Article of 07/06/2021 updated on 15/07/2022
The comments relating to the reporting obligations of trusts that appeared in the BOFiP relating to ISF were updated in 2022 and carried over to the BOFiP relating to trusts.
Directors have two declarations to file with the tax authorities in France:
- An “event-driven” declaration in respect of the constitution, modification, extinction as well as the content of the terms of the trust (2181 TRUST 1 form) within the month following the event;
- An annual declaration of the market value on the January 1st of the year of the assets and rights placed in the trust and their capitalized proceeds (2181 TRUST 2 form).
(article 1649 AB of the general tax code).
Before indicating the content of these declarations as well as the consequences resulting from the absence of a deposit, it is advisable to give a trust definition.
I – Trust definition and persons concerned
Definition of a trust and persons who manage it
First of all, here is the definition made by the general tax code (Article 792-0 bis): “A trust constitutes all the legal relationships created, under the law of a State other than France, by a person who has the quality of constituent, by act inter vivos or by cause of death, with a view to placing real estate or rights there, under the control of an administrator, in the interest of one or more beneficiaries or for the realization of a specific objective”.
The constituent of a trust is either the natural person who set it up, or, when it was set up by a natural person acting in a professional capacity or by a legal person, the natural person who invested assets and rights in it.
The tax beneficiary of a trust is the person or persons designated as beneficiaries of the trust income paid by the administrator. The beneficiary is also the person or persons who are the capital beneficiaries of the assets or rights of the trust, during the life of the trust or at the time of its extinction. The settlor of the trust can also be a beneficiary, in particular in the situation of an inter vivos trust.
Trusts and persons concerned by the formalities
These reporting obligations mentioned in the introduction (event driven and annual) are incumbent on the administrator of a trust when one of the following conditions is met:
- The settlor or the beneficiary deemed settlor resides in France for tax purposes on January 1st of the year of declaration;
- At least one of the beneficiaries resides in France for tax purposes on January 1st of the reporting year;
- At least one of the assets or rights placed in the trust is located in France, this condition being assessed on January 1st of the year with regard to the annual declaration;
- The administrator of the trust has his tax domicile in France on January 1st of the year of declaration;
- The administrator of the trust established or residing outside the European Union acquires real estate or enters into a business relationship in France.
Structures exempted from reporting obligations
- The administrators (when they are subject to the law of a State or territory which has concluded an administrative assistance agreement with France with a view to combating fraud and tax evasion) of trusts set up to manage the rights acquired, in respect of their professional activity, by the beneficiaries under a pension scheme set up by a company or a group of companies;
- Directors of structures that do not meet the definition of trust are also not bound by the reporting obligations.
II – Event declaration n° 2181 TRUST 1
The administrator of a trust, whether or not domiciled in France for tax purposes on January 1st of the year of the declaration, is required to declare the following events or information:
- The constitution, modification or termination, as well as the content of the terms of the trust;
- Information relating to the surname, first names, address, date, place of birth and nationality of the beneficial owners of the trusts.
Definition of beneficial owners: all natural persons having the capacity of administrator, settlor, beneficiary and, where applicable, protector. As well as any other natural person exercising effective control over the trust or performing equivalent or similar functions.
Definition of modification of the trust: this is any change in its terms, mode of operation, settlor, deemed beneficiary settlor, beneficial owner, administrator, any death of one of them, any new entry into the trust or any exit from the trust of property or rights, any transmission or allocation of property, rights or proceeds of the trust and, more generally, any change in law or fact likely to affect the economy or operation of the trust concerned.
Securities concerned by the reporting obligation: these are French securities when they are held directly by the trust, whether listed or unlisted, and regardless of the share of French securities in the trust’s portfolio, as well as unlisted foreign securities, predominantly real estate in France, which are then assimilated to French securities.
Special case: with regard to trusts whose settlor and all beneficiaries are all non-residents of France and whose assets located in France within the meaning of article 750 ter of the CGI consist exclusively of financial investments, this obligation is understood as follows:
- The administrators of the trusts in which these financial investments were placed during their constitution or during subsequent modifications are bound by the reporting obligation;
- In other cases, trust administrators are only bound by this reporting obligation when the settlor or one of the beneficiaries becomes a resident of France.
Filing of the declaration: it must be subscribed with the tax center for non-residents within the month following the constitution, modification or extinction of the trust. The declarations filed must be submitted in French on declaration n° 2181 TRUST 1 accessible online on the website www.impots.gouv.fr.
III – Annual declaration n° 2181-TRUST 2
The administrator of a trust that falls within the scope of the declarative obligations referred to in Chapter I-2 also declares the market value on January 1st of the year:
- For persons who have their tax domicile in France, assets and rights located in France or outside France and capitalized products placed in the trust;
- For other persons, only property and rights located in France and capitalized products placed in the trust.
Content of the declaration
The annual statement includes the following information:
- The identification of the settlor(s) or beneficiaries deemed to be settlors: surname and first name or company name, SIREN number, address, date and place of birth, nationality and, if applicable, date and place of death;
- The identification of the beneficial owner(s): surname and first name or company name, SIREN number, address, date and place of birth, nationality and, if applicable, date and place of death;
- The identification of the administrator of the trust: surname and first name or company name, SIREN number, address, date and place of birth;
- Identification of the trust: name and address;
- The content of the terms of the trust: content of the trust deed and any additional stipulations governing its operation, in particular the indication of its revocability or irrevocability, whether discretionary or not, and the rules for the allocation of property or rights placed in trust and their products;
Note: the administrator of the trust is exempted from indicating the information relating to the content of the terms of the trust if the event declaration has been previously filed.
- If at least one of the settlors, beneficiaries deemed to be settlors or beneficial owners has his tax domicile in France, the detailed inventory of assets, rights and capitalized products located in France or outside France and placed in the trust as well as their market value on January 1st of the year;
- If none of the settlors, beneficiaries deemed to be settlors or beneficial owners have their tax domicile in France, the detailed inventory of assets, rights and capitalized products located in France and placed in the trust, as well as their market value on January 1st of the year.
This annual return must be filed no later than June 15 of each year with the non-resident tax department.
The information declared by the trust is kept in the “trust register” placed under the responsibility of the minister responsible for the budget.
III – Tax sanctions
Failure to file the declaration is punishable by a fine of € 20,000. The settlor and the deemed beneficiaries who fall within the scope of application of the levy provided for in article 990 J of the CGI are jointly and severally liable with the administrator for the payment of the fine.
In addition, in the event of breaches of the trust declaration obligations abroad and in the event of rectification, the tax supplement is accompanied by an increase of 80% when the following two cumulative conditions are met:
- The foreign trust has not been declared in contradiction with the provisions of article 1649 AB of the CGI;
- The amounts held via this trust have not been included in the income tax base, of the I.F.I. or free transfer rights.
IV – Taxation of assets placed in a trust
Taxable assets placed in a trust are subject to either the I.F.I. or a specific levy of 1.50%. When the assets placed in the trust are declared to the IFI, the specific levy does not apply.
Consequently, the assets placed in the trust are not subject to the levy:
- If they are included in the patrimony of the settlor or of a beneficiary and taxed at the I.F.I.;
- Or if they are declared by the administrator of the trust, when the settlor or the beneficiary is not liable to the IFI (when his net assets including the assets concerned, is less than or equal to the tax threshold set at € 1,300,000).
You can of course contact us for more details and remember to make your declarations in time!
Why not sign up for our newsletter!