Trusts - filing and tax obligations

Trusts, even if unknown by French civil law, is not ignored by French tax rules.

The French tax specialist law firm CM-Tax and its team of English speaking French tax advisors, based in Lyon and Marseille but operating throughout France, advises and assists on all subjects relating to French tax law - tax advice and tax litigation - as well as French property law. We also assist tne international community in the sale and acquisition of French real estate.


We here make a brief review of some tax obligations weighing on the trustee, the settlor or the beneficiary of a trust.


1. Obligations of the settlor

The trustee has to submit some declarations to the French tax authorities, when the settlor, the beneficiary or the trustee himself has his tax domicile in France, or when the rights and assets included in the trust are located in France.

The trustee may then be required to submit two declarations:

(i) Declaration of specific events relating to the creation, modification or termination of the trust and the content of its terms.

This declaration must be filed within one month of the event.

(ii) Annual declaration of the market value, on January 1st of each year, of the assets and rights placed in the trust and their capitalized proceeds.

This declaration must be filed no later than June 15 of each year.

Failure to comply with a reporting obligation is punishable by a 20,000 euros penalty. The fine is jointly and severally due by the trustee, the settlor and the beneficiary.


2. Taxation of the settlor

French tax law provides for a specific tax on trusts, amounting to 1.5% of the value of the assets on January 1 of the tax year.

The settlor is liable for this tax, which is not due under the follwing circumstances:

• when the assets held through the trust are subject to real estate wealth tax and duly declared;

• the trusts declared by the administrator, in accordance with the declarative obligations referred to above, in the assets of the settlor, in the event that the settlor is not liable for the Real Estate Wealth Tax taking into account the net taxable value of his heritage. Hence the importance of respecting said reporting obligations.

When the trustee is subject to the law of a State or territory that has concluded an administrative assistance agreement with France against tax fraud and tax evasion, are exempted from the 1.5% specific tax on trusts:

• some pension trusts

• charitable trusts.

3. Taxation of the beneficiary

Proceeds distributed by a trust are taxable in the category of income from foreign securities, regardless of the nature of the property or rights placed in the trust.

The tax is in principle due at the flat rate of 30% (“flat tax”), except if it opted for the progressive scale of income tax if this is more favourable.