ALTHOUGH trusts are a common concept in England and Wales, they are not recognised in France and are therefore generally not suitable vehicles for the ownership and protection of assets.

Ownership of assets (such as property or investments) by a trust in France can be fraught with difficulty.

Even the Society of Trusts and Estate Practitioners (STEP), which deals with the administration of estates and estate planning and has a wide ranging international section where lawyers can seek specialist advice regarding cross-border successions, generally advises against the use of trusts in French estate planning for private clients.

However, there are occasions when a trust is found to own French assets. This may be as part of highly complex tax reduction strategies, or as a result of an individual not planning their estate ownership with sufficient forethought: for example, by stating in their English will that an English trust will include a French asset. In general, situations such as this should be avoided.

The new legislation will mean that the French authorities will be able to track what assets in France are held by trusts. Its aim is to impose a regime of declaration concerning the existence, modification or termination of trusts that have any involvement with France.

That involvement could be the residency of a trustee or beneficiary or the inclusion of property, investments or other assets located in France. Clearly, therefore, the legislator was looking for ways of bringing trusts and trust assets into the scope of the French tax system, rather than establishing structures for making trusts a normal, everyday method of structuring ones estate.

The obligation that has been imposed is that all qualifying trusts must now be registered in France. The deadline for registration will be June 15 each year, although the deadline for this year has been set at September 15.

Failure to declare will potentially lead to an automatic tax charge being imposed. The penalty could be 10,000 euros or 5% of the trust assets – whichever is higher – with the settlor (the person who created the trust) and the beneficiaries all potentially being jointly liable. There could also be an extra penalty (a withholding tax) of 0.5%.

This article is for general information purposes only and does not constitute legal or other professional advice. We would advise you to seek professional advice before acting on this information.

Ashton KCJ is authorised and regulated by the Solicitors Regulation Authority (Recognised Body number 45826) and by the Financial Services Authority.

: : Matthew Cameron is head of French legal services at Ashton KCJ Solicitors