Why Your Fidelity Account Is Illegal in France, The €100,000 Trap Americans Miss

So here is the uncomfortable version you only hear after a nasty letter lands. Holding a U.S. brokerage account is not automatically illegal in France, failing to treat it like a foreign financial account is. If you live in France and keep a Fidelity, Schwab, or Vanguard account, you must declare it every year on Form 3916 with your income return. Skip that and French tax law stacks fixed fines, retroactive tax, surcharges, and a ten-year lookback in ways that can blow past €100,000 before anyone argues substance. And yes, many Americans discover this during a mortgage application or an automatic data exchange match rather than by choice. The rule is simple, the enforcement is not gentle.

This is the field guide I wish someone had handed me the day French residency started. You will get the exact rules, the real penalties, how U.S. brokers like Fidelity treat French residents, and a two-week plan to get compliant without burning your portfolio. I will also show you how that scary “€100,000 fine” headline actually happens in practice, because it is less clickbait and more arithmetic.

What France actually requires you to do

Rule one: declare every non-French account, every year. If you are tax resident in France, the law (CGI article 1649 A) says you must disclose any bank, brokerage, crypto platform, or life-insurance account held outside France, even if it was only open for part of the year, even if you only hold cash, even if the balance is tiny. You add Form 3916 (or 3916-bis) to your income return 2042 and file online. One form per account, no exceptions.

What counts as an “account” here

• U.S. brokerage and retirement accounts you control
• U.S. bank accounts
• Crypto exchange accounts outside France
• Life insurance contracts outside France
  If in doubt, assume it is in scope and disclose. France asks for identifiers and dates, not your balance.

Bottom line: your Fidelity login is a foreign account in French eyes, and it belongs on Form 3916 the same way a Bank of America checking account does.

Penalties that create the “€100,000” shock

Start with the fixed fines, then add the multipliers.

Fixed fine for non-declaration

• €1,500 per undeclared account per year, standard case
• €10,000 per account per year if the account sits in a non-cooperative state for anti-fraud assistance
  These are per year and per account. Two accounts over four undeclared years is already €12,000 in fixed fines before any tax.

Lookback window
When you omit a foreign account, the tax office gets a ten-year reassessment window, not the usual three. That extra time is how a small mistake becomes an expensive one.

If income existed and was not declared
Interest, dividends, and gains linked to the undeclared account can be reassessed with penalties and surcharges. In heavy cases, an 80% surcharge for deliberate concealment may be applied, plus interest. Recent coverage has also highlighted a severe tool: if you cannot prove the lawful origin of funds, the administration can tax 60% of the highest balance observed under LPF L23 C. That is rare, but it exists, and courts have allowed it. This is where totals breach six figures very fast.

How the headline number happens
A typical path to €100,000+ looks like this: four to six years of non-declaration with two or three accounts, fines at €1,500 per account per year, reassessed investment income with penalties, and in bad documentation cases, application of the 60% “unexplained origin” measure to a high balance year. You do not need a mansion to hit the headline. You just need time, silence, and paperwork you cannot find.

Key idea: the fines start fixed and small, the multipliers are what hurt. Declare and you remove the multiplier.

“Illegal account” versus “illegal behavior”

It helps to be precise. Owning a Fidelity account as a French resident is not illegal. What triggers penalties is failing to declare it or failing to declare income from it. There is a second twist Americans trip over:

Many U.S. brokers restrict trading once you become a French resident.
Fidelity’s own policy: you may keep your old account and hold or sell, but no new purchases nor deposits after you change your legal address to France. That is a compliance choice tied to European product disclosure rules and licensing. If you move and update your profile, expect your account to become hold-and-liquidate only. Not illegal, just limited.

Bottom line: declare it and understand you may not be able to trade it like before. The solution is planning, not panic.

Five traps Americans hit in the first year

1) “It is my IRA, it does not count.”
It counts for account disclosure. Retirement status does not erase Form 3916. Report the existence. If distributions happen, those are taxable events under French rules depending on the treaty and product. Disclose first, ask a pro about the tax treatment second.

2) “The account is only cash now.”
Disclosure obligation does not care. Open, held, used, or closed during the year still triggers Form 3916.

3) “It was my mother’s account. I just had a POA.”
Powers of attorney and signatory rights are in scope. If you can operate it, you disclose it.

4) “My U.S. broker never sent a French tax form.”
They will not. You convert 1099 information yourself into the French return. Silence from a U.S. broker does not reduce your French duty.

5) “Nobody will find it.”
Automatic exchange of information (CRS, FATCA, EU tools) feeds the match engines. The letter arrives eventually.

Guiding line: assume visibility, file like a grown-up, sleep better.

What to do this month if you are behind

Here is a two-week triage that stops small problems becoming expensive ones.

Week 1 — Inventory and documents

• List every foreign account you controlled or used since arriving, including closed ones
• Download opening dates, closing dates, account numbers, addresses
• Pull 1099s and year-end statements for interest, dividends, and realized gains
• Note years you failed to file 3916 and years with reportable income

Week 2 — File and regularize

• Prepare current-year return with 3916 forms for all accounts
• If prior years are missing, self-regularize: file late 3916s and amend income where necessary. A professional can help sequence filings to minimize penalties
• If you truly cannot document origins of a large historical balance, collect any banking history or inheritance papers now. Documentation is what keeps you away from the 60% hammer.

Key move: show voluntary intent before the administration asks. The tone of your case changes.

How to live with a U.S. brokerage while resident in France

Accept the “hold-only” reality
If Fidelity freezes purchases for French residents, treat the U.S. account as legacy holdings. Harvest losses or gains strategically if allowed, but do not plan new builds there.

Open a compliant French or EU platform for new investing
Use a French broker or EU platform that issues French tax reports and complies with PRIIPs/MiFID rules. Your April will be calmer.

Keep product choice France-friendly

• Avoid complicated wrappers you do not understand
• Mind PFU (flat tax), social levies, and treaty details
• Remember: IFI is real-estate wealth tax, not financial-asset wealth tax. Securities alone do not trigger IFI. A good adviser aligns portfolio and tax, not just performance.

Always file 3916 each spring
One per account, appended to 2042. It is tedious. It is cheaper than the alternative.

Scripts you can actually use to ask about this

With your U.S. broker support chat
“Hi, I am now tax resident in France. Can you confirm what transactions remain permitted on my existing account and how address changes affect trading”
You want an explicit note that purchases and deposits stop, sales and withdrawals usually remain. Save the transcript.

With your French tax preparer
“I have U.S. brokerage and bank accounts. Please add Form 3916 for each and advise on dividend and gain reporting from my 1099s.”
Short, specific, makes them ask the right questions.

If you are late
“I want to regularize undeclared foreign accounts for years X–Y. I have identifiers and statements. Please draft late 3916s and amended returns.”
Voluntary cures beat discovery letters.

The math behind the pain, with a real-world example

Imagine you arrived in 2021, never filed 3916, and hold two U.S. accounts. In 2022 and 2023 the accounts generated modest dividends you also forgot to declare in France.

• Fixed fines: €1,500 × 2 accounts × 3 years = €9,000
• Reassessed dividend tax with penalties and interest: pick a round €5,000–€12,000 depending on amounts and timing
• Admin time, adviser, translations: €2,000–€5,000

You are already flirting with €20,000+. Add a third account or longer silence and the number rises. Throw in a large balance with missing provenance and the 60% measure can make the total explode into six figures. The headline is not drama. It is a compound effect of small errors.

Key reminder: declare early, document origin, and you remove the multipliers.

What to keep, what to close, what to move

Keep and disclose

• Old IRAs and 401(k)s you cannot or should not liquidate
• Brokerage accounts with embedded gains where selling would create a tax mess

Close or consolidate

• Dusty small accounts that make you file extra 3916s without benefit
• Dormant U.S. checking accounts you do not need

Move new investing to the EU side

• French broker or EU platform for fresh contributions
• Choose instruments that generate clear French tax forms and avoid U.S. estate-tax surprises for non-citizen spouses

One sentence sanity check: fewer accounts equals fewer forms equals fewer failure points.

The FAQ everyone asks in the first meeting

Do I have to declare if the balance is tiny
Yes. Disclosure is about existence, not size.

Does a joint account or power of attorney count
Yes. Control triggers the duty.

Is my account really visible to France
Automatic exchange frameworks and data matches make discovery likely over time. Assume yes.

Can I still sell in my Fidelity account after moving
Fidelity states you may generally sell and withdraw, but cannot make new purchases or deposits as a resident of France. Confirm for your account type.

Is it true there is a 10-year lookback
Yes, when foreign accounts were not declared, the reassessment period can stretch to ten years.

Two checklists to close this weekend

Compliance checklist

• List all foreign accounts since arrival
• Download identifiers and open/close dates
• Gather 1099s, year-end statements
• Prepare 3916 for each account with your 2042
• Amend prior years if missing
• Keep proof of origin of funds for large legacy balances

Brokerage reality checklist

• Confirm allowed actions with Fidelity support
• Stop new deposits into the U.S. account
• Open an EU-compliant account for new investing
• Simplify redundant U.S. accounts
• Calendar a yearly 3916 reminder for April

Memory hook: disclose, simplify, localize new money.

What to say to yourself if the letters already arrived

You do not fix this with panic. You fix it with paper, timelines, and humility. Make the list, file the forms, show cooperation, document origins, and negotiate penalties where the law allows. France cares about behavior and documentation. Show both and the story gets smaller.