The first rectified Finance Act for 2011 introduced a new penalizing regime of taxation for foreign Trust in France.
The French Tax Authorities (FTA) have now published a very short statement of practice (dated 18 July 2012 and realised on the 24 July 2012) providing a new deadline for 2012 in respect of the Trustees disclosure information obligation (1) and the sui generis levy of 0.5% for the Trustees (2).
1. TRUSTEES DISCLOSURE OBLIGATIONS
The first rectified Finance Act for 2011 has created an obligation for the Trustees to disclose information in respect of the existence, modification or extinction of the Trust, the specifications of the Trusts and the Trust assets. This disclosure information must be made if the settlor or a beneficiary is French tax resident, or if a Trust asset is located in France. The deadline to file the return is 15 June each year.
If the Trustees do not comply with this disclosure information, they are liable for a penalty of the higher of either €10,000 or 5% of the Trust assets. The settlor and beneficiaries are jointly liable for the payment of this fine. Non-compliance could also trigger the application of the specific withholding tax of 0.5%.
In their new statement of practice (dated 18 July 2012 and realised on the 24 July 2012) the FTA mentioned that the deadline to file this specific tax return is postponed to 15 September 2012 for this tax year 2012. The tax return needs to be filed to the tax centre of non-residents (Direction des résidents de l’étranger et des services généraux, 10 rue du Centre, 93465 Noisy-Le -Grand Cedex).
2. SUI GENERIS LEVY OF 0.5% FOR THE TRUSTEES
Under the new legislation, the settlor, or if he is already deceased, the beneficiaries, are subject to wealth tax on the Trust assets. If neither the settlor nor beneficiaries are residents in France, the settlor (or the beneficiary) is subject to wealth tax on the French assets or French rights only. The new law does not make any distinction between discretionary or non-discretionary Trusts, so it should apply to any foreign Trusts.
In the case where the Trust assets have not been taxed in the settlor’s wealth, a special levy of 0.5% (sui generis wealth tax) will have to be paid by the Trustees. This would apply whether the settlor or any of the beneficiaries are residents of France, or if the Trustees hold a French asset or right such as shares in a real estate company. The Trustees are responsible for the filing and payment of this 0.5% specific tax. Settlor and beneficiaries will be jointly liable with the trustees for the payment. The deadline for this specific 0.5% withholding tax is 15 June.
This 0.5% withholding tax will however not be due if the assets have been reported by the settlor (and subject to wealth tax) and the above disclosure obligations have been complied with.
In the same statement of practice, the FTA postpones also the deadline to file this sui generis levy of 0.5% to 15 September 2012 for tax year 2012. The tax return needs also to be filed to the tax centre of non-residents (Direction des résidents de l’étranger et des services généraux, 10 rue du Centre, 93465 Noisy-Le -Grand Cedex).
The FTA have also explained that they will give all the details on these two tax returns in a specific decree to be published shortly.
This article is for general information only and is not intended to provide legal advice
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