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Why the French Register of Trusts is going to go fiscally live ....

June 6th 2016

I have updated this today; 6th June, 2016.

It is likely that the French Register of Trusts is not going to remain a mere information gathering exercise.

The response made by the Tax Administration to the Fédération Bancaire Française in 2015 will never be published, and unfortunately, the responses given to the FBF which have been summarised by Ernst & Young show an awareness that the Register could be put to an expanded use, now the political, as opposed to any legal or economic, justification for it has appeared to have gained ground in France.

It would be naive to think that the Ministère de Finances will content itself with running such a costly register at a loss. See prior newsflashes on this point.

The fiscal possibilities pour "la rentabilisation des rentiers présumés" are manifold, and could range from actually rendering any change in French property rights subject to a new form of transfer duty, to extending that to worldwide movable assets as a form of advanced FATCA. Let us not forget that the French Ministère des Finances already runs the French land register:  the cadastre.

Given the current issues in France, generated largely by an inexcusably deliberate ignorance of international structuring of capital, the use of the Register as a declaration point by reference by the new French Parquet Financier to determine perceived "legitimacy" of capital holdings on a transparency basis needs careful attention.

It is not sufficient simply to fill out the forms in a sheep-like manner, as there is a difference in the process of being fiscally shorn, on a regular basis and being permanently fleeced. The animal perishes in the latter procedure.

Given the stretched ressurces admitted by Mme Houquette, the"Cheffe du Parquet Financier"  in a recent Senatorial hearing on the Parquet's reaction to the Panama Papers, any French civil servant will immediately consult the Trusts Register for information on any individual seeming to have a connection with a trust. If they do not appear on the Register - without good cause, the issue will then go "live" on a potentially criminal basis. What is equally clear is that the issue of trust asets is rapidly becoming of interest to the rehashed French concepts of "contrat social" into the idea of a "pacte démocratique" and the recent idealisation of "moralisation des marchés financiers" headed up by Albéric de Montgolfier. M. de Montgolfier is an investigative magistrat of some consequence, who also sat at the same Senatorial Hearing. I will not go into the issue of idealisation in the context of an anthropic analysis, but it would seem that the French have sacrificed their normally pragmatic thought processes on the altar of collective political unconsciousness.

It is therefore essential to ensure that the position of an individual is correctly defined and declared on the Register.

Hence the need to ensure that trust arrangements which do not meet the criteria of article 792-0 bis I be removed from the Register by a clearly defined and reasoned event declaration n° 2181 Trust1.

For example; French resident trustees might find themselves subject to an new or increased stamp or transfer duty and income tax exposure.

It is essential for trustees, "constituants" and beneficiaries to plan ahead here and get their trusts off the register if possible, or at least partially.

One method is to ensure that the trust no longer meets the criteria laid down in article 792-0 bis CGI I. There are others; but the best move is to concentrate on the legal definiton but within the international law and and Treaty context to which the somewhat inadequately drafted deeming mechanisms are subject.

Inaction now could lead to the trust assets being held in a fiscal and administrative "bearhug" to coin a phrase more usually found in stock market terminology.  There is no point in behaving like a rabbit caught in the headlights, as there are ways out of the administrative compliance trap, by turning the deeming provisions against themselves.

Consult Peter on + 44 1534 625879 or on peter.harris@overseaschambers.com