Président Macron's Government has confirmed his intention to
remove Wealth Tax as such by 2019 and convert it into a tax upon
high value immovable property. Whether that means that
l'impôt de solidarité sur la fortune will be renamed
is another matter. Given the political intention it will be.
However, please note that Switzerland has a Wealth tax and that
trusts are equally scrutinised under that régime, although without
the same degree of incomprehension is non-appréhension
as it France. Switzerland manages to make the vital distinction
between trusts set up by individuals resident in Switzerland, and
those set up by individuals prior to moving to Switzerland. France
is unable to do so, because of various degrees of interpretation of
its different and conflictual Constitutional values.
The reform of the net wealth tax (impôt de solidarité sur
la fortune) - which will involve restricting its scope and
turning it into a tax on high-value immovable property - will be
included in the 2018 Budget but only come into effect in 2019.
In other words, there will now be a structural and conceptual
missmatch with the tax régime set up for trusts in the loi de
finances rectificative pour 2011.
That régime was designed to implement a substitute for unpaid
ISF in the form of a prélèvement or levy on trustees who
either had assets in France or whose trust had French settlors,
deemed settlors (a perverse fiscal fiction analagous to enforced
forced heirship) or mere resident beneficiaries. In short, if
someone liable did not pay their ISF in France, the trustees would
have to pay the equivalent, on a gross, not a net asset basis of
1.5%. That is the top rate for ISF. This has been advertised by the
administration as a genetic combination of a stick and a carrot.
However the manner in which the €20,000 penalty for any single
missdeclaration or omission has been used as a bludgeon may still
remain a threat in the gift and succession duty sector even after
the proposed changes are implemented by the loi de
finances 2018 in 2019
It is very likely that that aspect of the 2011 legislation will
have to be amended, as it covers not only high value immovable
properties, but also movable assets such as shares.
It might to be too early to consign all the effort which has
been expended in the past rehabilitation of certain trusts with
French connections to the grave past, and celebrate in the form of
One of the objectives of the 2011 legislation was to create a
form of fiscal forced heirship by blood line transferring the
succession through the trust to the next generation, but treating
certain, if not all beneficiaries as deemed settlors having the
fiscal "ownership" and fictive possession of the trust assets.
That fictional transfer is subject to succession duty in France
under article 792-0 bis II CGI and the so-called "irrefrageable"
presumptions which the administration asserts were created by that
article. That they are rebuttable is a legal matter which has yet
to be advanced by a French avocat before the constitutional
It is therefore likely that part of the current declarative
régime for trusts will remain intact, and that the current
unsatisfactory administrative re-definition of the trust as a
quasi-contractual vehicle will remain entrenched in French minds
and approach. WXhilst this appears ot hav ebeen poo pooed by
certainFrench adovsers in ondon, perhaps they should re-read, if
not read the deliberate drafting of the definition in article 792-0
bis I before assulmng that the trust is tretad as a property law
concept as opposed to a fiduciary contract?
Le contrat de trust will remain a fallacy for years
to come. Some French advisors haven't noticed the fundamental
issue, believing that the trust concept as advanced by article 792-
bis I CGI is sufficient to itself. The definition refers to the
droit of another state, which implies that the
purported definition is therefore relative not absolute
This is unfortunate, as at least in the past millennium, it had
been well established in France that a trust was a property law
vehicle and not some fiduciary contract stemming from an overheated
Finally, while plans to introduce a flat 30% tax on personal
capital income were confirmed, no details were given regarding the
timing of the reform.