I have deliberately refrained from providing any unremunerated
website assistance to those trustees who are required to file
returns this year.
Seeing some of the inadequate responses made to the issue of
what is a trust on a full transparency basis, it is clear that
little effort is being put into questioning what to do when a
member of a family moves to France and how to indirectly prepare
the ground for a French resident beneficiary or deemed settlor
through a suitable restructuring.
It is clear that French lawyers and accountancy firms are
working as if unaware of the fact that it is the law of the foreign
state to which the putative trust is attached that determines
whether the "symptoms" of the French contractual fiscal definition
apply. Make no mistake, contrary to the allegationsof the French
Tax amdinstrtaion, it is not the pure Hague Convention set of
privae international law teminology which applies. The use of the
term "administrateur" rather than trustee, means that it cannot
be.
There have been several cases where for example English trusts
of land have been wrongly considered to fall within the article
729-0 I bis definition, which they do not, and time and expense has
been generated in attempting to explain why the trust is licit to
the French authorities and not an avoidance vehicle, when the
answer is in fact a categorical "no", under the laws of England and
Wales.
Those who continue to believe that the French have in some
manner recognised a trust should remember the ill-fated remark of
Senator Marini accompanied by a gaggle of French tax inspectors
when he visited Jersey when he made a singulary arrogant and
ill-fated "effet de Manche" saying "of course a trust is a
contract ». If you have not understood you need to tale
advice.
The problem with that arrogant assumption, obvious to English
lawyers who do not use such theatrical rhetoric and keep their
hands to themselves, is that a trust is an emanation of the
law of property, not that of personal créances and obligations such
as those in a contract. Apparently Fidal in particular have been
making money out of unnecessary negotiation with the administration
and "advice" on matters of English law in which they are not
qualified in sufficient depth.
Any French lawyer who does not go back to the law referred to in
article 792-0 bis I CGI is being negligent.
It is best to take advice from those who have learnt on the job
rather than those learning it.
To summarise the current declaration, the Millésime 2019 Trusts
2 has not been changed yet (Given French tendency to do such things
at the last minute it could still happen!), and it is that model
that will need to be filed before 15th June, 2020.
My only comments which I am prepared to publish are
The structure of the 2019 Millésime Declaration was put together
in a hurry, it was only published two days before the deadline in
2019, which had to be extended. As it is published under the remit
of the French Finance Ministry, is that it does not fully reflect
the legislation which it is meant to support. Most compliant French
residents affcected elect to pay the Immovable Wealth Tax (IFI) in
lieu of leaving it to the Trustee to pay a 1.5% levy
("prélèvement").
However, whilst the asset declaration forms at the exempt Cadre
7 have a section A for land, wherever situated, upon which
the taxpayer is paying the IFI, it lacks one for shares and
equivalents in real property holding companies upon which the licit
taxpayer will also have declared and paid the IFI, to the extent
that they have an IFI liability over the threshold of
€1.300.000.
The rub comes when the trustee is faced with declaring the
movable assets in trust which they are required to do by a sneaky
little insertion in the 2018 Finance Act, when the French fisc
requested Parliament to reintroduce the annual declaration for
movables held in trust. The justification for that was that they
had lost the means of tracking of movable assets and investments
held for French residents onthe repeal of ISF an dteh change in the
declaration mechanisms. No brave soiul has yet challen,ged that
onthe baiss that ther is no French tax due either by the French
rsidet connection, or by the trustee
There is therefore one Cadre 7 too few. This may be deliberate,
but it means that real property holding companies upon which the
IFI has been paid will need to be carried to the same cadre
as ordinary movable investments, which means that it is
impossible to determine the CRS consequences of the information
exchanges which will arise on the cocktail of immovable assets,
which are neither subject to FATCA or CRS and the movable
investments which are.
The French administration on have taken up the same habits as
their European colleagues, such as Germany, in treating taxpayers
information as a marketable commodity.
So, having ensured that my current clients have filed on time, I
am available for advice for late filers, and those who may wish to
amend or supplement their declarations.
Please note that any Trust Declaration, whether it be
the 2181 Trust1 déclaration événementielle or the
annual 2181 Trust2 is an opportunity to strategically place the
trust and the assets in their correct fiscal alignment, for example
using the definitions of Bénéficiaire Réputé Constituant to keep
assets outside the French tax net and to effectively plan by
reference to the heroic attempt or rather failure made to translate
the trust concept into a form of fiduciary contract.
Pleased note however that Swiss, Luxembourg and
Liechtenstein Trustees are less likely to be able to take advantage
of the anglo-saxon if not English ability to exist and prosper
within the laws of property, rather than those of the civil law.
That has been induced by the French attempt to use a private
international law recognition definition for identifying which
arrangements are and are not trusts as a fiscal definition.
As a mind experiment, try making a convincing argument to a
fictional HMRC compliance officer that a settlement is defined by
reference to the Recognition of Trusts Act 1987.
Finally, there is the perennial issue for those trustees holding
French high quality shares and bonds in their portfolios on
31st December - 1st January . There are ways
of rendering these non-French assets, thus escaping the obligation
to declare these, in particular where there is no French resident
individual within scope. I would be happy to advise on such
issues as to whether it is necessary to declare or not, and on the
means of retaining these investments without needing to declare
them for what is essentially a gift or succession duty obligation
as a French situs asset.
Put simply, the fact that the French administration
are currently unable to process and use the information that they
are given or not given otherwise than in scapegoat type
investigations should not tempt one into not making a correct
declaration.
However, certain English accountants have been making hay out
of straw by advising that any capital gains realised by a
non-resident trustee have to be declared by the French resident
concerned. That is a complete falsehood, and advice should be
taken on a professional negligence claim if any French capital
gains tax has been declared and paid on that basis. There is in
fact no "look-through" charging mechanism to render the tax due by
anyone else than the trustee on the usual basis when a trustee owns
and disposes of a French situs asset. It is the Trustee's gain, not
the settlor's or a beneficiary's. Please contact Peter for advice
if this has happened, or confirmation advice that y a Benefciiary
or a trustee does not have to declare.