French Reporting Obligations for Trustees: Finances Bill for 2019
The French Finances Bill for 2019 is currently under discussion. In its current version, it includes a provision broadening and clarifying the scope of the Annual Reporting Obligations for Trustees.
The French reporting obligations of Trustees derive from article 1649 AB of the French Tax Code. Originally, this article created 2 types of reporting obligations for trusts having a connection with France : an annual return due each year and event-driven returns due each time such trusts were impacted by any kind of modifications or distributions.
Early 2018, the annual reporting obligation was indirectly impacted by the reform of the French Wealth Tax. Indeed, the trusts’ assets to be reported within the annual returns were only those within the scope of the Wealth Tax. Since the scope of the Wealth Tax was reduced to real estate assets only (and shares of companies holding real estate assets) as from 2018, it looked like there were arguments to sustain that the 2018 annual return was not due for trusts which did not hold directly or indirectly any real estate asset as at January 1st, 2018.
The Finances Bill for 2019 includes a provision aiming at “fixing” the article 1649 AB. The draft of text specifies that the trustee should annually report the value as at January 1st of:
- Assets and rights located in France or outside of France and as well as capitalized income when French tax residents are involved, or
- Otherwise only assets and rights located in France and capitalized income held in trust.
As a consequence, unless the Senate modifies such provision, the annual return for 2019 should be due each time a trust involves a French tax resident or a French asset, even if there is no real estate held directly or indirectly in trust. In the case where a trust involves a French tax resident beneficiary, all the trust’s assets, including the financial assets, should be reported.