New deadline of 30 September 2012 for the Trustees disclosure obligations and the sui generis levy of 0.5%
The first rectified Finance Act for 2011 introduced a new penalizing regime of taxation for foreign Trusts in
The French Tax Authorities (FTA) have now published their Decree (dated 15 September) providing a new deadline for
1. TRUSTEES DISCLOSURE OBLIGATIONS
1. Declaration 1 : Creation, amendments or extinction of a Trust
The first rectified Finance Act for 2011 (article 1649 AB, paragraph 1) has created an obligation for the Trustees to disclose information in respect of the existence, modification or extinction of the Trust.
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 Decree introduces a new article 344 G sexies of the French Tax Code (FTC) which provides that this declaration must be filed by the Trustees within one month from the creation, amendment or extinction of the Trust.
For any creation, amendment or extinction of a Trust between 31st July 2011 and the publication of the new Decree (15 September) the deadline is postponed to 31 December 2012.
There is no specific tax return, and the Trustees need to make the declaration by a simple letter to the FTA.
An amendment to the Trust is defined as any changes of its terms, organization, any change to the Settlor, Beneficiary deemed Settlor, Beneficiary, Trustees, death of any of them, any addition or take away of assets or rights, transmission or attribution of assets, rights or income from the Trust and more generally any legal or factual amendments that could modify the economy or organization of the Trust.
The amount of information that needs to be provided is substantial and is listed as follow:
1. Identity of the Settlor (s) or deemed Settlor (s) (i.e. the Beneficiary (ies) if the settlor is already deceased): full name or registered name, address, date and place of birth (and date of death if applicable);
2. Identity of the Beneficiary (ies): full name or registered name, address, date of birth (and date of death if applicable);
3. Identity of the Trustees: full name or registered name, and address;
4. Identity of the Trust: name and address;
5. Terms of the Trust: contents of the provisions of the Trust and complementary provisions, if any, regarding its organization, including information on the revocability nature or not, discretionary nature or not, and the rules regarding the devolution of the assets and the income;
6. Nature and date of the event triggering the filing of the disclosure obligation;
7. When applicable, the composition of Trust assets and rights which have been transmitted, attributed, or coming out, at the date of the event mentioned in 6 above;
8. For each of these assets or rights mentioned in 7, the full name or registered name, address, and if applicable date and place of birth (and date and place of death if applicable) of the persons having placed these assets or rights in the Trust;
9. For each of these assets or rights transmitted, attributed or coming out from the Trust as mentioned in 7, the full name or registered name, the address, and if applicable date and place of birth (and date and place of death if applicable) of the persons to whom these assets or rights have been transmitted, attributed or coming out from the Trust.
For memory, 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%.
The tax return needs to be filed to the tax centre of the foreign companies.
2. Declaration 2 : Annual declaration of the market value at the 1st January of the Trusts assets, rights or products
The first rectified Finance Act for 2011 (article 1649 AB, alinea 2) has also created an obligation for the Trustees to disclose information in respect of the market value of the Trust assets, rights or products.
The Decree introduces a new article 344 G Septies of the FTC which provides that this declaration must be filed by the Trustees each year on the 15 June. The deadline is postponed to the 30 September 2012 for this tax year.
There is no specific tax return, and the Trustees need to make the declaration by a simple letter to the FTA.
This disclosure information must be made by the Trustees if the Settlor or a Beneficiary is French tax resident, or if a Trust asset is located in France.
The amount of information that needs to be provided is similar as the one mentioned above, and is listed as follow:
1. Identity of the Settlor (s) or deemed Settlor (s) (i.e. the Beneficiary (ies) if the settlor is already deceased): full name or registered name, address, date and place of birth (and date of death if applicable);
2. Identity of the Beneficiary (ies): full name or registered name, address, date of birth (and date of death if applicable);
3. Identity of the Trustees: full name or registered name, and address;
4. Identity of the Trust: name and address;
5. Terms of the Trust: contents of the provisions of the Trust and complementary provisions, if any, regarding its organization, including information on the revocability nature or not, discretionary nature or not, and the rules regarding the devolution of the assets and the income;
6. If at least one of the Settlors, deemed Settlors, or Beneficiaries is tax resident in France, a detailed inventory of the worldwide Trust assets, rights or capitalized products in the Trust and their market value on the 1st January;
7. If none of the Settlors, deemed Settlors, or Beneficiaries is tax resident in France a detailed inventory of the French situs Trust assets, rights or capitalized products in the Trust and their market value on the 1st January, excepting for the financial assets.
The Trustees do not have to provide information mentioned in 5, if the declaration 1 (article 1649 AB alinea 1) has been previously filed.
The sanction in case of non-declaration are the same as for Declaration 1.
The tax return needs to be filed to the tax centre of the foreign companies.
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 (the deadline for non resident Settlor was 31st August this year), a special levy of 0.5% (sui generis wealth tax) will have to be paid by the Trustees. This applies 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 but has also been postponed to 30 September for tax year 2012.
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.
The Decree mentions that this payment must be made at the same time as Declaration 2.
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Caroline Cohen
September 2012
This article is for general information only and is not intended to provide legal advice
For further information, please contact:
Caroline Cohen
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