{Please note that this page is no longer
an accurate description of the position in 2018, following the
change from ISF to the impôt sur la fortune immobilière (IFI). You
should contact Peter Harris directly on this and the current
position as to the filing of both types of declaration: 2181 Trust1
and 2181 Trust2}
The 2016 2181 Trust1 and Trust2 declaration campaign:
Offshore trustees who have made distributions of portfolio
income in 2015 to a French connected beneficiary or Constituant may
have missed the event declaration deadline of 31st January.
If that is the case, please contact Peter for assistance in
making a late filing declaration to avoid penalties, of a
substantial amount. See below for the French administration's
position at § 440.
One point in particular needs to be considered by most offshore
trustees making the annual 2181 Trust2 declaration prior to 15th
June of this year.
Declaration of investment portfolios
The BOI instruction at
http://bofip.impots.gouv.fr/bofip/7854-PGP.html?identifiant=BOI-PAT-ISF-30-20-30-20150304
published in April 2015 made certain apparent amendments and
clarification as to the obligations of trustees holding portfolios
for trusts with a French Connection.
I am setting out here certain of the issues for trustees with a
French resident constituant or beneficiary where the portfolio is
not held through an underlying investment holding company. Those
who have such an intermediate vehicle may need further advice on
how to address the risks for their clients in that area under inter
alia article 123 bis CGI where that article applies -
régime fiscal priviligié. I will not address those
issues here nor how to stay outside that provision, please contact
us for advice if needed
Those concerned with declaring portfolios under the new régime
will wish to note that whilst it is possible to attach an
Investment Managers' portfolio statement to the return as an
annexe, with a simple reference in either section 6 or section 7,
this has to be in French, otherwise a basic principle of French tax
declaration will be breached. A French tax inspecteur or
contrôleur may use any English or foreign language document annexed
to the 2181 Trust1 or Trust2 declaration as a formal excuse to
threaten penalties as leverage. There is a therefore a risk
of penalties if you attach a portfolio statement in English or
another language other than French.
Whilst we were hoping that the singularly draconian principles
might be slightly rounded off in their administrative application;
that has not happened, yet.
These modifications stem from a set of questions put to the
administration by the Fédération des Banques Française, in relation
to ostensibly French banker's issues with the declarative
procedures. Clarification has therefore been given but from a
metropolitan French perspective, of certain, but limited relevance
elsewhere.
The underlying reasoning of the French administration is that
they have the opportunity to detect underlying changes in portfolio
composition, and also pick up on gains and interest and dividend
payments, otherwise undeclared by the French resident
concerned.
To sum the clarifications up:
1. Declaration
of investment portfolios held in trust
§410 It is admitted that an investment portfolio be declared as
a whole on a line in section 7 B of declaration 2181 Trust 2 (Cerfa
n° 14807 ...) when held in trust, provided that two conditions are
fulfilled:
- The section relating to its description in addition to
the general description of the portfolio a reference as to the
detail of its content to the document detailing the movable
investments making up the portfolio which is attached to the
declaration; and
- the details of the investments comprising the portfolio
must be clearly and legibly indicated in the
attachment,in French, of standard
format A4 paper. The document must carry all the elements
'useful and necessary' to enable the identification of each
investment.
§420. [here the wording appears a little weird
as it refers to the same declaration] This measure is also
applicable under the same conditions to Declaration n° 2181 Trust2
(Cerfa n° 14807 .... ) of the valeur vénale (equivalent to
realisable market value) of the portfolio on 1st January of each
year. That declaration will declare the global value of the
portfolio and the detailed statement of the assets will mention the
value of each of them.
2. Disposals and
repurchase of movable assets within the portfolio
§ 430
It is admitted that acquisitions and successive sales of assets
comprised within the portfolio are not considered to be
modifications of the trust to be declared by the administrateur
[trustee] of the trust, provided that all the proceeds of sale
remain liquidities within the portfolio or are reinvested in assets
within it.
3. Distribution
of interest and dividends arising from the management of the
portfolio
§440
It is admitted that
distributions of interest and dividends be globalised beneficiary
by beneficiary on a single "event" declaration filed in the month
of January of the year following that of the
distributions.
However this measure does not apply
to distributions of all or part of the proceeds of sale of one or
more assets.
In addition, this measure only
applies where the interests and dividends so distributed were not
capitalised prior to their distribution and are taxable in the
category of "revenus de capitaux mobiliers" (movable investment
income).
It behoves the administrateur
[Trustee)] responsible for the filing the declarations relating to
modifications of trusts [2181 Trust1] to decide whether the
revenues concerned fulfil these conditions.
We cannot stress the need to take advice on how to structure
trusts with a French Connection, as Trusts which Peter has advised
upon fall outside certain of these conditions, in particular the
event declaration requirement at §440 of distributions of dividends
and interest in the following January owing to the manner in which
he has advised that the underlying assets be structured. Most
accounting firms and bank trustees will not be aware of these
possibilities, neither will trustees relying on mere accountancy
advice.
The French text is reproduced here:
1. Déclaration du portefeuille-titres mis en trust
410
Il est admis qu'un
portefeuille-titres soit déclaré dans sa globalité sur une ligne du
cadre 7 B de la déclaration 2181 TRUST 2 (CERFA
n° 14 807, accessible en ligne sur le site www.impots.gouv.fr à la rubrique "Recherche de
formulaires"), lorsqu'il est mis en trust, sous réserve que les
deux conditions suivantes soient remplies :
- la case réservée à la description
doit comprendre, outre les éléments généraux de description du
portefeuille, un renvoi, pour le détail de son contenu, au document
joint à la déclaration détaillant les valeurs mobilières composant
le portefeuille ;
- le détail des valeurs mobilières
doit être clairement et lisiblement indiqué dans le document joint,
en langue française, sur des feuilles papier au format standard
commercial A4. Ce document indique tous les éléments utiles et
nécessaires à l'identification de chaque valeur mobilière.
420
Cette mesure est applicable sous les
mêmes conditions pour la déclaration n° 2181 TRUST
2 (CERFA n° 14 807, accessible en ligne sur le site www.impots.gouv.fr à la rubrique "Recherche de
formulaires") de la valeur vénale du portefeuille à chaque
1er janvier. La déclaration mentionnera la valeur
globale du portefeuille et le relevé détaillé des titres
mentionnera la valeur de chacun d'entre eux.
2. Cessions et rachats de valeurs mobilières à l'intérieur du
portefeuille-titres
430
Il est admis que les achats et ventes
successives des valeurs contenues dans le portefeuille mis en trust
ne sont pas constitutifs de modifications à déclarer par
l'administrateur du trust, à condition que toutes les sommes
provenant des cessions de titres restent en liquidités dans le
portefeuille ou soient réinvesties en titres du portefeuille.
3. Distribution d'intérêts et de dividendes issus de la gestion
du portefeuille-titres
440
Il est admis que les distributions
des intérêts et dividendes issus des valeurs mobilières du
portefeuille mis en trust soient globalisées par bénéficiaire sur
une seule déclaration événementielle à déposer au mois de janvier
de l'année qui suit celle au cours de laquelle ces distributions
ont été effectuées.
En revanche, cette mesure n'est pas
applicable pour les distributions de tout ou partie du prix de
cession d'un ou plusieurs titres.
En outre, cette mesure est applicable
seulement si les intérêts et dividendes ainsi distribués n'ont pas
été capitalisés préalablement à leur distribution et sont
imposables dans la catégorie des revenus de capitaux mobiliers.
Il appartient à l'administrateur du
trust chargé de déposer les déclarations au titre des modifications
du trust d'apprécier si les produits en cause répondent à ces
conditions.