Taken on trust

  • Author : Patrick Delas
  • Author : Jenny Bird
  • Date : December 2012
ABOUT THE AUTHORS: Patrick Delas is a Solicitor at Avocat au Barreau de Paris and Jenny Bird is a Solicitor at Russell-Cooke LLP, London

Decree n° 2012-1050 of 14 September 2012, published on 15 September 2012, finally details the reporting obligations applicable to trustees introduced by LFR 2011-900 of 29 July 2011.

The Decree, by adding three articles to Annexe III of the Code Général des Impôts (CGI), confirms two separate reporting obligations. The first is to report information to the French Revenue when settlors, beneficiaries or trust assets are situated in France. The second is for the assessment and payment of the 0.5 per cent prélèvement of Article 900 J with reference to wealth tax (ISF).

Ongoing reporting obligation (Article 344 G sexies Annexe III CGI)

The constitution, modification or extinction of a trust should be declared within a month to the Direction des résidents à l’étranger et des services généraux (DRESG), 10 rue du Centre, 93465 Noisy-le-Grand, Cédex, France. The decree indicates that the declaration should be made on papier libre (blank paper). CERFA form n° 14805*01 has since been issued and is available on www.impots.gouv.fr – but its use is not obligatory.

The declaration should include the following information:

  • name and address of the trust
  • full details of the settlors (or deemed settlors), beneficiaries and trustees, with their dates and places of birth (or death) and addresses
  • nature of the trust (revocable, discretionary, etc), with full details of its terms and conditions, including principles of distribution of the trust assets and income
  • ‘consistency’ of the assets settled or distributed at the date of the event triggering the declaration (constitution, modification or extinction) with full details of the beneficiary for each and every asset; and
  • modification of the trust, including any amendment to its terms and conditions, change or death of any settlor, trustee or beneficiary, additional settlement or distribution and generally any event the nature of which may affect the ‘economy’ of the trust.
Annual declaration (Article 344 G septies Annexe III CGI)

For assessment and payment of the prélèvement of Article 990 J CGI (0.5 per cent), an annual declaration should be sent annually by 15 June each year. Again, the declaration should be sent to the DRESG on papier libre (blank paper). CERFA form n° 14807*01 is available on www.impots.gouv.fr. Again, its use is not obligatory.

The declaration should include:

  • name and address of the trust
  • full details of the settlors (or deemed settlors), beneficiaries and trustees, with their dates and places of birth (or death) and addresses
  • unless a declaration under Article 344 G sexies was previously lodged, the nature of the trust (revocable, discretionary, etc) with full details of its terms and conditions, including principles of distribution of the trust assets and income; and
  • if one or more of the settlors or beneficiaries is a French resident, an inventory of the trust worldwide assets with their value as of 1 January; if none is a French resident, an inventory of the trust’s French situs assets with their value as of 1 January (with the exception of financial assets since rescrit n°2011-37 of 23 December 2011).

The declaration should be sent with payment of the 0.5 per cent prélèvement due unless the trust assets were included in the settlor’s or beneficiary’s ISF (as applicable).

Deadlines

The declaration of Article 344 G sexies should be sent before 31 December 2012 for any constitution, modification or extinction of a trust before 14 September 2012. After that date, any constitution, modification or extinction should be declared within a month.

The declaration of Article 344 G septies should have been sent before 30 September 2012 for this year.

The Decree therefore confirms the existence of two separate reporting obligations, the first remaining applicable even if the trustee is exempt from the second. For example, if the trust no longer had a settlor, beneficiary or assets in France on 1 January 2012 but had one at any time since 31 July 2011, the trustees should report this under the ongoing obligation.

These articles and deadlines for the first year raise questions. What covers ‘consistency’ (consistance) referred to in Article 344 G sexies, which seems distinct from the ‘detailed inventory and market value’ referred to in Article 344 G septies? Is a detailed inventory without valuation sufficient? With the publishing of two separate CERFA forms, it is clear the two reporting obligations are distinct, even if it appears that, by sending a detailed inventory and market value of the trust assets under Article 344 G septies, the trustee would have fulfilled the obligations under Article 344 G sexies. Separate declarations need to be made to satisfy each. It is therefore suggested that trustees who are obliged to submit an annual declaration by 30 September 2012 will also need to submit a second declaration by 31 December 2012 to report the ‘creation’ of the trust, even if this occurred before the obligation to report.

Sanctions

Sanctions remain severe (5 per cent of the trust assets with a minimum of EUR10,000). The Decree does not detail to what extent an incomplete or late declaration will create exposure to sanctions. Trustees are therefore advised to scrupulously fulfil their reporting obligations as soon as possible. As for payment of the 0.5 per cent prélèvement, the Decree does not clarify whether the trustee is personally liable for the prélèvement and the possible sanctions (as suggested in Feuillet Rapide Francis Lefebvre FR 29 11 n° 42) for not paying. A strict reading of Article 990 J, however, suggests that the trustee is only responsible for administrating the payment, for which the settlor remains entirely liable.


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