Blame the french

  • Author : Javier Enrique Ayuso
  • Author : Ezequiel Lipovetzky
  • Author : Santiago Oscar Zebel
  • Date : August/September
ABOUT THE AUTHOR: Javier Enrique Ayuso is a Partner and Ezequiel Lipovetzky and Santiago Oscar Zebel are Associates at Bruchou, Fernández Madero & Lombardi law firm in Argentina

Napoleon’s invasion of Spain was to blame for Argentina’s independence. Early 20th-century Parisian-style palaces and cafés left an indelible mark on Buenos Aires’ architecture and joie de vivre. Tango icon Carlos Gardel was actually born in Toulouse under the surname Gardès. And Argentineans’ love for cheese and cheesy things is, undoubtedly, French in taste. Likewise, Argentina’s novel foreign law trusts disclosure regime may be (or may not, but might aspire to be) linked to the enactment in France of the much bolder 2011 Amended Finance Act.

The new reporting duties imposed on Argentine-resident settlors, trustees and beneficiaries (the ‘reporting fellowship’) of foreign law trusts by AFIP’s (the Republic’s federal tax collector) General Resolution 3312 of 18 April 2012 (GR 3312) is, basically, an amplification of the existing one (AFIP’s GR 2419), which applied only to local fideicomisa (a multi-purpose, sui generis version of the Roman fideicommissum, branded ‘Latin American’, introduced by Law 24,441 in the mid-1990s). The approach used – fitting into one category what pertains to another with limited features in common – shows predictable shortcomings.

Information regime

In its own words, GR 3312 ‘[e]stablishes an information regime that should be fulfilled by… those resident in the country that act as fiduciarios (trustees, fiduciaries or similar), fiduciantes (trustors, settlors or similar) or beneficiarios (beneficiaries) of fideicomisa (trusts) created abroad’ (s1), and also quotes – for construction purposes – the legal definition of fideicomiso: ‘Law Nº 24,441 sets forth in Section 1 that there will be fideicomiso when a person (fiduciante) transfers ownership of defined assets to another (fiduciario), who undertakes to exercise it for the benefit of whomever is designated in the agreement (beneficiario), and to transfer it upon expiration of a term or occurrence of a condition to the beneficiario or fideicomisario’ (note 1.1). GR 3312 makes clear that ‘fideicomisa (trusts) created abroad’ comprise ‘fiduciary [juristic] arrangements, trusts or those of equivalent juristic nature created abroad in accordance with the law in force in the respective jurisdiction’ (note 1.4).

What type of structure does GR 3312 attempt to capture? Note 1.4 leads to placing the concept of fiduciary arrangements at the centre of GR 3312, with the express inclusion of common-law trusts (a mention incorporated to prevent creative interpretations) and a predictable catch-all reference to other legal categories of similar juristic nature. All Latin American fideicomisa, as well as express (not implied, resulting or constructive), inter vivos and will, private and charitable, revocable and irrevocable, fixed and discretionary common-law trusts, fall within the scope of GR 3312, though not all of them deserve the same treatment.

Defining ‘fiduciary arrangements’

Nothing is certain beyond this first circle of undoubted targets. What is meant by fiduciary arrangements? They should not be equated to the growing category of ‘fiduciary relationships’ in English-speaking jurisdictions, that is, relations whose critical feature is ‘that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense’1. The breadth assigned to things fiduciary under GR 3312 should be much narrower; for example, limited to property transfers to someone in a fiduciary capacity. Other legal categories, non-fiduciary and different in juristic nature, that may share certain objectives are, a priori, excluded.

GR 3312 charges the reporting fellowship with annual and transactional – i.e. the basic incidences in the life of a trust – disclosure duties (‘annual reporting’ and ‘transactional disclosure’ respectively, and together ‘reporting duties’), regardless of whether taxes are payable. The initial annual reporting reaches back to the fiscal year 2009 onwards, while transactional disclosure is forward-looking, as from 1 January 2012. At this point differences among trust types and with the fideicomiso should matter. While the fideicomiso is seen as a contract to which the settlor and the trustee remain parties with roles during its entire life, irrevocable trusts with no settlor-reserved powers or benefit should be seen as property dispositions analogous – from this perspective – to outright gifts. Therefore, settlors of irrevocable trusts without retained powers or benefit should not be burdened with continued reporting duties beyond the declaration of the initial or subsequent asset settlements. However, a defective analogy with the local fideicomiso might lead AFIP to disagree – in error, though.


What about beneficiaries included in the reporting fellowship? A first take at this question should define the type of benefit concerned. One might correctly assume that tax collectors would only be interested in rights to receive capital or income from the trust fund, for GR 3312 refers to ‘[b]enefits collected’ (Annex II, s2.3d) and ‘[d]etail of assets assigned and amount’ (Annex IV, s6.3). Therefore, other entitlements, such as the right to use or live in trust property, could be ruled out. But the main issue involves discretionary beneficiaries before vesting, and whether they are bound to report. Argentine legislation recognises that the settlor may not identify the beneficiary by name in the fideicomiso agreement, but requires that sufficient clues be left in it to determine who that person may be. Again, blind analogy might lead to a distorted conclusion (such as ‘no matter what the terms and status of their entitlement, as long as they are named in the trust deed they should report’). Actually, before vesting, discretionary beneficiaries have no certainty of their benefit, or may not be aware that there is a trust potentially in their benefit at all. Here the French got it right: a Nanterre court ruled in 2004 that a mere US trust discretionary beneficiary could not be assessed to wealth tax on any part of the trust fund2.

above: The Argentine National Congress in Buenos Aires

Transactional disclosure burdens Argentine-resident trustees for all events enlisted for declaration, while resident settlors and beneficiaries are bound to report only transactions related to their ‘respective participation interests in the trust’ (GR 3312 sections 7(a) and (b)). While for beneficiaries the ‘participation interest’ in the trust can be equated to the benefit they are entitled to receive, it is difficult to see how the same restraint would apply to settlors, if at all.

Information rights and confidentiality duties

GR 3312 also raises questions about the extent of settlors’ and beneficiaries’ information rights and trustees’ confidentiality duties under the respective trust settlements and governing law, and about what trustees’ attitude should and will be in the face of information requests addressed to them by the reporting fellowship. It might even lead the tax collector to suspect why a compliant settlor of an irrevocable settlement, who otherwise purports to no longer have anything to do with the trust, or its affairs or assets, knows so much about their current circumstances.

Annual reporting starts on 1 July 2012, while disclosure of transactions implemented during the first half of 2012 should be reported on or before 31 August, and those that shall arise as of 2 July 2012 should be reported within ten working days of the transaction date. The information collected may form the basis for further inquiries, which might include tapping Argentina’s recently enlarged net of tax information exchange agreements (TIEAs). In addition to administrative consequences, breach of reporting duties carries sanctions that range from an ARS10,000 fine to, for high-income taxpayers who do not abide by the third demand to report sent by AFIP, one of up to ARS450,000 (around USD100,000 at the May 2012 prevailing exchange rate).


As predicted of the French regime, the new Argentine provisions can be said to be ‘drafted in general terms and there are glaring loopholes to an Anglo Saxon lawyer’s eye. The question is to what extent the French courts [in GR 3312’s case, their Argentine peers and the tax collector] would be sympathetic to technical points of construction on English trust law’3 or those of other jurisdictions.

For all its weaknesses, at least GR 3312 has not fallen into the French trap of denying the segregation of trust funds from settlors’ own assets and treating trustees as mere managers: ‘The trust is understood as a bundle of juristic relationships created under the laws of a state other than France by a person, who qualifies as settlor, inter vivos or mortis causae, with the aim of placing in it assets or rights under control of an administrator, for the benefit of one or more beneficiaries or for the purpose of achieving a defined objective4.’

For now, the new reporting duties are just that: a disclosure regime. Their aftermath will reveal the extent of the French precedent’s influence, if any. Rumours already abound of increased harassment through tax audits and litigation, an increase in applicable taxes, a new levy or even a tax moratorium coupled with mandatory repatriation, which might await the reporting fellowship over the horizon.

Hospital Products Ltd v United States Surgical Corp (1984) 55 ALR 417 (Australia HC) at 454, quoted by L I Rotman, Fiduciary Law, Toronto (2005), p54
Tribunal de Grande Instance de Nanterre, 4 May 2004, quoted by J L Bochatay, A Moreau and G Aubineau, ‘The new French rules of taxation for trusts: wide (scope), heavy (tax) and severe (penalty),’ Trusts & Trustees, Vol 18, No 2 (February 2012), p117
D Anderson, ‘New Rules on taxation of trusts in France’ (September 2011), s28,
J-Y Mercier and B Gouthière, ‘L’ISF après la réforme,’ Dossier Pratiques Francis Lefebvre Paris (2012), at 2200


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