Trusts
Axtead regularly advises on international wealth strategies involving trusts, specifically focusing on:
- French tax residents who are beneficiaries of foreign trusts;
- Trustees navigating the complex disclosure and reporting requirements of the French tax authorities.
In these matters, we:
- Analyze the applicable tax regime under French domestic law (Income Tax, Real Estate Wealth Tax/IFI, Transfer Duties, specific tax on trusts);
- Ensure tax compliance and reporting, managing both annual and event-based filings;
- Review international tax treaties to prevent double taxation and ensure the correct characterization of flows (income, distributions, and asset transfers);
- Secure trust transfers or liquidations, which are often complex from both a civil and tax law perspective.
Our goal is to ensure the legal and tax certainty of trust arrangements, while proactively managing the risks of recharacterization or tax reassessment within a strictly compliant and controlled framework.
Questions
Since 2011, France has imposed a strict reporting regime on trusts if at least one of the following criteria is met:
- The settlor, a beneficiary, or a trustee is a French tax resident;
- The trust holds assets located in France (real estate, shares, or interests in real estate holding companies);
- A non-EU trustee operates in France (e.g., real estate acquisition, establishing a business relationship).
All filings must be completed in French using official forms (No. 2181-TRUST 1 or 2). They can be handled by:
- The trustee;
- An authorized agent or proxy, such as a representative acting for the settlor.
The trustee is required to:
- File an annual return no later than June 15th of each year, reflecting the trust’s status as of January 1st (including a detailed inventory of assets, their valuation, and the identity of the settlors, beneficiaries, and trustees);
- Report any significant event (creation, modification, or termination of the trust, as well as deaths, distributions, etc.) within one month of its occurrence.
Failure to comply with these obligations is subject to a fixed penalty of €20,000 per missing declaration. While the primary responsibility lies with the trustee, the settlors and beneficiaries deemed to be settlors are jointly and severally liable for the payment of these fines.
Retroactive regularization is possible within a four-year period, subject to the applicable penalties.
Yes, subject to a specific case-by-case analysis. When a settlor or a beneficiary deemed to be a settlor falls within the scope of the Real Estate Wealth Tax (impôt sur la fortune immobilière–IFI), they must declare any real estate assets held through the trust in the same manner as their other taxable property.
These assets must be valued as of January 1st of the tax year and reported in the annual IFI return.
In the event of an omission, the tax authorities may apply a specific sui generis levy in lieu of the IFI. While this tax is technically owed by the trustee, the concerned settlors and beneficiaries are jointly and severally liable for its payment.
