New Flophouse Address:

You will find all the posts, comments, and reading lists (old and some new ones I just published) here:

Wednesday, October 9, 2013

Paypal is "offshore"?

With the stroke of a pen, millions of French have become "tax evaders."

And once again the notion of a "foreign" account is interpreted in such a way to include something that I'm sure the average French resident (and any reasonable person for that matter) would not consider to be "offshore."

I'm sure you all know what Paypal is - a nifty on-line payment and money transfer system.  It's so simple and elegant.  Just open an account (it's free) and then pay for your on-line purchases without all the hassle of hauling out your credit card every time you want to order, say, bulbs for the garden from an on-line catalog.

Imagine everyone's surprise when a few days ago a judge in Pau handed down a hefty fine for an individual because he had a Paypal account.

How, in heaven's name, could having such an account put one at risk of being accused of fraud and facing a 1,500 Euro fine?

It goes back to a form called CERFA 1190606.  It resembles the FBAR that "US Persons" have to fill out and send to Detroit but differs in that only tax residents of France are required to file it.  Here's the rule:
"Les particuliers, les associations et les sociétés n'ayant pas la forme commerciale sont tenus de déclarer, en même temps que leur déclaration de revenus ou de résultats, les références des comptes ouverts, utilisés ou clos à l'étranger au cours de l'année de déclaration
(Individuals, associations and non-commercial companies must declare, at the same time they declare their income, information about active accounts, used or closed, outside of France for that fiscal year.)
We know this form well.  As tax residents in France, my French spouse and I must declare any accounts we have in countries outside of France.  It just so happens that my spouse (not me) has an old Boeing Employee Credit Union account in Seattle with a few dollars in it. That account is definitely "foreign" because we don't live in the US. Given the United States' reputation as a paradis fiscal (tax haven) we understand why we have to declare it and we do.

But Paypal?  Since when is a Paypal account an offshore account?

Because Paypal's HQ in Europe is not in France, it's in Luxembourg.  Technically, and according to a very strict interpretation of the law, it is a foreign account and that's how the judge ruled.   

Who knew?

You can read more about it on Maître Catherine Taurand's blog.  She has updated her original post with   some reassuring words from the Direction Générale des Finances publiques.  She reports:
La direction générale des Finances publiques a tenu à rassurer les personnes détentrices d'un compte Paypal en assurant qu'elle n'infligerait pas d'amende à des personnes françaises qui utilisent une solution de paiement dématérialisée (de type Paypal ou autre) pour faire des achats ou des transactions de vie courante.
(The Public Finance administration has tried to reassure those owners of Paypal accounts by saying that they will not penalize French individuals who use on-line payment systems (Paypal or other) for daily purchases or transactions.)
How sensible of them.  I have to admire their handling of the situation - their quick reaction and reassuring response.

Yet another example of why I am perfectly happy to pay high taxes in France.  Good public service is not free and I see every day that my taxes go toward something very important:  responsible government and efficient administration.

Something I do not see when I look across the Atlantic today.


Ellen Lebelle said...

I think they are going to be "understanding" if people just use their paypal account as a transfer account, tied to their credit card.
However, if people use their paypal accounts to store funds, which they then use to pay for things or services, it might be considered in the same light as a checking account.
As treasurer of an association, a lifetime ago, the association used the paypal account to attend attendance fees at events and then used the account to offset speaker expenses when the speaker used a currency other than EUR. It was easier that way. Then, at the end we just transferred whatever remained in the paypal account to our regular checking account.

Unknown said...

For a while, I was using Paypal to legally transfer money without paying a transfer fee, but someone somewhere didn't like that, so I can't get it to work anymore.

Victoria FERAUGE said...

@Ellen, I think you're right. Until they put out a definitive notice about this, I'm going to start reporting ours. Just to be on the safe side.

@Dani, You're kidding. Do you know what happened? Did they simply drop your account or what?