Taxation of trust in France : a quick reminder !
A trust is the set of legal relationships created by a person who is a “settlor”, by deed between living persons or in the event of death with a view to placing assets or rights under the control of a director, in the interest of one or more beneficiaries or for the achievement of a specific objective.
The law of 6 December 2013 on the fight against tax fraud had established a register that listed all trusts.
In this register appears: the name of the administrator, the name of the settlor, the names of the beneficiaries and the date the trust was set up.
Taxation of trust in France : When a trust must be declared?
The administrator of the trust is required to declare this if it has a connection with France, for example:
- The director has his tax domicile in France
- The settlor or one of the beneficiaries has his tax domicile in France
- Some of the properties are located in France
For example, you live in France and are the beneficiary of a trust incorporated in the United States, you are required to declare it.
You must make an annual declaration of the market value, on 1 January of the year, of the assets and rights placed in the trust and their capitalised income. This declaration must be filed no later than June 15 of each year with the tax authorities of foreign companies (Services des Impôts des Entreprises Etrangères).
It is also required to declare the creation, modification and termination of this trust.
Failure to declare the trust and its amendments may result in a fine of 20,000 euros.
What must be declared?
In addition to information relating in particular to the terms of the trust, the identity of the settlor, the beneficiary and the administrator, the annual declaration must include a detailed inventory of the assets, rights and products capitalised in France or outside France and placed in the trust, as well as their market value on 1 January of the year.
The annual reporting obligation applies to movable assets and not only to rights and real estate included in the base of the real estate wealth tax.
Are trusts to be reported on the French Wealth Tax ?
From a Real Estate Wealth Tax (IFI) perspective, taxable real estate placed in a trust is included in the assets of the settlor or beneficiary deemed to be a settlor unless the settlor can prove that the assets do not confer any capacity to pay. “Retirement” trusts are not concerned.
In the absence of a declaration, these assets are subject to a specific levy of 1.50% corresponding to the maximum rate of the French wealth tax.
It is possible to be exempt if the director is subject to the law of a State or territory that has concluded an administrative assistance agreement with France to combat tax fraud and evasion.
Do not hesitate to contact us to check that you are up to date with your reporting obligations.
Déborah Zerbib has several years of experience in the field
of personal and international taxation after a Master II degree specialized in tax law.