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.
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.