Trusts in France and recent changes
A RECENT article on the Daily Mail website caused a bit of a stir as it claimed 'British expats face a shock £8,000 fine'.
The article covered tax rules concerning trusts in France, but with phrases like 'stealth ploy' and interviewees being quoted as saying the 'French authorities are absolutely gunning for British expats' there did appear to be a touch of top-spin and scaremongering.
So offering up an alternative view of the tax rules is regular contributor to the site, Guillaume Barlet, a French lawyer at Bank House Investment Management:
"The article is indeed a bit of scaremongering although it is based on some truthful elements. The concept of a trust is surrounded in France with great legal and tax uncertainty which does not help. The trust is, as such, an institution unknown to French law, which always renders it difficult to identify.
A specific tax system has been established by a French Act on 29 July 2011 (the conditions of application of this Act, although partially enforceable, should be specified in an implementing decree yet to be issued).
Since that date, the Act applies a number of rules and principles. Nevertheless, the legal provisions are very recent and the French tax authorities have not provided any reliable guidance yet so it is necessary to stay cautious in respect of its exact consequences.
The issue is mostly that the same rules apply to any trust which in practice is difficult to implement.
These rules could affect:
- Individuals with assets in France held in trust
- French residents settlors of a trust of any nature
- French residents beneficiaries of a trust of any nature
- French residents trustees of a trust of any nature
In practice, I do not see how this could possibly be enforced so like everybody else we have to wait for some guidance from the tax authorities (they should have issued such guidance back in March).
Since the law has been in force since 1 January 2012 (15 June mentioned in the article is linked to the wealth tax return deadline), it is technically possible to fall foul of its measures.
However, since there is no indication of how this should be implemented, it is unlikely that the tax authorities will be very organised to strike. In addition, the individuals most 'at risk' (if any) are the ones with an asset value exceeding €1.3 million.
The measure referred to in the article (I guess from the mention of a €10,000 fine) is mostly the reporting requirements regarding the trust to be carried out by the trustees (i.e. constitution, modification or termination of the trust and the description of its conditions and value of its assets).
For the moment, no form or guidance has been issued to perform this duty. The law in question provides that there is a fine (€10,000 or, if higher, an amount equal to 5% of the assets) if this obligation is not met (but no imprisonment!)."