January 23, 2023

French legislation on trusts – an overview

In 2011, France introduced a special tax regime applicable to non-French trusts. This covers reporting requirements, gift and succession tax, and wealth tax.

Despite this legislation, the concept of trust remains an alien concept in France and the legislation on foreign trusts reflects this conceptual incomprehension. The French view of trusts is generally negative and often associated with fraud and tax evasion, and it is not a surprise that the French legislation on foreign trusts is unclear, severe and dissuasive.

Reporting obligations

French reporting obligations are applicable where a trust has a connection with France. This will be the case when the settlor, trustee, or the trust’s beneficiaries are French resident, or when the trust owns French assets.

Event based return

Trustees are required to declare any creation, modification and revocation of a trust within 30 days.

A modification includes asset distributions and disposals, when further assets are placed into the trust, any change in the trustees or beneficiaries, any change likely to affect the finances, business or the functioning of the trust, etc.

Annual returns

By 15 June each year the trustees must declare the market value of the trust assets as at 1 January.

The assets to be declared will be the worldwide assets of the trust if the settlor or a beneficiary is French resident. Otherwise, the declaration is limited to assets situated in France.


Failure to declare will result in a €20,000 penalty. There is also a penalty of 80% of the tax avoided in respect of trust assets not duly reported.

Additional penalties and criminal sanctions apply in case of fraud, including voluntarily failing to file.

The severity of the potential penalties makes it essential for trustees – and indeed all those involved with French connected trusts – to review their reporting obligations.

Wealth tax

The French wealth tax (Impôt sur la Fortune Immobilière, or ‘IFI’) is a tax on real estate whose taxable base is limited to non-business related real estate assets.

For IFI purposes the trust’s real estate belong to the settlor, even when the trust is fully discretionary. It is possible for the beneficiaries of a trust to be treated as the settlor. This is the case when the actual settlor has died. When this happens, each of the beneficiaries is effectively treated as the settlor (beneficiary who is deemed to be a settlor or ‘BDS’). This happens indefinitely so where any BDS dies, the next beneficiaries become BDSs.

An individual is liable to pay IFI when the net market value of his taxable French real estate assets exceeds €1.3m as at 1 January.  However, if this is the case, then only the first €800,000 is exempt from tax, and the tax rate below will apply.


Under €800,000 800,000 0% 0
€800,001 to €1,300,000 500,000 0.50% €2,500
€1,300,001 to €2,570,000 1,270,000 0.70% €8,890
€2,570,001 to €5,000,000 2,430,000 1.00% €24,300
€5,000,001 to €10,000,000 5,000,000 1.25% €62,500
€10,000,000 upwards 1.50%


Non-French tax resident settlors or BDS are only taxable on French real estate assets, whilst French resident settlors or BDS are generally taxable on their worldwide real estate assets.

Gift and succession tax

For French gift and succession tax purposes the trust’s assets belong to the settlor or by the BDS when the settlor has died.

Tax will be due on the trust’s worldwide assets when the settlor or BDS is French tax resident, and in some instances when the beneficiary is a long-term French tax resident. Otherwise, only French assets may be taxable.

A variety of rates apply based on the relationship between the settlor/BDS and the beneficiary. For most discretionary trusts a punitive rate of 60% is applicable on death of the settlor/BDS. The tax is payable by the beneficiary.


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