The 2020 French Trustee declaration 2081 Trust2.
Trustees and French resident settlors or beneficiaries of trusts
with French connections should read this carefully and seek advice.
It may be possible not to declare, but care needs to be taken to
ensure that there is no breach of compliance rules and best
I am not dealing with the full impact of the French trust fiscal
régime or the declaration here, simply one aspectrealing to trusts
with no Frech connection other than French situs assets in the form
of shares or financial instruments, quoted or unquoted.
Those seeking advice on how to best draft the declaration
according to their trust's configuration should contact me
directly. There are ways through the ridiculously artificial
deeming provisions which the French have invented, for example when
a beneficiary moves to France. I can help there.
This posting concerns trusts with no French connection other
than French movable assets, it only addresses these issues as many
trustees have chosen to invest in high quality shares or bonds
issued by French companies, whether quoted on a French stock
exchange or elsewhere. That choice has been made simply because
they have had no French residents connected with the trust.
The relevant pargraphs of article 369A Annexe II CGI dfines the
content of the annual declaration as follows :
« 6° Si l'un au moins des constituants, bénéficiaires
réputés constituants ou bénéficiaires a son domicile fiscal en
France, l'inventaire détaillé des biens, droits et produits
capitalisés situés en France ou hors de France et placés dans le
trust ainsi que leur valeur vénale au 1er janvier de l'année
« 7° Si aucun des constituants, bénéficiaires réputés
constituants ou bénéficiaires n'a son domicile fiscal en France,
l'inventaire détaillé des biens, droits et produits capitalisés
situés en France et placés dans le trust, ainsi que leur valeur
vénale au 1er janvier de l'année....
There is a clear distinction drawn between trusts with
individual French connections and those with no other connections
than shares and assets. There is a specific requirement at 7° that
where no individual has a French connection, an annual
declaration, still has tp be filed listing the French situs assets
held by the administrateur (trustee) on 1st January of the year in
Depending upon their department, French civil servants are
either extremely sensitive or totally insensitive as to whether the
trust declaration and penalty régime dissuades or prevents foreign
non-French investors from investing in French quoted shares and
bonds through trusts.
Whilst the ISF (wealth tax) on immovable assets and movable
investments such as shares and other securities has been repealed
and replaced by the IFI (wealth tax on immovable property), the
French administration decided to reintroduce the annual reporting
requirements for trusts with French connections whether or not
these hold immovable assets because they had lost annual
information on holdings of French and foreign movables, and
therefore were unable to track the deemed ownership of assets
subject to gift or succession duty. Technically French situs
movables held in trust for non-residents could be subject to gift
or succession duty.
The political note to that was that this was intended to enable
the French administration to keep track of movable investments held
by trusts with French connections for gift and succession duty
purposes. They had lost their means of checking French residents'
movable wealth held in trust on the repeal of ISF as from January
2018. No 2181 Trust2 declarations were required in
2018. They were reintroduced in 2019.
Most advisers, including myself, concluded that this meant that
a trust with any French situs movable asset needed to file an
annual pro forma declaration, even when the trust had no French
resident settlor or beneficiary. Following a discussion with a
French colleague, we decided that that might not be as absolute a
compliance requirement as we initially thought. However, §7°
article 369A Annexe II CGI states that the obligation
The annual trust declaration 2181 Trust2 including such
information is to be filed by 15th June this year. The
eyewatering default penalty of €20,000 has, for reasons which
escape most people as to proportionality, been confirmed as
constitutional by the French Conseil Constitutionnel who appear to
believe that all trusts including the English, are richer that
The French administration have not yet issued a BOFIP explaining
which assets are affected and whether the declaratory obligation is
subject to any limitations, such as whether or not there are French
resident constituants (settlors) or beneficiaries of the trust. The
initial ISF commentary on "situs" of assets has been withdrawn.
The only doctrinal comment that they have made which dates back
to 2012 is more limited than the provision in the Tax Code and is
open to interpretation: it might allow certain types of trust
arrangement with non-resident beneficiaries to maintain their
positions on French companies without needing to make an annual
declaration. There is no tax involved, as the ISF has been
repealed and the IFI does not apply unless the share is in an
immovable property holding company. The only possible tax issue is
gift or estate duty (DMTG) which only arise on certain events. That
begs the question as to what transfers could give rise to a
That is where the issue becomes difficult as the French deeming
provisions treat all beneficiaries as receiving a benefit on the
death of a settlor irrespective of the actual terms of the trust as
they become the next in Napoleonic fiscal line. If the whole
beneficial class is non-resident, the DMTG can only fix upon a
French situs asset. The definition of a French situs asset
includes French shares and bonds and may also affix itself on such
shares and securities listed, traded and payable outside
The French administration do not make it easy for their
companies seeking foreign capital.
The question for any trustee with French situs assets in the
form of shares, bonds and other type of movable asset is whether
they are required to make a declaration or not under the current
declarative requirements, patricularly where these are
dematerialised and traded on an exchange outside France
That may depend in itself upon whether the constituant (settlor)
was French resident whether at the time that the trust was
constituted or afterwards, whether there is a French resident
deemed settlor, or whether or not there are French beneficiaries.
At present the safe advice is to say that a 2181 Trust2 declaration
should be filed when there is a French situs asset at 1st January,
Hence the attraction of a n underlying company holding a
portfolio of such assets.
The issues are complex and each trust is different.
This of course does not address the Event declaration 2181
Trust1 (déclaration événementielle) addressed at 369 Annex CGI
which has to be to be filed on a gift within the trust or on the
death of a constituant (settlor) or a bénéficiaire réputée
constituant (deemed settlor) which triggers a deemed disposal of
the trust assets. Trustees with French assets of any description,
irrespective of the tax residence of the settlor or beneficiary
need to take specific advice here to determine whether and how to
make any declaration that may be necessary.
Whilst it is tempting to say that the 2181 Trust2 is only
relevant where there is a French resident individual connected to a
trust, and that, in any event, a 2181 Trust1 "event" declaration
has to be filed on any deemed transfer by gift within thevtrust or
the asset taken out of the trust or on the death of the settlor,
the French deeming provision is so out of sync with the actual
economy of a standard trust situation that trustees may feel it
unwise to take any risks and file.
Contact Peter Harris for details on whether or not a declaration
should be filed. (+44 (0)1534 625879)
Please note that there are penalties of €20.000 per default
which can be levied against French resident beneficiaries as well
as the Trustee, and against French assets.
Having worked in France for over 20 years, it is clear that the
French have decided not to overburden their minds with actualy
understanding the trust as a concept of property law, and have
redesignated it as a contractual relationship with quasi corporate
status. Certain provisions of the CGI assume that a trustee
can produce a balance sheet and a profit and loss account, which is
a complete falsehood and require that a "trust" prepare its
accounts as it it were a company subject to the French impôt sur
You still have Senateur Marini protesting that that is