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The Annual Obligation on Trustees to Disclose Trust Information to The French tax Office

Amongst the myriad of tax changes introduced by the French Revised Finance Act of 29/07/11, Article 14 substantially broadened the scope for French taxation of trusts as well as placing an annual administrative burden on the trustees when a French connection exists, either through assets held or due to the location of the settlor or one or more of the beneficiaries.

There are two primary areas where this scope was extended:

  • French Inheritance tax on the death of the settlor or beneficiary and
  • An obligation to submit annual Trust declarations to the French tax office alongside payment of a stand alone asset tax when relevant.

I will tackle the Inheritance tax question in a separate bulletin, meanwhile this update briefly explains the new annual declaration imposed on Trustees from 2012 onwards.

Scope of the Trustee Obligations:

New article 1649 AB of the Code Général des Impôts, resulting from article 14 of the above French Revised Finance Act requires trustees of all Trusts existing at or created after 31/07/2011 to submit information to the French tax office whenever:

  • The settlor of the trust is tax resident in France at or after 31/07/2011, or
  • Any trust beneficiary is tax resident in France, at or after 31/07/2011, or
  • The Trust holds one or more French located assets, including all financial assets which have been placed into Trust on its creation or modification and all land and property in all cases (whether placed into trust or purchased by the Trustees).

The requirement applies to all trusts meeting any one of the above descriptions, with the exception of:

  • Bare trusts and
  • Trusts resident in a State which has concluded a co-operative agreement with France and which:
  • Are recognised pension schemes, or
  • Trusts created by a company or group of companies for their own trading purposes, or
  • Certain Charitable trusts

To all practical purposes then, the rule governs the quasi-total range of settlements and trusts created in the UK and offshore, when a French connection exists as determined above.

The Annual Obligation on Trustees to Disclose Trust Information to The French tax Office

Initial and Event Based Declaration

Whenever any of the three qualifying criteria are met, an initial declaration must be made disclosing the terms and conditions of the Trust via the Trust deed, the settlor, beneficiaries and Trust assets, including details of its creation along with any modifications and eventual termination.

Annual declaration

Subsequently, if the criteria are still relevant, the trustees must submit an annual declaration no later than 15th June each year, disclosing the market value of trust assets at the 1st January of that year.

When the settlor or a beneficiary is French tax resident, the trustees must disclose the value of all trust assets, irrespective of their nature and location. When neither settlor nor any beneficiaries are French tax resident, only those trust assets located in France need be declared, (in certain instances the requirement may be exempt depending on the nature of those assets).

Annual Asset Tax

Trustees must accompany the annual declaration with a tax payment of 0.5% of the value of assets which it either retains in France or of total Trust assets wherever they are held when the settlor one or more beneficiary is resident in France, unless:

  • These assets are included in the settlor’s or beneficiary’s annual wealthtax declaration, or
  • Are stated as belonging to the settlor or beneficiary for the purposes of wealth and Inheritance taxes.

The implication of this, therefore, is that if there is a range of beneficiaries to whom no particular element of the trust capital is attached, (e.g. a standard discretionary trust), then if one of those beneficiaries lives in France the trust (or the French resident settlor or beneficiary) must pay 0.5% of the total trust assets as an annual tax charge.

Effectively, an annual charge of 0.5% of total trust assets is the price paid for the privilege of not disclosing the underlying proportion of the trust assets nominally allocated for the benefit of the French resident beneficiary.

Sanction Charge for Non Compliance

Article 1736 IV bis of the CGI provides that failure on the part of the Trustees to meet the above responsibilities is subject to a €10.000 penalty, or an amount equal to 5% of the trust assets if higher.

Under the terms of article 1754 V-8 of the CGI, the settlor and any French tax resident beneficiaries are jointly and severally liable for the fine, along with the trustees.


Clearly, being effective from 31/07/2011 and with the first declaration deadline being less than 6 months away, the pressure is on all Trustees to cross reference whether or not any of their trusts are caught by this new requirement which has not been well publicised in the UK

Bearing in mind its size, (minimum 10 years worth of annual tax payments which might not be due anyway), the sanction charge for non disclosure constitutes a strong incentive to make complete disclosure of the trust to the tax office.

This is particularly true if, as a result of disclosure and nominal allocation of trust assets, the 0.5% tax charge can be set aside and any consequent wealth tax paid on the part of the settlor or beneficiary falls below 0.5%.

For further information and details of how Charles Hamer Financial Services can help you meet these French obligations please contact me, Jon Pawsey, on 01844 218956 or by email: jon@charleshamer.co.uk

As FSA authorised and regulated Independent Financial Advisers specialising in Anglo-French planning since 1988, Charles Hamer are always up-to-date with the external developments affecting clients with differing French interests and realise that the same information will not always find itself across the channel to professionals such as you.

Click here to see related articles French Taxation of Trusts 2012 Disclosure Deadline Announced

Our free CHFS Anglo-French Financial Planning Bulletin is a great way of staying on top of this and runs every six weeks which provides information on similar developments. It’s quick and easy and a great way to keep in contact with us.