This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our PRIVACY POLICY for more information on the cookies we use and how to delete or block them.
  • French Tax and Trusts
French Tax Insight:

French Tax and Trusts

10 January 2022

Since July 2011 the French Tax Code (“FTC”) contains a definition of trusts and outlines French reporting obligations for French connected trusts.

This information gathering exercise is an obvious cross-referencing tool of tax details when it comes to French personal income, wealth, inheritance taxes, and any unreported foreign life bonds, policies and accounts for certain trust parties.  France maintains a trust register in line with EU legislation.

Although numerous areas still remain uncertain, the relevant FTC Articles provide some guidelines on the French tax treatment of trusts, an area which was formerly very depleted.

FTC Art 792-0 bis defines trusts but without necessarily grasping their true concept.  Where there is any uncertainty, the French Tax Administration (“FTA”) is likely to rely on the notion of propriété apparente, and tax the true beneficial owner. The FTA will also seek to identify the true economic settlor. Where the original settlor is dead, all the beneficiaries are treated as “deemed settlors” (bénéficiaires réputés constituants).

Reportable Trusts and Reporting Scope

The reporting obligations need to be met by all trustees who administer settlements, or any trust-like arrangements with at least one French resident party or those which hold at least one French asset. The definition of what constitutes a reportable French asset has evolved since 2011.

Where a trust is reportable, the trustee must state all the trust parties, regardless of their residence, and full details of the trust’s assets including the market values as at 1 January every year on form 2181- TRUST2.  If the only connecting factor is a French asset, this only needs reporting but all trust parties still need to figure on the form.

2011 - 2017 Annual Reporting

Where all parties are resident outside France, a trust would be reportable if it held at least one French asset, excluding French financial assets as defined as exempt assets in the hands of non-French residents under the pre-2018 French wealth tax legislation.

2018 Annual Reporting (a “one off” year)

2018 annual trust reporting was aligned with the 2018 reformed wealth tax legislation (Impôt sur la Fortune Immobilière, “IFI”) and therefore only concerned trusts:

•holding French real estate directly or indirectly regardless of the tax residence of its members;

•with at least one French resident, and the reporting had to state worldwide real estate or rights therein.

The wealth tax definition of reportable and taxable real estate and rights therein contains some exceptions and deminimis rules.

2019 Annual Reporting 

Article 48 of the 2019 French budget re-established the reporting obligations which existed before the wealth tax reform referred to above.

The reporting scope was also broadened, so that trusts must now report all their assets and rights (financial or immovable assets) as well as capitalised products situated in France, regardless of tax residence status. The FTA confirmed that French assets held through an underlying entity or collective fund are not reportable.

The 15 June 2019 deadline was postponed to 1 July 2019.

2020 and Onwards Trust Reporting  

The 2021 annual report filing deadline was postponed to 15 September 2021.

The FTA integrated the provisions of the 2018/843 AML EU Directive into its domestic law through Decree no2020-115 with effect from 14 February 2020.

The Decree extends the reporting obligations to all trustees who are not established in the EU, if:

i. they acquire French real estate – it does not specify if this includes indirect acquisitions. French property ownership makes a trust reportable anyway;

ii. they enter into a professional or commercial relationship in France as defined by Article L 561-2-1 of the French Monetary and Commercial Code.  The “relationship” concerns regular and ongoing dealings with financial or advisory professionals regardless of the existence of a written contract.  In the absence of any comments to the contrary, this change is also likely to affect trusts with no French resident parties although, in practice, these may not be widespread.

Trustees now have to include the following details in respect of any reportable trusts:

i. the protector’s identity and details; and

ii. details of any other individual(s) who exercises effective control over the trust or who holds a similar role.

Finally, the Decree introduced a new article in the procedural legislation, Article L.102 AH which sets out an obligation for relevant professionals and authorities, who have access to the French trust register, to report any discrepancies or omissions they may come across in reference to this register to the FTA. The trustee is then notified and must provide them with an explanation in a timely manner.  Provided the trustees’ replies are sufficient, the FTA will simply correct the register accordingly.  In the absence of any satisfactory response, the €20,000 penalty for omission may apply.

Event Reports

Trustees who administer trusts with at least one French resident party or reportable French assets (see above), must disclose, within a month, any relevant changes on event form 2181-TRUST1.

This concerns any alteration to the trust’s terms or powers, parties, appointments of assets on to new trusts, and distributions. Non-capitalised income distributions made over the course of the year could be regrouped as a one-off reporting exercise by the end of January of the following year. This tolerance may have been removed as a result of the 2018 changes and we expect the FTA to clarify the position at some stage. In the meantime, if you decide to continue reporting all annual income distributions onto one form it may be advisable to include a mention on the trust form or cover letter to that effect.  Generally, all legal or factual modifications likely to affect the economy or the running of the trust should be reported.  Disposals and changes to the nature of a trust’s assets should therefore be carefully considered.

“Events reporting” runs throughout the period of the trust’s exposure to the French obligations.

French trust reports are filed at the Recette Patrimoniale des Non Résidents, 10 rue du Centre, TSA 50014, 94465 Noisy le Grand CEDEX, France.

Subject to strict conditions, certain pension trusts may be exempt from the French reporting.  Nevertheless, it is essential to obtain proper advice especially when it comes to individual retirement trusts since these may be exposed to the reporting and, therefore, the annual trust charge (see below).

Trust Charge

French-connected trusts may be faced with an annual trust charge (“sui generis” levy) at the highest rate of wealth tax which is currently 1.5% unless the relevant trust parties have reported their “share” of the trust assets for wealth tax purposes.

Where the relevant trust parties are not subject to wealth tax, or where they duly pay the tax, including any that may be due on their trust “rights”, the trust should not be subject to the annual charge.  However, this does not preclude trustees from the French reporting obligations as stated above. Indeed, it is important to note that failure to report the trust annually may lead to the application of the “sui generis” levy (up to ten years in arrears) even if the trust parties are not liable to wealth tax because their net taxable assets, including that of the trust, is below the wealth tax limit.

As a result of a challenge before the Conseil d’Etat – which was promptly referred to the Conseil Constitutionnel (French Supreme Court), the FTA confirmed that the “sui generis” levy and wealth tax charge should not be cumulative.

Charitable trusts which meet the strict exemption conditions in respect of the sui generis charge are sadly not excluded from the reporting obligations.

Taxes on Distributions

Any distributions from a French connected trust to any parties should be carefully considered since these need to be reported within a month and may trigger French income tax, gift or inheritance tax considerations.

Taxation on look-through basis

Under anti-tax avoidance FTC Article 123 bis, trust income and gains may be subject to French income tax on a look-through basis in the hands of French tax resident settlors or beneficiaries treated as “deemed settlors”.

The scope of this article was amended with effect from 2022 to facilitate its application in the context of offshore irrevocable and discretionary settlements so it is important to carefully review the impact of this measure on any given case.


The penalties for omission or incomplete reports currently stand at €20,000 and the authorities may apply these up to four years in arrears.  For instance, any reports due in 2016 should no longer attract penalties beyond 31 December 2020.

Note, however, that whilst the penalties cannot be levied beyond this four-year period, any French tax liability relating to trust assets or distributions may be recovered by the French Tax Authorities up to ten years in arrears and penalties and interest charges would apply to such outstanding liabilities.

French measures affecting French-connected trusts make them difficult to use in the context of French assets or French resident parties regardless of where the trust is domiciled. The presence of a double tax treaty may entail some differences in the ultimate French tax treatment.

For regular updates, please email us to receive our bulletins.

For more information, please contact Virginie Deflassieux or Catherine Le Pelley

This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only.  It cannot be relied upon to cover specific situations without obtaining professional advice.

BDO is the brand name of the BDO network and for each of the BDO member firms.

© 2022 BDO Limited. All rights reserved.