Trust and fiduciary
You have transferred a part of your estate via a foreign structure akin to a trust.
You are the beneficiary of income from a trust.
You will be receiving an estate transferred through the intermediary of a trust.
The tax treatment of trusts in France
Trusts exist in some foreign legal systems (notably in English-speaking countries) but are not recognised under French civil law. However, to ensure a certain legal certainty, the legislator has adapted the French tax system to accommodate this type of structure.
One of the difficulties lies in identifying a structure as a trust (for example, certain foundations under foreign law). The law defines the trust as “a set of legal relationships that arise under the law of a state other than France, when a person (the settlor), transfers through a settlement between living persons (inter vivos) or upon death, certain assets or entitlements to an administrator (the trustee) for the benefit of one or more beneficiaries or for the accomplishment of a defined purpose.” (Article 792-0 of the French General Tax Code).
The tax treatment of trusts varies according to the type of tax in question (income tax, wealth tax, death/transfer duties etc.). However, the general principle is that of the connection of assets held by the trust including its income, to the person having brought the assets to the trust.
With respect to transfers of estate assets made through a trust or an equivalent structure, the latter are subject to duties on free transfer as if the settlor had intended to make a donation.
The income distributed by trusts is taxed in the relevant category of securities income (distribution or interest).
Finally, from the point of view of the tax on real estate assets, real estate assets held in a trust are included in the estate of the beneficiaries who are deemed to be the settlors, i.e. the persons originally placing the assets in the trust.
French tax residents having the status of settlor-beneficiary of a trust have certain declaratory obligations:
- A “factual” declaration at the time the settlement is made, amended and terminated
- An annual declaration of the current value of the assets and entitlements placed in the trust and of capitalised products as at the first of January of the respective year.
Failure to declare a trust is subject to a fine of €20,000.
Finally, if tax adjustments are made for assets or entitlements placed in a trust which has not been declared, the surtax applicable is then accompanied by an 80% tax increase.
Altexis offers you support in the treatment of operations involving a foreign trust:
- We can carry out the declaratory formalities required for trusts.
- We can help you to compile a return on the income generated from a trust.
- We can help you in the case of a tax inspection or voluntary (spontaneous) disclosure of a foreign trust.