PayPal and the French tax authorities, how does it work?

PayPal is an electronic payments service allowing money transfers (sending, receiving) in the context of transactions with individuals, for payments to merchants on eBay or other online sales sites.

PayPal Europe being a financial institution based in Luxembourg, a PayPal account is legally considered to be an account opened abroad. In principle, any account held abroad must be declared to the French tax authorities, under penalty of sanctions (fine, penalties). But the tax administration has provided for an exemption from this obligation under certain conditions, applicable to most PayPal account holders residing in France.

Account abroad: mandatory tax declaration

What the law provides

In application of article 1649 A of the CGI (General Tax Code), the holder in 2023 of an account opened abroad is required to declare it to the French tax authorities at the same time as his tax returnin April-May-June 2024.

“Natural persons (…) domiciled or established in France, are required to declare, at the same time as their income or profit declaration, the references of accounts opened, held, used or closed abroad.indicates article 1649 A of the CGI.

This principle applies regardless of the use made of the account (personal or professional).

Account number, opening date… Information to declare

For each account, the taxpayer domiciled in France must provide details of all the following references:

  • name and address of the establishment with which the account is opened
  • designation of the account: number, nature, use and type of account (electronic money account, bank account, savings account, term account, etc.)
  • date the account was opened or closed in the past year
  • surname, first name, date and place of birth, address of the account holder or his representative

Declaration 3916 – 3916 bis online

The declaration of a Paypal account is carried out, in the case of online income tax declaration, using the annexed declaration n°3916 – 3916 bis. Sometimes this statement is pre-checked, sometimes not.

The procedure is as follows when annex declaration no. 3916 – 3916 bis is not pre-checked:

  • in step 3 of the online declaration “Income and expenses”, click on the button ANNEXES declarations
  • check the box “Declaration by a resident of an account opened outside France N° 3916 – 3916 bis”
  • click on “Validate”
  • enter the number of accounts to declare in the field after the question “How many accounts opened outside France do you wish to declare?” »
  • complete the four sections of the form (the third is not necessary in the absence of a power of attorney):
    1. Identity of the declarant(s)
    2. Name, first names, date and place of birth, domicile of the account holder(s)
    3. Name, first names, date and place of birth, domicile of the holder(s) of the power of attorney on the account
    4. Designation of the account opened, held, used or closed abroad
  • Click on “next” (twice)

In the account designation sectionyou must complete the following fields:

  • Account name
  • Designation of the establishment, organization, administration or person managing the account
  • Address (number and street), municipality and country: for Paypal: PayPal (Europe) S.à.rl et Cie, SCA 22-24 Boulevard Royal L-2449, Luxembourg
  • Account number
  • Account Features
  • Opening date (dd/mm/yyyy)
  • Closing date (dd/mm/yyyy)

To note : when declaration no. 3916 – 3916 bis is completed, box 8UU “Accounts opened, held, used or closed abroad” located at the end of step 3 of the online declaration “Income and expenses” is checked automatically.

Declaration with or without the Cerfa 11916 form

These elements can be declared as desired, in the event of a tax declaration made on the paper form:

  • on plain paper modeled on form n°3916 – 3916 bis
  • or by means of declaration form n°3916 – 3916 bis (Cerfa form 11916 *12 or 50869 #13) entitled “ Declaration by a resident of an account opened, held, used or closed abroad“.

The 2023 version of the form is available on the impots.gouv.fr website for download since April 2, 2024. > Click here to download it

These indications must be renewed each year when preparing the annual income tax return. In addition, you must check the box 8UU dedicated to “Accounts opened, used or closed abroad”.

Please note, these steps aim to:

Likewise, every taxpayer is concerned, whether one is taxable or non-taxable on his income.

Declaration 3916 – 3916 bis of holding an account abroad pre-checked, what to do?

The annexed declaration n°3916 – 3916 bis is sometimes pre-checked in the online income declaration for holders of a Paypal account for whom annual collections are less than 10,000 euros. For what ? Because Paypal Europe, the company operating the account, is a company domiciled in Luxembourg and not in France. This method has existed since the 2021 declaration on 2020 income.

In this case, the obligation to declare a foreign account does not apply.

If the Paypal account holder does not have any account or life insurance contract held abroad, he or she can avoid this obligation by carrying out the following procedure (it's very simple):

  1. in step 3 of the online declaration “Income and expenses”, click on the button ANNEXES declarations
  2. uncheck the box “Declaration by a resident of an account opened outside France No. 3916”
  3. click on “Validate”

Sanctions for non-declaration

In the event of non-declaration, a fine of 1,500 euros is due per undeclared account. Beyond a total amount of 50,000 euros in assets (on one or more accounts), the fine per undeclared account is equal to 5% of the credit balance, with a minimum of 1,500 euros. Penalties may be added to these fines: taxation of undeclared assets, with an increase of 40% applied in the event of an omission.

PayPal account: no declaration obligation, under conditions

In the majority of cases, holding a PayPal account is not subject to the declaration obligation provided for by law. This is the consequence of the opinion given on November 12, 2013 by the General Directorate of Public Finances (DGFiP) on the question, shortly after a decision of the administrative court of Pau which had condemned an antique dealer for failure to declare his Paypal account.

Thus, according to a note published in BOFiP-Impôts (the official tax bulletin), the obligation to declare an account held abroad does not apply provided that the three cumulative conditions are met following:

  1. the account allows you to make online payments for purchases or collections in connection with the sale of goods
  2. this payment services account requires the holding of another account opened in France, to which it is backed
  3. the total sums credited to this account resulting from sales made by its holder is less than or equal to 10,000 euros per year.

If these three criteria are not met, the exemption from obligation is not applicable. The holder must then fulfill the declaration formalities imposed by law.

Are amounts in a PayPal account taxable?

Any applicable taxation is not the responsibility of PayPal Europe. In its conditions of use, the company specifies that it is not “in no way responsible for determining applicable taxes” transactions carried out by the account holder, “nor to collect, report or remit any taxes associated with a transaction.”

In fact, the taxable event is not linked to money transfers or the balance held in a PayPal account. It arises from the activity at the origin of the financial flows passing through the account.

Several situations can then arise:

  • Non-taxation: use of the PayPal account for personal or family purposes, for example to resell second-hand goods (a bed, trinkets, toys, etc.) from time to time on Le Bon Coin for example. In this case, it is not a paid extra-professional activity.
  • Taxation: use of the PayPal account as part of a paid activity (example: sale of self-made objects, purchase-resale activity to make a profit). In this case, the income must be declared as non-commercial profits (BNC) for an occasional activity or as industrial and commercial profits (BIC) if it is a usual activity. There are then different declaration methods, depending on the nature of the activity and the amount of turnover achieved (micro regime or real tax regime).

> To find out more, read the article Income tax return for Internet sales between individuals

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