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Declaring Foreign (Non-Resident) Trusts in France

Non-resident trusts play a crucial role in estate planning. They are versatile tools that can serve various purposes for individuals and families with assets and interests in multiple jurisdictions.  

Whilst commonly used in the UK, trusts do not exist in France. However, France does acknowledge non-resident trusts for tax purposes. A non-resident trust is a legal arrangement that involves the separation of legal ownership (held by the trustee) from beneficial ownership (held by the beneficiaries) of assets. The key distinguishing feature is that the trust is not considered a tax resident of France. Instead, it is typically established in another jurisdiction. 

If your trust has French connections, it must comply with the relevant French laws. A French connection is created if the settlor, trustee, or beneficiaries are French residents, or if the trust owns French assets. You must understand how and when you must declare your trust in France. 

Common Uses and Objectives of Non-Resident Trusts

Non-resident trusts are employed for various purposes, including: 

  • Estate Planning: Non-resident trusts can help individuals plan the distribution of their assets, ensuring that they are passed on to intended beneficiaries efficiently and in accordance with their wishes. 
  • Tax Efficiency: Non-resident trusts can provide tax advantages, such as reducing inheritance tax or capital gains tax liabilities. 
  • Cross-Border Asset Management: They facilitate the management of assets located in different countries, streamlining the administration of an international portfolio.

Legal Framework for Non-Resident Trusts in France

In France, the legal framework for non-resident trusts is primarily governed by the Tax code and various tax laws and regulations. Key points to consider within this framework include: 

  1. Recognition: French law recognises the existence of foreign trusts, but they are subject to specific disclosure and reporting requirements. 
  2. Disclosure Obligations: Trustees and beneficiaries of non-resident trusts are obligated to provide certain information to French tax authorities, ensuring transparency. 
  3. Taxation: Non-resident trust taxation in France varies depending on factors such as the type of income generated and the residency status of beneficiaries. 

Understanding these legal foundations is essential for individuals and families considering the establishment of non-resident trusts in France, as it sets the stage for complying with local regulations and maximising the benefits of these financial structures. 

Step-by-Step Process for Creating a Non-Resident Trust

Choosing Trust Structure

Selecting the appropriate trust structure based on your specific goals and circumstances is crucial. Common trust structures include discretionary trusts, fixed-interest trusts, and charitable trusts. When selecting the trust structure, consider the trust's objectives, such as asset protection, estate planning, or tax optimisation. Seek legal and financial advice to determine which trust type best aligns with your goals.

Selecting Trustees and Beneficiaries

Choosing the right trustees and beneficiaries is pivotal. Trustees should be trustworthy and capable, with clearly defined roles. Beneficiaries must be identified, and their interests within the trust determined.

Drafting the Trust Deed

Collaborate with experienced legal professionals to meticulously craft a comprehensive trust deed. This document outlines the trust's purpose, beneficiary details, trustee powers, and distribution provisions.

Registration and Compliance with French Authorities

Register the trust as required, adhering to French disclosure regulations. Ensure ongoing compliance with tax authorities, meeting reporting obligations in France and the trust's home jurisdiction.

Tax Implications of Trust Creation

Seek guidance from French tax law experts to understand the tax implications both in France and the trust's jurisdiction. Explore strategies for optimising tax efficiency and potential benefits associated with the trust. 

The process of setting up a non-resident trust can be complex and should be approached with careful planning and professional help. Understanding the legal and financial implications at each stage is essential to ensure that the trust meets your objectives while remaining compliant with French regulations.

Declaring Foreign Trusts in France

When you have established a non-resident trust, it's imperative to understand the obligations related to declaring it in France.

Who Needs to Declare a Foreign Trust in France?

A trustee must declare the creation of a trust. Modifications to the trust, including changes to the assets or beneficiaries, must also be reported.

What Information Needs to Be Disclosed?

Where the settlor or beneficiary of a trust is a French resident, you must declare the trust's global assets. Otherwise, you only need to declare assets located in France. In simpler cases, working out what needs declaring can be relatively straightforward. However, where there are multiple beneficiaries from different jurisdictions, for example, it can be much more complex. France Tax Law's team of experts can help you understand your obligations and avoid failing to declare your assets correctly (as this can be penalised with significant fines).

Non-Resident Trust Declaration Deadlines in France

Non-resident trusts must be declared in France within 30 days of being created. If the trust is modified or revoked, you also have 30 days to declare these changes. Furthermore, you must provide an annual declaration of the market value of the assets in a trust. You are required to declare the market value as it was as of the 1st of January that year and must do so before the 15th of June.

Declare Foreign Trusts With France Tax Law

Establishing a trust and properly declaring it in France is a complex process. It is also crucially important. Failing to properly declare your trust can lead to large fines. At France Tax Law, we can help you understand your reporting obligations and ensure a smooth and accurate process that fully considers the tax implications at every stage. Non-resident trusts are unique as they interact with the laws of several countries. As specialists in UK and French inheritance and tax law, our team is equipped to navigate the complexities of cross-border tax issues such as these. Whether creating and declaring trusts, writing French wills, or assisting with purchasing property in France, France Tax Law is here for you.

More France Tax Law Advice

Discover more about French succession and tax with our helpful guides. Here are some related articles to help you manage matters of cross-border tax and inheritance.

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