Possible change in French tax treatment of trusts


(Peter Harris, Barrister, Overseas Chambers ) #1

I am taking the liberty of drawing the attention of those interested in the French treatment of trusts to the implications of M. Macron’s initiative to convert l’impôt de solidarité sur la fortune to a more restricted form of internal taxation on the value of High Value properties situated in France. I have no information yet as to whether the new tax might extend to properties outside France held by French residents, as well.

This would place the modified tax in line with the well trodden 3% tax on immovable property holding structures with which the Forum is historically familiar.

The tax will therefore change and it is possible that the 1.5% levy on Trustees might also be cut back, if not removed, as the Wealth tax which it is meant to complement will no longer apply to French or foreign situs movable assets if the reform takes its proposed shape .

The change will have several ramifications, and it is not yet clear which parts of the now considerable French anti-évasion mechanisms will be changed.

It is a matter of factual habit that a tax administration be unwilling to undo the machinery into which such effort and influence has been poured, particularly where its deliberate deeming fictions bears little resemblance to reality and where it provides a significant budgetary resource.

It might be that the French administration will simply attempt keep the levy in place on its own and dissociate it from the ISF, but that would render it incoherent for the French resident’s position, and probably be an effective obstacle to the freedom of movement of capital. That freedom,which extends to third non-EU states would not be connected to Brexit.

The changes will not necessarily impact the succession deeming provisions in 792-0 bis CGI, for example article 754 CGI and it is therefore likely that any possible declarative changes will be limited to the enabling article and decree for the 2181 Trusts2 annual levy return. It is probable that the current event reporting declaration, 2181 Trusts1 will remain, which still includes the declaration of assets at market value on the date of the event…

if anyone wishes to have advice on this issue, please contact me directly, as it might be difficult to discuss certain issues directly on the forum, which is open access.

Also see the Step cross border estates group link

Peter Harris
www.overseaschambers.com .