Private individuals

Private individuals

Here we will also consider the taxation of income and capital gains, then the taxation of holdings and transfers.

 

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Focus // trusts...not welcome here!

The trust is a legal form common in the English-speaking world, it is: 

  • a contract by which, 
  • a person (the settlor) disposes of certain assets, 
  • for the benefit of a third party (the trustee), 
  • who is responsible for managing and transferring income from and / or ownership of the assets,
  • to beneficiaries who are either designated in advance or determined by the trustee according to generally predefined criteria. 

This mechanism has the particular effect of splitting ownership of property placed in trust between: 

  • the legal ownership, which is in the hands of the trustee, 
  • the economic ownership, which is in the hands of the beneficiary. 

Trusts can be irrevocable or revocable, whereby the settlor can change the contract and in particular the designation of the beneficiaries during the life of the trust. 

In tax terms, the French authorities regard trusts with suspicion, seeing them primarily as a way of avoiding tax. 

They have since 2012 therefore been subject to particularly burdensome regulation, backed by very heavy penalties. 

Declaration obligations

These concern all trusts where: 

  • the settlor or beneficiary, 
  • of the assets or rights,
  • is resident / located in France. 

Exemptions

  • trusts managing pension funds on behalf of a company or group of companies, 
  • trusts established by a company or group of companies for their own use with no natural person involved, provided that the trustee is located in a state that has concluded an agreement governing assistance against fraud. 

Aim of declaration

  • If the settlor or a beneficiary is a French resident for tax  purposes → all assets are affected. 
  • Otherwise, only assets located in France are affected, with the exception of financial investments. 

Date of declaration 

15 June of each year. 

Taxation 

  • Settlors must pay wealth tax on either all of their assets if they are French residents for tax purposes, or solely on their French assets if not.
  • Otherwise a charge equal to 0.5% of the assets in trust is due jointly by the settlor and as appropriate by the beneficiaries and the trustee. 

Penalties 

  • Failure to declare may be punished by a fine equal to 5% of the value of the trust (minimum €10,000). 
  • Here too settlors, beneficiaries and trustees have joint and several liability. 
  • Payment of the fine does not discharge the trust from its other liabilities (income tax, wealth tax, etc.).

 


This document and the information it contains are intended to provide as complete and accurate information as possible. It is however theoretical in nature and must undergo all necessary checking prior to its application. FiscalImmo and its authors cannot in any circumstances be held liable on the basis of this document.