French Reporting Obligations of Trustees : Latest development
The French tax authorities recently updated its official guidelines. On top of the comments required by the Ordonnance n° 2020-115 dated 12 February 2020, the French tax authorities lighten the trustee’s reporting obligations by re-establishing tolerances for financial assets.
1/ When the trust has no connection with France but the holding of French financial investments:
The event-driven return is due only:
- In the case where such French financial assets were contributed or endowed in trust at the set up or at a later stage
- Or when the settlor or a beneficiary transfers his tax residence to France under the meaning of French domestic law.
In practice, when the trust holds a diversified portfolio which buys and sells French financial investments, the purchases and sells of such French financial assets no longer trigger any event-driven return.
However, there is no similar tolerance for the annual return, which remains due if French financial assets are held as at 1 January of a given year.
The updated guidelines provide for further details about the definition of French financial investments:
- They confirm that French securities held through the interposition of foreign underlying companies remain outside of the scope of the trustee’s reporting obligations;
- They also confirm that (i) French securities (listed or not) held directly at trust level are targeted irrespective of any threshold of shareholding and that (ii) foreign non listed securities can also be caught if they are issued by entities qualifying as predominantly French real estate entities.
2/ When the trustee needs to report a portfolio:
- It is allowed to report the details of the bank account holding such portfolio instead of listing each line one by one provided that the trustee’s return encloses a document in French specifying the content of the portfolio (such as the bank statement);
- It is accepted that purchases and sales of securities held in a portfolio do not qualify as reportable events provided that all the proceeds deriving from such sales remain in cash or reinvested in the portfolio.
- It is accepted that distributions of dividends and interests can be gathered in a single event-driven return filed in January following a given year. However such specific tolerance does not apply when (i) capitalized dividends or interests are distributed or (ii) when part or all of a sale proceed is distributed.