to be able to do so in the future. These schemes generally require that you tie up your cash for a specific period, and their returns are related to the performance of the stock market or government bonds.

Nevertheless, take a look at our short review of life insurance policies, as they can operate as tax efficient savings schemes in France, although their advantages have been eroded in recent years. Particularly useful for those arriving in France with a lump sum to invest and planning for inheritance.

9.1. European Savings Tax Directive/Exchange of Information

Since 2005 the European Savings Tax Directive came has been in force, under which the 39 signatories have agreed to exchange information about customers who earn interest in one country, but live in another.

All countries within the EU are signatories to the agreement, as well as many other countries.

This means that if you are resident in France, interest earned on a bank account in a signatory country will be reported to the French tax authorities and, in some cases, subject to a withholding tax.

Likewise, if you are non-resident, and you hold savings in a bank account in France, the amount of interest earned on the account will be reported to the tax authority of your home country if they are a signatory to the agreement.

Neither should you assume that, even if you are able to circumvent the rules of the European Tax Directive, this will necessarily grant you the privacy you seek concerning your financial affairs.

The European Directive of 15 February 2011 on administrative cooperation on tax field, known as DAC 1 ('Directive on administrative cooperation'), provided for an automatic exchange of information on income originating in a Member State and received by a resident of another Member State. This concerns the following income categories:

• employment income (salary, wages, etc.);

• Directors' fees and attendance fees;

• life insurance products not covered by other EU legal acts concerning the exchange of information (Savings Directive);

• pensions ;

• real estate assets and income from real estate.

This directive came into effect in 2015, on income in 2014.

In addition, bilateral Tax Information Exchange Agreements (TIEAs) between France and some tax havens are becoming a much more common, and although the information requests are not common (and work with variable levels of effectiveness), France is taking determined action to cut down on the level of tax evasion that it believes occurs through offshore accounts.

More widely, the global standard on Automatic Exchange of Information (AEOI) under the auspices of the OECD provides for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence.

These standards provide for sharing of information about financial assets outside of your country of residence, including interest, dividends and other financial assets.

Not only banks involved, but other financial bodies, such as insurance companies and investment companies.

As you are legally required by the French tax authority to declare all foreign bank accounts on your tax return you face the prospect of a heavy fine if you do not comply with disclosure procedures. These fines are notably higher for offshore tax haven accounts. Accounts in which there has been no debit or credit in the year are exempt from the mandatory declaration.

In short, if you want to sleep at night, you really need to be open and honest with the authorities about your financial affairs!

There are options that you may be able to take, although the legal risks with some of these options is substantial.

This, some banks offer the option of a 'deferred interest' account, so that, whilst interest is still accrued on your capital, it is not paid into your account until you elect to do so. However, you may still be liable for payment of a withholding or 'retention' tax when, ultimately, you do credit the funds to the account.

Another option is to have an EU account held jointly with someone who lives outside the area of jurisdiction of the rules, and choose for the other account holder to receive the benefit of the interest. In these circumstances, the account is outside of the scope of the tax directive.

There are also certain types of financial instruments that are exempt from the regulations, notably certain types of securities, equities and life insurance products. In addition, non-financial assets are not covered by the regulations.

Finally , it is possible to set up legal structures that disguise the identity of the beneficial owner, which authorities find difficult to penetrate, by the use of non-cooperating tax havens, but the costs of such processes are substantial and it would be illegal to do so.

Whichever option you choose, you should take professional advise before you make a final decision. Be aware also that accountants, lawyers and other professionals dealing with client funds are all subject to French, EU and other international regulations on money laundering, which makes it a requirement for them to maintain proper records and report suspicious transactions.

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