First Tax Filing Due September 15, 2012

SUMMARY

Trustees of trusts that either own French assets (as defined below) or have a settlor or beneficiary who is a French tax resident are subject to new French annual tax reporting requirements. Under the new provisions, a first filing is due by September 15, 2012.

DISCUSSION

Effective January 1, 2012, France has imposed new annual tax reporting requirements for trusts that meet either of the following conditions (subject to certain exceptions): (1) the trust owns one or more French assets, or (2) the settlor or at least one of the beneficiaries is a French tax resident. “French assets” include real properties located in France, receivables/loans from a French debtor and shares issued by French companies. Trustees of trusts that met either of such conditions on July 31, 2011 are required to comply with the new reporting obligations by September 15, 2012.  

In connection with such reporting, trustees must disclose to the French tax authorities information regarding the trust and the fair market value of the assets held by the trust on January 1 of the year in which the report is filed. Failure to comply with the reporting requirements may trigger a penalty equal to the higher of €10,000 or 5% of the value of the trust fund worldwide. The settlor and beneficiaries of the trust are jointly and severally liable for the penalty.

In addition to the new reporting requirements, France also has enacted changes to the French tax treatment of trusts, including in the area of wealth tax, inheritance tax and gift tax.