👉 News. The tax return campaign is coming to an end.

👉 Background. The OECD wants to expand the automatic exchange of information between exchange platforms and tax administrations.

👉 Why it matters. It's going to get harder and harder to hide your cryptos.

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The end of the tax return campaign is fast approaching. Before June 8 evening (23:59), all French taxpayers must have sent their complete information to the tax authorities or face... penalties. And don't think, as some people do, that you will be able to slip through the cracks! If taxation is not an exact science, the administration has made enormous progress in recent years on cryptos. It has means that allow it today to identify more easily the small investors as the big ones.

As our survey shows, the main lever for the tax authorities is the bank account, which acts as a kind of financial identity card. "Tax audits are triggered when there are inconsistencies between the declarations and the information available to the administration," confirms Alexandre Lourimi, tax lawyer for the ORWL firm, which specializes in disruptive technology law. If you receive a transfer from an exchange platform when you have not informed the tax authorities, you are exposed to penalties of up to 750 euros per undeclared account. The amount is doubled if the value of the accounts exceeds 50,000 euros.

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This is followed by an adjustment on the undeclared capital gains which can be particularly painful. In case of deliberate breach or bad faith of the taxpayer, the increase is raised to 40%.

Banks are increasingly under pressure from regulators to fight fraud and laundering. They therefore tend to report to TracFin, the intelligence service responsible for, among other things, the fight against tax fraud, many movements on accounts, especially when these come from a crypto exchange platform. TracFin then forwards the file to the tax authorities, which will trace the fraudster. "The number of intelligence notes sent to the tax authorities is constantly increasing and these could be a privileged source of information," adds Alexandre Lourimi.

Unusually high amounts

Another set of clues that can make the administration take notice: the amounts you receive on your account. The banks themselves define their alert thresholds, but the first of these is often an "unusually" high inflow of money. "There's no specific amount, it depends on the individual," notes the tax attorney. "Someone who earns 10,000 euros per month and receives 15,000 euros on his account from a platform will have less chance of attracting attention than a person on the RSA who receives the same amount," explains Alexandre Lourimi.

The tax administration has a specialized team based in Paris, which can intervene itself or assist local inspectors who request it. This human work, based on the cross-referencing of information sources, is carried out by the Direction nationale d'enquêtes fiscales (DNEF), a service attached to the Direction générale des finances publiques (DGFIP). If necessary, this team of crypto-experts can use Chainalysis-type tools to trace all the crypto transactions that pass through the addresses known to the taxpayer (you have to be a very big fish for that, though).

There is also a "data mining" service at Bercy that scans social networks for potentially compromising information. "A standard of living that is out of all proportion to one's income attracts attention," warns a person close to Bercy. "But this research activity is mostly automated, it will never replace human work," he insists.

How the tax authorities communicate with trading platforms

Platforms are not subject to spontaneous reporting obligations to the tax authorities. They are therefore not required to inform the authorities about their users' activities. However, as part of their obligations to combat money laundering and terrorist financing, they may, like banks, be required to spontaneously send information to financial intelligence services, such as Tracfin in France, that may be used for tax audits (via suspicious transaction reports).

When the administration directly suspects a taxpayer of being in an irregular situation, it can request a platform. "If the platform is registered with the Autorité des marchés financiers (AMF), it is obliged to respond to requests for information", insists Alexandre Lourimi. So don't expect to slip through the cracks if you are a customer of Coinhouse or Paymium: these companies are exposed to heavy fines if they refuse.

In the case of foreign platforms, it is sometimes more complicated for the tax authorities to get answers, even if most of the giants of the sector comply. According to our information, the American platforms Coinbase and Kraken all answer to the French tax authorities, even if the delays can sometimes be longer because of the large number of requests. On the other hand, Asian platforms or those located in tax havens can be less cooperative.

"As for the traditional financial sector, the most difficult data to access are those kept by actors domiciled in states that do not cooperate with France in tax matters," insists Alexandre Lourimi. These so-called "non-cooperative" states are on a list that is constantly being reduced as France negotiates administrative assistance and information exchange agreements.

According to our information, the tax authorities do not bother to initiate audits abroad when the sums involved are modest. "If it is necessary to put a civil servant on it for six months, it will not be profitable", explains a specialist in the subject.

Automated information flows coming soon

However, this "tolerance" towards certain platforms could soon end. The Organization for Economic Cooperation and Development (OECD), which brings together 38 countries (including France), is currently working on an extension to cryprot platforms of the spontaneous reporting standards applied to banks.

These standards allow since 2014 the tax authority of an adhering country to receive annually the information on financial assets held by its tax residents abroad. Thus, when a resident opens an account abroad, the tax authority of the host country informs the tax authority of the country of origin. The objective for the OECD is to extend this system to crypto exchange platforms. Thus, Coinbase would communicate each year to the American administration the list of its customers, before it automatically transmits to France the identity of all its residents who use the platform.

"The public consultation has just opened, so it's hard to know when this project will be applied, but it is certain that it will one day concern crypto exchange platforms," assures Alexandre Lourimi. "The mass of information spontaneously available to the tax authorities will increase substantially, stresses the lawyer, tomorrow it will be very easy to know who has an account, where, and also potentially the balance on the platforms."

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Did Binance provide the list of its French users in exchange for the PSAN? 🤔

A rumor that Binance would have provided the tax authorities with a list of all its French clients has recently circulated. This "deal" would have been concluded after the Chinese giant obtained from the French Financial Markets Authority (AMF), the registration as a Service Provider on Digital Assets (PSAN). When questioned, Binance categorically denied. For the lawyer Alexandre Lourimi, "it is not necessary to negotiate this kind of agreement, because Binance is now registered in France, the tax authorities can ask him to report all users that interest him, such as all those who have a balance greater than 5000 euros.

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