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French Taxes on Trusts
All French residents linked to a trust - whether as settlors, beneficiaries or trustees - are subject to specific French trust tax rules.
FRENCH TRUST DECLARATIONS Trusts must be declared each year in any of the following cases: The declaration must be made (in French) using the appropriate form and submitted by June 15 (extended to August 31 for non-resident settlors & beneficiaries). The key items include: * Name & address, place & date of birth for the settlor (or “deemed settlor”) and each beneficiary Part of this information is fed into a French Tax Register (Registre des Trusts) listing the names of the settlor, beneficiaries and trustees of each trust. Access to this register is restricted, but includes all tax and customs officials, lawyers, bankers, accountants, notaires, bailiffs, ... In addition, the creation, modification (including distributions of capital and/or income), or closing of trusts must be declared using the appopriate form within ONE MONTH of the event. The key items include: * Name & address, place & date of birth for the settlor (or “deemed settlor”) and each beneficiary
ANNUAL FRENCH TAXES ON TRUSTS A fixed levy (prélèvement spécifique) of 1.5% (equivalent to the top rate of ISF/IFI) is due each year on all such trust assets. The fixed levy is avoided if: The French tax authorities provided specific instructions on how trust assets should be declared for ISF (PAT - Impôt de solidarité sur la fortune - Biens ou droits mis en Trust). In particular, if the settlor is deceased, the assets are considered as being split equally between all relevant beneficiaries unless the Trust Deed indicates a specific allocation. The usual wealth tax reductions and exemptions (including the 5-year exemption on non-French assets for newcomers to France - see Wealth tax exemption ) are only available for trust assets if correctly declared. Explaining to the authorities that trust beneficiaries are excluded from ISF/IFI due to the 5-year exemption is complex but necessary. We work with French lawyers who will complete all the necessary forms and prepare the appropriate correspondence for you.
FRENCH TAX ON DISTRIBUTIONS & LEGACIES FROM TRUSTS Income from a trust received by a French resident is taxed as foreign financial income (revenus de valeurs mobilières étrangères) whatever the true underlying nature of the assets (see BOI-RPPM-RCM-10-30-10-10-20160304 - section IIC). For further information on the tax rates that will be applied, please refer to French Income Tax. Income that rolls up inside a trust without being distributed is not normally subject to any French tax liability. French gift and inheritance taxes arise on the death of the settlor if If at the date of death, the specific share of assets due to a beneficiary is clearly identifiable, then the usual allowances and reduced “family rates” are applied - based on the relationship between the settlor and the beneficiary. The trust assets are combined for tax purposes with any other assets that may be received by each beneficiary - so tax-free allowances may already have been used up before being applied to trust assets. If at the date of death, there is a share of assets “globally due to descendants of the settlor”, then the rate of 45% will be applied to those assets In all other cases (eg assets remaining in the trust without specifically being attributed to family), then the rate of 60% will apply. The rate of 60% will also apply to
Cabinet Gregory works closely on this subject with other US, UK and French experts & lawyers based in Paris to ensure that all regulations are respected whilst minimising any potential taxes and penalties. Given the complex nature of these rules, any French resident who is also a settlor, beneficiary or trustee of any trust should obtain expert advice from a French avocat fiscaliste . We hold no responsibility in the event of relying purely on the outline information shown on this website.
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