French taxes on currency exchange gains

Hi, this is a topic specific to the French community, but I stick to English for respect of the international community using this forum.

The Revolut account is an IBAN starting with GB, so it is in a foreign country from my perspective. Although I have seen many people doubt on the forum, there is no doubt for me that I need to declare the account to the tax authorities, which I do each year.

My question is more around how to declare to tax authorities the gain made on currencies. My intention is not to use Revolut as a trading platform. But I changed some currency (NOK and ZAR) more than 2 years ago, in preparation or a trip abroad in 2020 that was canceled because of COVID. As I don’t need the currencies anymore, I changed them back to EUR thus generating a profit on the exchange rate.

I hope that someone on this forum has some good tax expertise to help me to declare this gain. I called the “Allo Impot” today which is a 1 day free service for accountant support, however the person on the phone said this was too technical for him to answer and did not have the answer.

He just gave the hint that I should declare it on the 2047 form, section 3, under “Plus-values de cession de valeurs mobilières: avant abattement”

It is not clear if a loss in one currency can compensate a gain in another currency from a tax perspective, and whether this is the right way to declare it?

@pprt I’m a French resident and tax payer and I’m not sure that, unless you can be regarded as doing forex commercially (in the same way that selling some of your household items at a brocante is generally exempt) , that there would be anything to declare in such a circumstance as you outline.
Sure, income/pensions from (in my case) the UK need to be translated to Euro for the tax declaration (by whatever means - often the ECB annualised rate is used) so you could if you were feeling super honest check the cross rate between the Euro NOK and Euro ZAK on the days of translation in the ECB website to see if you did indeed make a profit and help you decide what to do.
If the holiday had gone ahead and you used the currency, I presume you would not have felt the need to declare anything even if the value of the currency was above expectations…

Hi Graham, as it is a source of income, my interpretation is that I need to declare it. Even if I am not doing forex commercially as I am not trading very often, there is still obligation to declare this gain.

I am really wondering how to do that. Of course Revolut does not offer any tax guidance (let alone an IFU “Imprimé Fiscal Unique”) as it is not a local financial institution, so I have to do everything myself. I am leaning towards the 2047 taxation form, section 3, under “Plus-values de cession de valeurs mobilières: avant abattement” but I have no confirmation of this.

I even had some people tell me that within 1 month of making a profit on currency exchange, I must declare it to the tax authorities and pay taxes on it without waiting for the tax statement of the following year.

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Are we talking substantial sums of Euro (or whatever currency you exchanged from/to) here?
Personally, I think you are making a mountain out of a molehill.
In the commercial context, the profit/loss is reported as income in the P&L account of the enterprise based on the investment holdings at the 31st December in the tax year under view - this isn’t the case here from what I understand you to have said.
But as I outlined earlier, it’s your choice. Personally I’d not bother if you are not doing this commercially which IMO is why the tax office were reluctant (or unable) to give you a direct response.
Don’t also forget that you may be charged cotisations on any “profit” you declare which might completley wipe out any gain :frowning_face:
Other than that, I can only suggest you engage the services of a tax consultant which will have a similar effect on any percieved gain.

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Hi Graham, I am sorry but whatever the gain (1000€ or 10 000€) it is irrelevant to the obligation to declare. No I cannot afford the services of a tax consultant. For example if you make profit from buying and selling a stock, even a small price, even if you are not doing it commercially, as an individual you will have the obligation to declare it.

I don’t see why it is different when the gain comes from currency exchange. Except it is much more clearer how to declare when it is a gain from selling a stock. I have limited guidance on how to do that for currencies.

I think you’re wrong but believe what you will.
If you buy a car privately and then sell it sometime later at a profit - a vehicule de collection for example - would you need to declare the profit?
IMO no and that is also the opinion of the fisc on the understanding it was not sold as a business activity.

I believe you’re right Graham. All tax authorities aren’t stupid, they know that people aren’t in a position to claim tax on infinitely small gains + they know it would cost more to actually ensure those are being taxed than it’s worth

If tax authorities want us to declare everything, they need to put that burden on the shoulders of the people we hold our financial products with, and have it paid real-time!

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This is how it works in some countries with broker and savings accounts, but cross boarder investments are a different story. Just because the foreign bank doesn’t report and deduct investment tax to your national tax authorities doesn’t mean you don’t have to report that income.

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@pprt
I’ve done some further digging and found that there is a new requirement from January 2020 in respect to Digital Asset Accounts and a form 3916-bis on which to declare (I translated to English):


and this
On page 3 of the 3916-bis it outlines “Persons required to carry out the declaration” and where to place profits on the return.
This reference outlines the French Tax Law concerned.
I still maintain that this will only apply where an individual is “trading” currencies as in the case of share holdings by private individuals but it is for you to decide what to do based on the available information.
Strange that your tax office didn’t seem to know about it…
I hope you find the references useful.

Hi Graham, let me give you my view on the various topics that you raised. Note that this is the opinion of a single user who interprets his own way the legislation in place. I am not a tax professional:

  • 3916-bis. This is to declare your account in cryto. to the tax authorities. My interpretation: if you have activated BCH, BTC, ETH, XRP or LTC in Revolut then you need to declare it. To be on the safe side, I would fill-in 1 form for each crypto currency opened on Revolut

  • 3916: This is to declare your account which is not in France. Which is the case of Revolut. This page walks you through step-by-step how to do it for N26 and Revolut.
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As regards taxation of gains (which was my original question):

  • Crypto - only applies if you sold more than 305€ of crypto currencies. You need to declare both in 2086 (this is the new form dedicated to Crypto gains) and 2042C (3AN, 3BN). Gains will be flat-taxed ie 30% on your gains. I won’t get into detail, but this is much more favorable than the previous tax regime, and the introduction of the 2086 is a good step forward.

  • Resell of a car (vehicule de collection) at a profit. If the amount of the sale is above 5000€ then you are indeed taxed on this. You can opt-in for a tax of 6.5% on the sell price, or a tax on the profit you made in the sale. It has nothing to do with acting as a business activity, this applies to single individuals.

  • Gains on Currencies. This was the point of my original question, as there is not a lot of information on this. I have a good understanding how to declare profits made from gain on stocks held in an account in a foreign account (Revolut Trading for example). I can tell you more if you need.
    I am going to apply the same mechanism for declaring my gains on currencies. And be taxed at 30% of my gains realized.
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Then let me add my 2 cents to some statements made in this thread:

I absolutely agree with @Frank

@Recchan since Revolut does not have the burden of calculating what gains you need to declare, this burden is on you.

@Recchan, as you could see in my examples, there are taxation thresholds to account for small gains (ie crypto gains only if you’ve sold above 305€, tax on reselling a car at a profit only if the amount of the transaction was above 5000€ etc.)

In any case, unless you are in the Caiman Islands, there is still an obligation to declare any gains, regardless how small or big. At the end of the day it is your choice to declare or not to declare if you hope to go under the radar. However with every transaction being recorded and shared between banks & governments around the globe, there is extreme visibility and I would not play the game of trying to go under the radar.

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Thanks @pprt for a useful summary which I have bookmarked for next year’s return.