Why France's 60% levy on undeclared foreign assets can be challenged on limitation grounds — and how a taxpayer can build a defence.
A French tax resident receives, after several years of silence, a request from the tax authority asking him to justify the origin of funds held in a bank account opened abroad decades earlier. The old statements are gone, the bank no longer keeps records beyond ten years, and the institution that held the account has sometimes changed its name or disappeared. Unable to reconstruct an origin he no longer controls, the taxpayer sees the entire balance deemed to be wealth acquired gratuitously, taxed at the highest rate of French gift and inheritance tax, sixty percent. The amount claimed may exceed the actual value of what remains in the account.
This scenario is anything but exceptional. It is the direct consequence of a mechanism, Article 755 of the French General Tax Code combined with Article L. 23 C of the Tax Procedure Code, whose temporal architecture disconnects the taxation from the date the assets were acquired. The central legal question is now squarely posed: by leaving the tax authority in control of the moment the tax arises, does this mechanism produce an effect of imprescriptibility (a de facto absence of any limitation period) contrary to the free movement of capital guaranteed by European Union law?
French courts are now divided on the answer. We first examine the structure of the mechanism and the temporal trigger that makes it so singular (I), then the challenge to its conventionality, from the European case-law matrix to the open resistance of a trial court against the Cour de cassation (II), before setting out the concrete lines of defence available to the taxpayer, on terrain that is by no means limited to conventionality alone (III).
I. A default-assessment mechanism whose trigger is disconnected from time
A. The L. 23 C / 755 / 777 architecture and the presumption of gratuitous acquisition
The starting point is a long-standing and broad reporting obligation. Under Article 1649 A, paragraph 2, of the General Tax Code, individuals domiciled or established in France must report, together with their income tax return, the references of accounts opened, held, used or closed abroad. This obligation has no equivalent for accounts opened in France, which are reported directly by the banks themselves. It is precisely this asymmetry of treatment that will later be examined against the free movement of capital, since it bears more heavily on cross-border holdings than on purely domestic ones.
Where that obligation has not been met at least once during the previous ten years, Article L. 23 C of the Tax Procedure Code, created by the amending finance law of 29 December 2012 and applicable since 1 January 2013, allows the authority to require the taxpayer, within sixty days, to provide all information or evidence on the origin and means of acquisition of the assets held in the account. The request operates independently of any personal tax audit, which deprives the taxpayer of the safeguards attached to that adversarial procedure. Where the response is insufficient, a formal notice to complete must be issued within thirty days.
The penalty for silence: default assessment. Absent a satisfactory response, Article L. 71 of the Tax Procedure Code triggers the default assessment provided for by Article 755 of the General Tax Code. The assets are then deemed, until proof to the contrary, to constitute wealth acquired gratuitously, subject to gift and inheritance tax at the highest rate of Table III of Article 777, sixty percent, the rate applicable between unrelated persons. The tax base is not the current balance but the highest value known to the authority over the ten years preceding the request, less the portion whose origin has been justified. The presumption is described as rebuttable, but it can be reversed in only one way: by demonstrating that the assets were not acquired gratuitously. The burden of proof rests on the taxpayer alone, a burden that the age of the transactions often renders illusory.
B. The temporal trigger: a chargeable event set by the authority, independent of the acquisition date
The singularity, and the difficulty, of the mechanism lies in where its chargeable event is located in time. Counterintuitively, the Article 755 tax is not tied to the date on which the assets entered the taxpayer's estate, nor to the year in which the reporting obligation was breached. The chargeable event corresponds to the expiry of the deadlines set out in Article L. 23 C, that is, the end of the response period opened by the authority's request. The Cour de cassation confirmed this long ago: that chargeable event constitutes the starting point of the ten-year limitation period fixed by Article L. 181-0 A of the Tax Procedure Code (Com., 16 December 2020, no. 18-16.801, published).
This construction carries a formidable consequence. Because the Article L. 23 C request may be issued whenever the reporting obligation has not been met "at least once during the previous ten years", and because the reporting omission mechanically repeats with each annual return for as long as the account remains undeclared, the authority enjoys a power of perpetual renewal. The text fixes no objective anchor: it refers neither to the date the assets were acquired, nor to the date on which the authority may have learned, through a third party or automatic exchange of information, of the account's existence. The moment the tax arises therefore depends solely on the authority's decision to activate the mechanism.
In other words, the only limit on the authority's power to assess is its own initiative. It may wait, let the years run, then trigger the procedure at the moment it deems opportune, without any limitation period ever being enforceable against it as regards the assets themselves. It is this mechanism, a ten-year limitation period formally provided for, but whose starting point lies in the hands of the very party that benefits from it, that fuels the argument of de facto imprescriptibility. The debate is not academic: it concerns the compatibility of this latitude with a fundamental requirement of EU law, namely the principle that public authorities may not make indefinite use of their powers to remedy an unlawful situation.
II. Conventionality challenged: from the Spanish matrix to the Toulouse resistance
A. The European framework (CJEU, C-788/19) and the requirement of an in concreto review
The matrix of the debate is Spanish. In its judgment of 27 January 2022, European Commission v Kingdom of Spain (C-788/19), the Court of Justice of the European Union condemned the Spanish reporting regime on foreign-held assets, the well-known "modelo 720". The Court held that the Member State had breached Article 63 of the Treaty on the Functioning of the European Union by providing that failure to comply with the reporting obligation entailed taxation of the undeclared assets with no practical possibility of benefiting from the limitation period. The reasoning rests on a guiding principle every practitioner must keep in mind: the fundamental requirement of legal certainty precludes, in principle, public authorities from making indefinite use of their powers to remedy an unlawful situation.
The Court of Justice has long accepted that a Member State may institute an extended limitation period to combat the concealment of foreign assets, provided that its duration does not exceed what is necessary, having regard in particular to the mechanisms of information exchange and administrative assistance between States (ECJ, 11 June 2009, X and Passenheim-van Schoot, C-155/08 and C-157/08). But it draws a clear line between the extended period, which is permissible, and mechanisms that amount "in practice to extending indefinitely the period during which taxation may occur, or that allow a limitation period already acquired to be reopened" (C-788/19, paragraph 38). It is this second, prohibited category that is at issue with Article 755.
The heart of the method: a concrete review. The decisive contribution of this case-law, for transposition into French law, lies in the method it imposes. It is not enough, in order to dispel the charge of imprescriptibility, that a limitation rule formally appears in the national texts. One must verify that the concrete application of the full mechanism does not produce an effect of imprescriptibility that actually deprives the taxpayer of the benefit of that limitation. The conventionality review is not abstract, theoretical or structural: it is concrete, tied to the taxpayer's actual situation. This methodological distinction, technical in appearance, has become the true battleground of the French litigation.
It bears emphasis that the Court of Justice was not placed in a position to rule directly on the question for the French mechanism. Seised by the Nanterre Tribunal judiciaire of a preliminary question concerning precisely the imprescriptibility effect of Article 755, it declared the question inadmissible by order of 20 March 2025 (C-141/24), on grounds relating to the framing of the reference. The consequence is significant: in the absence of a direct European ruling, the national court is left alone to apply the framework of the Spanish judgment to the domestic mechanism. It is this interpretive solitude that explains how French courts could, within a few months, reach diametrically opposed conclusions.
B. The Cour de cassation validates, the Toulouse court resists: a battle of method
The mechanism first cleared constitutional review without difficulty. In its decision no. 2021-939 QPC of 15 October 2021, the Conseil constitutionnel held that Articles L. 23 C and 755 breached neither the principle of equality before the law nor that of equality before public charges. With the constitutional terrain thus closed, the challenge shifted to the conventionality terrain, more promising since the 2022 Spanish judgment.
Validation by the Cour de cassation. By a judgment published in the bulletin on 17 September 2025 (Com., no. 23-10.403), the Commercial Chamber held the mechanism compatible with Article 63 of the Treaty and with the principle of legal certainty. Its reasoning unfolds in four stages: the mechanism pursues the constitutional objective of combating tax fraud and evasion, an overriding reason in the public interest; it does indeed constitute a restriction on the free movement of capital, the extended period of Article L. 181-0 A being a derogation from ordinary law; it nonetheless appears suited to securing the objective pursued; and it satisfies the proportionality requirement. The Court grounds its conclusion on two points: that the level of information available to the authorities on assets held abroad remains globally lower than for domestic assets, even taking account of exchange and assistance mechanisms; and that a taxpayer who justifies the origin of the assets escapes default assessment and remains subject to the ordinary limitation regime. It infers that the starting point fixed at the expiry of the Article L. 23 C deadlines is not disproportionate, and declines to refer a preliminary question to the Court of Justice, finding the interpretation of Article 63 sufficiently clear.
The resistance of the Toulouse Tribunal judiciaire. Ruling three months later, by a judgment of 18 December 2025, and in full knowledge of the Commercial Chamber's position, the Toulouse Tribunal judiciaire set the mechanism aside as incompatible with EU law. Its method is precisely the one the Court of Justice imposes: in concreto assessment. The court recalls that a formally provided limitation rule does not suffice to cure the defect, and that one must verify that the concrete application of the mechanism does not entail an effect of imprescriptibility. Carrying out that verification, it notes that the chargeable event depends exclusively on the authority's decision to activate Article L. 23 C, that the presumption is independent of the date the assets were acquired, and that the reporting omission, liable to repeat each year, allows the authority to defer its power to assess indefinitely. It concludes that the mechanism, by establishing de facto imprescriptibility of the default assessment at the highest rate, breaches the principle of non-restriction of the free movement of capital derived from the Spanish judgment.
A divergence of method, not of text. Our analysis locates the disagreement not in the reading of the texts but in the method of review. The Cour de cassation conducts an abstract review: it assesses the proportionality of the mechanism in its structure, globally, and concludes that it is valid. The Toulouse court conducts the concrete review required by the Court of Justice: it verifies whether, as applied to the facts, the mechanism actually deprives the taxpayer of the limitation period. It is this difference of perspective that explains the opposition of outcomes. The "global" assessment of the level of information adopted by the Commercial Chamber is precisely what the in concreto method forbids where, in a given case, the authority had the means to act long before it did. The proper measure of this resistance must nonetheless be kept in view: the Toulouse judgment is a first-instance decision, contrary to the published position of the Cour de cassation, and very likely to be reversed on appeal. Its weight is that of a reference argument, not of settled case-law.
III. The taxpayer's lines of defence, beyond conventionality alone
A. The safest terrain: challenging the very trigger of the procedure
To rest the entire defence on conventionality would be a strategic mistake, since the Cour de cassation has ruled the other way in a published judgment. The well-advised taxpayer has a more solid terrain, one that draws on favourable case-law from the same Commercial Chamber and allows the procedure to be attacked at its root. Article L. 23 C can target only those individuals who, over the previous ten years, have failed to comply with the obligation of Article 1649 A. Yet that reporting obligation arises only if the taxpayer, or a member of his household, opened, closed or used the account during the year in question. Absent characterised use, the reporting obligation has not arisen, and the authority is simply not entitled to issue a request under Article L. 23 C, nor, consequently, to assess by default.
The Cour de cassation endorsed this reasoning in a judgment of 21 June 2023 (Com., no. 22-11.132), quashing an appellate decision that had failed to address the plea based on the absence of use. The precise scope of that judgment deserves to be understood: it is a quashing for failure to address pleadings, not a judgment of principle on the merits, but it nonetheless endorses the structure of the reasoning and holds the plea to be operative. Above all, the Court provides a decisive clarification of the notion of use: operations that merely record the interest and income, such as dividends, produced by sums already deposited in earlier years do not characterise use of the account, nor do debit operations corresponding to the payment of account-management fees. A "dormant" account, which merely capitalises its own income and bears its custody fees, is therefore not an account that is "used" within the meaning of the text. This case-law shifts onto the authority the burden of demonstrating actual use, account by account and year by year, a requirement that the tax services frequently neglect, asserting the existence of movements without dating them or producing the corresponding statements.
B. The defective statement of reasons in the default-assessment notice
A second lever, purely procedural, may secure discharge without any need to reach the merits. Default assessment, while dispensing the authority from the adversarial procedure, does not erase every requirement of reasoning. Article L. 76 of the Tax Procedure Code requires the authority to bring to the taxpayer's knowledge the bases or elements used to calculate the default assessment and the means of their determination, within a sufficient period before recovery. Article L. 76 B adds the obligation to inform the taxpayer of the content and origin of information obtained from third parties. The reasoning is admittedly lighter than under the adversarial rectification procedure, but it must remain sufficient to enable the taxpayer to engage meaningfully in a discussion of the assessment.
The defect lies precisely at the point that conditions the previous plea. Where the notice fails to establish the actual use of the accounts over the period, yet an essential condition for triggering the procedure, and remains silent on the dates of the alleged movements and on the bank statements supposed to corroborate them, the taxpayer is not placed in a position to debate meaningfully the determining element of his liability. The two pleas reinforce one another: one argues that the condition of use is not met, the other that the taxpayer was not enabled to contest it. This procedural plea nonetheless remains traditionally more fragile, since the court accepts lighter reasoning in default-assessment matters; it is intended to support the defence, not to carry it alone.
C. Practical recommendations: rank the pleas and document the time factor
Rank the pleas; do not stake everything on conventionality. Our recommendation, where such litigation looms, is to build the challenge by placing first the plea based on the absence of characterised use of the accounts, which rests on favourable case-law and allows discharge without any debate on conventionality, then the defective-reasoning plea in support, and to reserve the conventionality plea, high in potential but legally exposed since the judgment of 17 September 2025, for an avowedly subsidiary rank. This hierarchy reproduces the logic that allowed the Toulouse court to grant discharge: offering the judge several paths to the same result, some of which do not require him to depart from the Cour de cassation.
Document the authority's prior knowledge. On the conventionality terrain, the strength of a case rests on a precise factual factor: demonstrating that the authority had, well before triggering the procedure, the means to identify the account. Where automatic exchange of information, or an administrative-assistance convention conforming to the standard of Article 26 of the OECD Model, made it possible to obtain proof of holding several years before the taxation, the imprescriptibility effect ceases to be theoretical: it becomes the concrete demonstration that the "global" justification adopted by the Cour de cassation does not hold in the particular case. The chronology of the authority's knowledge must therefore be reconstructed and placed before the court.
Preserve evidence of origin, upstream. For the taxpayer holding old assets abroad, prevention remains the best protection. Banks, in France as abroad, generally do not archive beyond ten years; for assets inherited or built up several decades ago, proof of origin becomes materially impossible to produce on the day the authority demands it. Requesting from the bank, while there is still time, the reconstruction of the original entries, preserving the gift or succession deeds that fed the account, and spontaneously regularising the Article 1649 A reporting are the only genuinely effective protections against a tax whose confiscatory rate leaves, in practice, no margin.
Conclusion
The default-assessment mechanism for undeclared foreign assets rests on a singular temporal architecture: by fixing the chargeable event at a moment the authority alone controls, it confers a latitude that, in its concrete application, can verge on imprescriptibility. The framework laid down by the Court of Justice in the Spanish case condemns precisely those mechanisms that result, in practice, in extending the taxation period indefinitely. The whole stake of the litigation turns on the method of review: abstract for the Cour de cassation, concrete for the Court of Justice and for the Toulouse court that dared to resist it.
Our analysis is that, in situations where the authority had long held the means to act and yet deferred the taxation, the imprescriptibility effect is made out and the mechanism collides with the free movement of capital. But we are equally aware that the Commercial Chamber has, by a published judgment, closed the door to this reasoning at the level of the supreme court for the time being. Prudence therefore dictates never resting the defence on that terrain alone.
Our recommendation is clear: faced with an assessment based on Articles L. 23 C and 755, the taxpayer must build a layered defence, attacking first the very trigger of the procedure on the ground of account use, exploiting defects in the notice's reasoning, and reserving the conventionality plea as a subsidiary weapon, solidly documented by the chronology of the authority's knowledge. It is this architecture, rather than the gamble of a single plea, that maximises the prospects of discharge.
Frequently asked questions
Is the 60% tax on undeclared foreign assets automatic?
No. It depends on several cumulative conditions, each opening a line of defence. The authority must establish that the Article 1649 A reporting obligation was breached, which requires showing that the account was opened, closed or used during the period. It must follow the Article L. 23 C procedure, with a request for evidence and then a formal notice, and must give sufficient reasons in the default-assessment notice. A defect in any of these conditions may lead to discharge. The tax is therefore far from inevitable.
Is a foreign account that merely earns interest an account that is "used"?
No, according to the Cour de cassation (Com., 21 June 2023, no. 22-11.132). Operations that merely record interest and income, such as dividends, produced by sums already deposited do not characterise use of the account, nor do debit operations corresponding to management fees. A dormant account, which simply capitalises its own income and bears its custody fees, is therefore not a "used" account within the meaning of Article 1649 A, so the authority cannot trigger the Article L. 23 C procedure. This is often the most solid line of defence.
Is the Article 755 mechanism contrary to European Union law?
The question is open and divides the courts. The Cour de cassation, by a published judgment of 17 September 2025 (no. 23-10.403), held the mechanism compatible with the free movement of capital. The Toulouse Tribunal judiciaire, on 18 December 2025, held the opposite, finding that the mechanism establishes de facto imprescriptibility prohibited by the CJEU judgment of 27 January 2022 (C-788/19). The disagreement concerns the method of review, abstract for the Cour de cassation, concrete for Toulouse. The plea remains arguable, but with clear-eyed awareness of its fragility against the supreme court's position.
What should I do if I have long held an undeclared account abroad?
Spontaneous regularisation, before any request from the authority, remains the most protective route: it allows the account to be declared, avoids default assessment, and keeps the taxpayer under the ordinary limitation regime. It is also essential to reconstruct, while bank archives still exist, the evidence of the funds' origin, since these documents become untraceable beyond ten years. A tax lawyer can help weigh regularisation against a litigation strategy according to the age of the assets and the state of the authority's knowledge.