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Source : Cour de cassation – Base Open Data « Judilibre » & « Légifrance ».

Barreau de Paris Immobilier, sociétés, affaires Fiche CNB avocat.fr
Maître Reda KOHEN, avocat au Barreau de Paris
Maître Reda KOHEN
Avocat au Barreau de Paris

Your ISA Is Not Tax-Free in France After Brexit: How a British Resident Declares It, Pays French Tax, and Challenges the Bill

You opened an Individual Savings Account in Britain, watched the interest and dividends roll up exempt from British tax for years, then moved to France after Brexit and assumed the shelter travelled with you. It does not. London will happily let you keep the account open, yet Paris taxes you on everything inside it, every year, as if the British wrapper did not exist. British residents in France discover this the hard way: a cash ISA whose interest was never declared, a stocks and shares ISA whose dividends never appeared on the French return, and then a letter from the tax office asking where the money came from. This guide explains, for a British reader living in France, why your ISA loses its British tax shelter the day you become French tax resident, what France taxes inside a cash ISA and a stocks and shares ISA, how you declare the account and the income on the French forms, when the 30% French flat rate beats the progressive scale, and how you challenge a bill that goes too far. French legal terms are explained the first time they appear, every decisive rule is tied to its official source, and the court decision quoted below shows what an undeclared foreign account really costs.

I. Why Your ISA Loses Its British Tax Shelter When You Become French Tax Resident

A. “Can I Keep My ISA When I Move to France?” What London Allows and What Paris Adds

Start with the reassuring half of the answer, the British half. So long as you hold an Individual Savings Account, universally called an ISA, British law exempts what grows inside it. The government guide states the rule plainly: no British tax on interest on cash held in an ISA, and none on income or capital gains from investments held in an ISA, adding that a person who completes a British tax return does not even have to declare ISA interest, income or gains on it. Each tax year you may shelter up to £20,000 of subscriptions, and the allowance is strictly annual. That is the shelter you remember, and it is entirely a creature of British domestic law. You can read it in full in the official guide to how ISAs work.

Moving abroad does not close the account, and this is where the misunderstanding begins. The official page for leavers says that a person who opens an ISA in Britain and then moves abroad to become non-UK resident cannot pay further money into it, apart from narrow exceptions for Crown employees serving overseas and their spouses or civil partners. It adds that the provider must be told as soon as UK residence ends. And then comes the sentence everyone remembers: the account itself may stay open with British tax relief continuing on the money and investments it already holds. The full page is the official guide on ISAs if you move abroad. Many British savers in Lyon, Bordeaux or Paris stop reading there. They keep the ISA, add nothing, tell the provider, and conclude that nothing more is required. For Britain, that conclusion is broadly right: no new subscriptions, no British tax on what stays inside.

France then adds the second half, and it reverses the practical result. French tax residence turns you into a worldwide taxpayer. Article 4 A of the French General Tax Code, the code général des impôts universally shortened to CGI, provides: “Les personnes qui ont en France leur domicile fiscal sont passibles de l’impôt sur le revenu en raison de l’ensemble de leurs revenus.” In plain English: if your tax home, your domicile fiscal, is in France, you owe French income tax on all of your income, wherever it arises. The official text is here: CGI, article 4 A. And the test for that tax home is deliberately broad. Article 4 B of the same code provides: “Sont considérées comme ayant leur domicile fiscal en France au sens de l’article 4 A : a. Les personnes qui ont en France leur foyer ou le lieu de leur séjour principal ; b. Celles qui exercent en France une activité professionnelle, salariée ou non, à moins qu’elles ne justifient que cette activité y est exercée à titre accessoire ;” Your foyer, your household and family home, or your main place of stay is enough on its own. The official text is here: CGI, article 4 B. A British couple renting a flat in the 11th arrondissement of Paris, children at a local school, present in France ten months of the year, will satisfy that test without difficulty, even if the husband still flies to London two days a week.

The decisive point follows: France has no equivalent of the ISA, and French law recognises no foreign equivalent either. Exempt savings in France form a closed list written into the statute. Article 157 of the CGI lists them one by one: “Les intérêts des sommes inscrites sur les livrets A, ainsi que ceux des sommes inscrites sur les comptes spéciaux sur livret du Crédit mutuel ouverts avant le 1er janvier 2009 ;” then the livret d’épargne populaire, the livret jeune, the livret de développement durable et solidaire, and a handful of other strictly French products. The official text is here: CGI, article 157. A livret A is the French state-regulated instant-access savings book whose interest is exempt from tax by statute; a British ISA simply does not appear in that list, and no tax treaty deems it to appear there. The wrapper is transparent in French eyes. What sits inside, interest, dividends, gains, is taxed as though you held it in an ordinary taxable account. If you arrived in France in June, you became French tax resident for that year under the sojourn test, and the ISA income from June onwards belongs on the French return. The months before arrival, when you were still British resident, remain outside French tax, which is why the exact date of your move matters and why you should keep the plane tickets, the lease and the removal invoices.

B. What France Taxes Inside Your ISA: Cash Interest, Dividends and Gains

Take the three things an ISA can produce and follow each into French law. First, the interest on a cash ISA. Interest paid to a French resident from abroad falls squarely inside the French definition of investment income. Article 120 of the CGI provides: “Sont considérés comme revenus au sens du présent article : 1° Les dividendes, intérêts, arrérages et tous autres produits des actions de toute nature et des parts de fondateur des sociétés, compagnies ou entreprises financières, industrielles, commerciales, civiles et généralement quelconques dont le siège social est situé à l’étranger quelle que soit l’époque de leur création ;” The official text is here: CGI, article 120. The £900 of interest your cash ISA earned in Manchester is therefore French taxable income in your hands in Montpellier, and it must be declared for its gross amount, before any British charge, because Britain levies none inside the wrapper.

Second, the dividends in a stocks and shares ISA. The same article 120 catches them, and a second provision sets the mechanism. Article 117 quater of the CGI provides: “Les personnes physiques fiscalement domiciliées en France au sens de l’ article 4 B qui bénéficient de revenus distribués mentionnés aux articles 108 à 117 bis et 120 à 123 bis sont assujetties à un prélèvement au taux de 12,8 % .” The official text is here: CGI, article 117 quater. In practice that withholding, the prélèvement, is collected by a French paying agent, which a British ISA manager is not, so no 12.8% is taken at source on your Tesco or Shell dividends inside the ISA. The income simply arrives gross and waits for your annual return, where the same 12.8% rate reappears inside the flat-rate charge described below. Do not confuse this with the old British dividend tax credit. Readers who owned British shares before 2016 sometimes remember a credit attached to British dividends; the French tax commentary confirms that the tax credit once attached to dividends paid by British-resident companies for the benefit of French-resident recipients under the 1968 convention is no longer transferred for dividends paid since the convention of 19 June 2008 took effect. That is the official BOFiP commentary on the France-United Kingdom treaty, and it means no British credit softens the French bill on ISA dividends today. The France-United Kingdom double tax treaty signed on 19 June 2008, which replaced the 1968 convention, divides taxing rights between the two states, but it does not exempt your ISA income in France; France keeps the right to tax, with a credit only for British tax actually levied, and inside the ISA there is none.

Third, the gains when you sell investments inside a stocks and shares ISA. Britain exempts them; France does not. Article 150-0 A of the CGI provides that “les gains nets retirés des cessions à titre onéreux, effectuées directement, par personne interposée ou par l’intermédiaire d’une fiducie, de valeurs mobilières, de droits sociaux, de titres mentionnés au 1° de l’article 118 et aux 6° et 7° de l’article 120 , de droits portant sur ces valeurs, droits ou titres ou de titres représentatifs des mêmes valeurs, droits ou titres, sont soumis à l’impôt sur le revenu.” A cession à titre onéreux is simply a sale for consideration, and valeurs mobilières are transferable securities such as shares and bonds. The official text is here: CGI, article 150-0 A. Every disposal inside the ISA, even a switch from one fund to another that you regard as internal housekeeping, is in principle a taxable sale for France if it realises a gain. Keep the contract notes, because the purchase price, the prix de revient, is what fixes the taxable gain, and British platforms do not format their statements for the French return.

The rate that then applies is the French flat rate on savings income, the prélèvement forfaitaire unique, universally called the PFU. Article 200 A of the CGI provides: “Le taux forfaitaire mentionné au premier alinéa du présent 1 est fixé à 12,8 % ;” The official text is here: CGI, article 200 A. The same article deals expressly with foreign-source income: “Les revenus mentionnés au premier alinéa du présent 1° de source étrangère sont également retenus pour leur montant brut. L’impôt retenu à la source est imputé sur l’imposition à taux forfaitaire dans la limite du crédit d’impôt auquel il ouvre droit, dans les conditions prévues par les conventions internationales.” Gross amount, in other words, with a credit for foreign withholding tax only where a treaty grants one. The finance ministry’s public guide completes the picture: the all-in PFU rate is 30%, made up of 12.8% income tax and 17.2% social charges. Those prélèvements sociaux are the French social charges on investment income. See the official explainer on how the PFU works. Concretely, €2,400 of cash-ISA interest costs a French resident €720 in total: €307.20 of income tax and €412.80 of social charges. £1,000 of ISA dividends, converted into euros at the rate on the day of payment, costs the same 30% on the gross euro figure, with no British credit to deduct because none was levied. And a £8,000 gain realised on a sale inside the ISA is taxed at the same flat rate on the net gain. The PFU applies automatically, but you may instead elect the progressive scale, the barème progressif, for all of your savings income together by ticking the dedicated option box on the 2042 return; the election is all-or-nothing for the year and cannot be revoked for that year, so it suits lower-rate taxpayers and penalises higher ones, a calculation worked through in Part II.

II. How to Declare Your ISA in France, Pay the Right Amount and Challenge the Bill

A. Declare the Account Every Year: Form 3916, Form 2047 and the €1,500 Fine

The most expensive mistake is not the tax itself but the silence around it. France requires every resident to report each foreign account separately from the income it produces. Article 1649 A of the CGI provides: “Les personnes physiques, les associations, les sociétés n’ayant pas la forme commerciale, domiciliées ou établies en France, sont tenues de déclarer, en même temps que leur déclaration de revenus ou de résultats, les références des comptes ouverts, détenus, utilisés ou clos à l’étranger.” The official text is here: CGI, article 1649 A. Note the four verbs: opened, held, used or closed. An ISA you emptied in March and closed in April is still declarable for that year, and an ISA you merely left dormant must be declared every year without exception. In practice the declaration travels on form 3916, filed at the same time as the income return, and the form and its notice sit on the official page for form 3916, declaration by a resident of an account abroad, mirrored on service-public.fr. One 3916 per account: a cash ISA with one bank and a stocks and shares ISA with one platform means two declarations, even if both belong to the same person.

The income itself goes elsewhere, on the income return, and the two declarations must agree. ISA interest and dividends are foreign investment income, revenus de capitaux mobiliers de source étrangère, reported through the foreign-income schedule 2047 and carried onto the main 2042 return; gains on sales inside the ISA go through the capital-gains schedules. Convert every pound figure into euros, keep the platform statements, and reconcile the totals with the 3916: an ISA that produced £1,400 of dividends on the 2047 but appears on no 3916 is precisely the mismatch that triggers a letter. Junior ISAs held for minor children follow the same logic in the parents’ return, because the parents declare the child’s foreign accounts and income; the child’s age changes nothing about the reporting duty.

The price of silence is fixed by statute and it is deliberately harsh. Article 1736 of the CGI, in the version currently in force, provides: “Les infractions aux dispositions du deuxième alinéa de l’article 1649 A et de l’article 1649 A bis sont passibles d’une amende de 1 500 € par compte ou avance non déclaré.” The official text is here: CGI, article 1736. Britain has an administrative-assistance treaty with France, so the higher €10,000 figure reserved for uncooperative states does not apply, but €1,500 per undeclared ISA per year accumulates quickly across a cash ISA, a stocks ISA and several silent years. Worse, the same article 1649 A adds a presumption that reverses the burden of proof: “Les sommes, titres ou valeurs transférés à l’étranger ou en provenance de l’étranger par l’intermédiaire de comptes non déclarés dans les conditions prévues au deuxième alinéa constituent, sauf preuve contraire, des revenus imposables.” The official wording is anchored here: CGI, article 1649 A. Money moving through an undeclared account is presumed taxable income unless you prove otherwise, and the years you cannot document become tax years you cannot defend.

The chain does not stop at the fine. Once the administration has identified an undeclared foreign account, it can question the taxpayer on the origin of the funds and, absent satisfactory justification, assess the amounts by default, the taxation d’office, with the burden of proof resting on the taxpayer under the presumption quoted above. That is why the order of operations matters so much: a taxpayer who files the missing 3916 forms and corrects past returns spontaneously, before any examination begins, faces the €1,500 fine per account but keeps control of the narrative and the documents. A taxpayer the administration discovers first must instead prove, document by document and year by year, that money the statute presumes taxable is not. Keep every funding proof for the ISA, payslips, sale proceeds, inheritance paperwork, transfer slips, because the day those papers are needed, they are the only way to rebut the presumption.

B. Pay the 30% Flat Rate or Choose the Progressive Scale, Then Challenge Errors

With the account declared, the remaining question is arithmetic: flat rate or progressive scale. Take a household in Lyon with €3,000 of ISA interest and €2,000 of ISA dividends, €5,000 in total. Under the PFU the bill is €1,500, mechanically: €640 of income tax and €860 of social charges. Under the progressive scale, the barème progressif, the same €5,000 joins the rest of the household income, dividends benefit from the 40% allowance, the abattement de 40%, and the social charges still apply at 17.2% on the gross. A non-taxable household therefore pays roughly €860 instead of €1,500, while a household in the 30% marginal bracket pays more than the flat rate and should stay with the PFU. The election covers all savings income for the year, it cannot mix flat rate for the ISA with scale for the rest, and it cannot be undone for that year, so run both calculations before ticking the box. The same comparison governs gains realised inside the ISA, with one difference: under the scale, older shares may qualify for holding-period allowances that the flat rate ignores, which is another reason to keep dated purchase records from the British platform.

A short word for readers in Paris and the Île-de-France, where many British arrivals settle. Nothing in the ISA rules is Paris-specific, but the practical circuit is: your service des impôts des particuliers, the local personal-tax office of your arrondissement or suburb, receives the 3916 and the returns; the réclamation contentieuse, the formal claim that opens every dispute, goes to that same office; and if the claim fails, the competent court is the administrative court of your domicile, the tribunal administratif de Paris for the capital, Montreuil, Cergy or Versailles for the inner and outer suburbs. Deadlines run from the notice, not from the payment, so diary the date on the avis d’impôt the day it arrives in your online account. Readers whose British income extends beyond the ISA, dividends on directly held shares or interest on an ordinary British savings account, will find the treaty mechanics and the declaration circuit explained step by step in our companion guide on British dividends and interest in France, and those weighing the ISA against French tax-efficient envelopes should compare with the taxation of assurance-vie for British residents before moving money.

When the assessment is wrong, challenge it in the order the system expects. First, the formal claim to the tax office, setting out precisely which line is disputed: ISA income taxed although received before the move to France, a treaty credit refused although British withholding was actually levied on non-ISA income, a 40% allowance forgotten under the progressive option, or a €1,500 fine imposed although the 3916 was filed on time. Attach the provider statements, the proof of the arrival date, the exchange-rate printouts and a copy of the filed 3916. Second, if the administration confirms the bill in whole or in part, appeal to the administrative court within the time stated in the reply; the judge re-examines both the facts and the law, including the treaty. Third, never ignore the parallel track: while the dispute runs, the sums remain payable unless a stay is granted, so request deferred payment, the sursis de paiement, expressly when you file the claim, otherwise enforcement continues during the proceedings. Throughout, keep one file per tax year: provider annual statements, conversion calculations, copies of every filed form and every letter. The taxpayers who win are the ones whose paperwork answers the question before the judge asks it.

Conclusion

Your ISA survives the move to France as an account, not as a shelter. Britain lets you keep it open and keeps it exempt from British tax, but from the day France becomes your tax home, every pound of interest, every dividend and every realised gain inside it is French taxable income, declared on the 3916 and the income return and charged at the 30% flat rate unless the progressive scale suits you better. The €1,500 fine per undeclared account and the presumption that money in hidden accounts is taxable income make silence the costliest option: the fine applies per account and the statute presumes the money in hidden accounts to be taxable income. Declare the account the first year, convert carefully, compare the two rates before choosing, and challenge precisely and early when the bill misstates the facts or forgets the treaty. Handled that way, the ISA remains a perfectly serviceable British savings account for a French resident: taxed, yes, but predictable, documented and defensible.

Source : Cour de cassation – Base Open Data « Judilibre » & « Légifrance ».

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