Signifiant changes to french trust reporting obligations

In 2019, significant changes occurred regarding French trust reporting obligations.
By way of update, a decree of application regarding the scope of French trust reporting has been published on June 13th, 2019. The French tax authorities has published the new trust forms after the deadline of June 15th and has exceptionally postponed the deadline for the annual trust return to July 1st, 2019.

Extension of the scope of the trust reporting obligation by 2019 Finance Act

The scope of the trust reporting obligation is clarified to include both:

  • Real estate assets; and
  • Non-real estate assets (e.g. financial assets, artworks, gold …)

Under article 1649 AB of the French Tax Code, the trustee must report:

  • If there is a French tax resident settlor, beneficiary or trustee: assets and rights located in France or outside of France and capitalized income placed within the trust; or
  • If all parties to the trust are non-French tax residents (where the French nexus is only materialized by French situs assets): assets and rights exclusively located in France and related capitalized income placed within the trust

For non-French tax residents, a renewed assessment of the situs of the assets is therefore required since guidelines have changed.

Latest news on trust reporting requirements:

  • Further to the amendment of the article 1649 AB of the French Tax Code, a decree dated June 13th, 2019 has reinstated the articles 369, 369 A and 369 B of the annex II of the French Tax Code, which specify the content and conditions of the trust reporting obligations.
    It also suppresses the articles 344 G sexies to 344 G octies of the annex III of the French Tax Code, which established the content and conditions to the trust reporting obligations
  • The deadline for filing the annual trust return (2181-TRUST1 Form), stating the fair market value as at January 1st, 2019 of assets held in trust, initially set for June 15th, 2019 was postponed to July 1st, 2019
  • New trust return forms and notice have been published post June 15th, 2019

No comments on trust reporting obligation in the New French Tax Administration Official Guidelines:

Following the replacement of the Wealth Tax by the Real Estate Wealth Tax, the French Tax administration retracted its official guidelines on the Wealth Tax (which included comments for trust reporting purposes) and published new official guidelines on the Real Estate Wealth Tax.

However, while the former Wealth Tax official guidelines included reporting exemptions and tolerances for trust reporting purposes, the new Real Estate Wealth Tax official guidelines do not include comments on trust reporting obligations.

Therefore, the following reporting exemptions and tolerances may potentially no longer apply:

  • Employment related pension trusts (except that the exemption was maintained in the new version of the non-binding filing instructions)
  • Portfolios held in trust
    • Simplified reporting tolerance for portfolio is no longer mentioned in the guidelines
    • Simplified tolerance for intra-portfolio events (disposals, dividends, interest) is no longer mentioned in the guideline
  • Financial assets held in trust

The decree of application being published we will be monitoring any update or clarification from the French Tax administration official guidelines on the Wealth Tax.

In this context, we remain at your disposal to proceed with an updated assessment of the scope of the trust reporting obligation in order to ensure compliance with French Law and avoid penalties (20 000 EUR per non-filed trust return, 1.5% sui generis tax, non-reporting penalty equal to 80% of the amount of avoided tax, late-payment interest).

 

Christina Melady

Christina Melady, Partner, has over 23 years’ experience practicing tax law in France and advises both companies and managers on personal tax matters. Christina created the specialized practice in France […]

Virginie Bousquenaud

Virginie Bousquenaud works as a tax lawyer specialized in designing rewards, compensation and private equity schemes. She was admitted to the French Bar in 2015. Virginie has over 4 years’ […]