The introduction of new reporting requirements has resulted in trusts being liable for penalty charges, if full disclosure is not given by the relevant date.
From January, trustees acting for settlements with either French tax resident settlors or beneficiaries or French properties, loans, stocks and shares held as assets will be required to comply with the new rules.
Failure to comply with the disclosure requirements may lead to a €10,000 (£8,399, $12,997) penalty or 5% of the value of the trust’s assets, whichever is the highest.
Making the relevant disclosures should remove the danger of the penalty charge, but the trust may be liable to a 0.5% annual charge depending on the situation of the French resident taxpayer, according to Virginie Deflassieux, associate director of French Tax at Guernsey based tax and business advisors PKF (Channel Islands) Limited.
Although it remains unclear how the French authorities propose to recover these charges, Deflassieux suggests the risks should be properly considered as soon as possible.
“What is left of December could be a very busy time for trustees who will need to check all of their structures and identify any French resident settlors, beneficiaries or assets, so they may consider any planning possibilities ahead of the changes or confirm the way the trust will be disclosed to the French authorities,” she said.
