Trust Declarations in France
A trust registration service has existed in France for over 11 years
The start of this month marked the deadline for the registration of trusts on the HMRC’s Trust Registration Service (TRS). To allow trustees to get to grips with their reporting obligations, HMRC has confirmed that the penalties rules will be relaxed for a period of time provided trustees are cooperative with their reporting, but it won’t be long before failing to comply will lead to fines.
While trustees will understandably take a little time to adjust to the requirements in the UK and what is expected of them in order to maintain a trust register, a similar type of register has existed in France for over 11 years and the penalties for failure to comply could be very harsh – a penalty of €20,000 for failure to declare.
This article serves as a reminder of the obligation resting on trustees to maintain an up-to-date register with the French tax authorities.
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The trust register in France is designed to retain information about trusts created in a country other than in France, where there is some connection with France. Part of the finance legislation of 2011 created a set of taxation rules to apply to trusts, as well as imposing an obligation on trustees to register a trust and make annual and event declarations.
It can be difficult at times to determine the tax regime applicable in France in respect of a trust, especially as there is one relatively short set of rules which is to apply to any type of trust whether, for example, it is an English interest in possession trust, a discretionary trust, or indeed a trust created in any other country of the world.
The table at the end is a short glossary of terms used within the French legislation.
A trustee can expect to have to notify the French tax authorities of the existence of a trust if there is some connection with France. This could be any one or more of the following:
- The settlor (or the “deemed” settlor) is resident in France;
- A trustee is resident in France;
- One of the beneficiaries is resident in France;
- Any of the trust assets are situated in France (e.g. a French property, cash or investments are located in France).
This highlights the obligation resting with trustees to ensure that they know not only the identity of the beneficiaries of the trust, but also where they are located. Trustees would do well to keep in regular contact with the beneficiaries and inform them that if they move abroad, they must inform the trustees immediately. Whereas HMRC gives trustees 90 days to update the TRS with any changes, the timeframe for trustees to make updates in France is only one month.
If there is a relevant connection with France, the trustees have an obligation to file two different types of declaration:
- A déclaration événementielle, being an “event” declaration, also known as “Trust 1”; and
- A déclaration annuelle des valeurs, being an annual declaration, also known as “Trust 2”.
The event declaration must be filed first to add the trust to the register. A new Trust 1 declaration must then be filed every time there is a change affecting the trust. For example, this could be:
- a change to the terms of the trust;
- addition of assets to the trust;
- the advancement or appointment of assets out to beneficiaries;
- a change of address for a settlor, trustee or beneficiary;
- the death of a settlor, trustee or beneficiary;
- a change to the composition of beneficiaries.
The Trust 1 must be filed within one month of the event.
The annual declaration must be filed each year there continues to be a connection with France, by 15 June each year. The Trustees must report the assets comprising the trust and their value as at 1 January of the year in question.
The information a trustee will need for a declaration includes the full name, date and place of birth, address and date and place of death (where applicable) for each relevant person (settlor, trustee, beneficiary) and details of the trust assets and values. Trustees must also include an explanation of the trust terms, and any trust documentation annexed to the declarations must be in French.
Trustees’ responsibilities today are as burdensome as they have ever been. A trustee isn’t expected to have an in-depth knowledge of foreign laws, but it’s clear that if there’s any cross-border element, they would do well to seek advice from a professional specialising in the relevant laws to guide them through their responsibilities overseas.
The same applies for professionals who act for trustees. Professionals cannot be expected to be master of all the world’s systems of law, but they should be alert to the possible need to involve other advisers to fill the gaps, and advise the trustees of this need.
Glossary of terms:
|The person(s) holding the legal title to the trust assets, and managing the trust, being the Trustee(s)
|The beneficiary of a trust. This could be a beneficiary in respect of the income (bénéficiaire en revenus) or in respect of the capital assets (bénéficiaire en capital)
|bénéficiaire réputé constituant
|A “beneficiary deemed to be settlor”. This arises when the settlor has died. The beneficiaries are deemed to be equal settlors of the trust for the purposes of working out the French tax treatment going forward
|The person who has transferred assets to a trust, being the Settlor
|Annual trust declaration (“Trust 2”)
|Event trust declaration (“Trust 1”)
|This could be a trust created by a trust deed during the settlor’s lifetime (trust intervivos), or a Will trust (trust testamentaire)
|trust définitif / irrévocable
|An irrevocable trust
|trust temporaire/ revocable
|A revocable trust
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