May 2012 | France - disclosure and tax obligations on trusts

Legislation passed in France in July 2011 imposes tax and disclosure obligations on trusts that have a connection to France akin to the controversial FATCA legislation in the US. Although French law does not recognise the concept of a trust, the legislation creates a regime for its definition and taxation including the taxation of fixed or discretionary trusts.

The legislation is intended as an incentive for the settlor or the beneficiary to declare the trust assets as part of his annual wealth tax return as the withholding tax will not apply in such a case.

The legislation introduces a specific annual 0.5% withholding tax on trusts and reporting obligations. The withholding tax will apply when the settlor or one of the beneficiaries is a French tax resident or when the trust holds an asset or a right located in France. The tax applies to worldwide assets if the parties are tax resident in France, but only to French assets if the parties are not French tax residents. 

Charitable trusts are excluded from the withholding tax. 

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Aileen Keogan | Solicitor & Tax Consultant | 21 The Avenue | Louisa Valley | Leixlip | Co. Kildare | Ireland

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