The recent Impôt sur la Fortune immobilère or IFI and the
necessary allowances and exemptions has had to be adapted to the
main sanction for non-declaration of Trust assets which is
the prélèvement of 1.5%
Those trustees with mere portfolio investments which do not
contain immovables will be relieved of that they are no longer
affected by the IFI or the prélèvement. Those with a French
connection and a mixture of assets will not be entirely
That prélèvement has been carried over to the IFI by the
unrepealed article 344 sepites of Annexe III CGI, which sets out
the elements required in the prélèvement declaration 2181 Trusts2
and which has been amended to take account of the new tax.
The Trustee declaration's due date of 15t June was not changed,
unlike the individual's IFI filing date being held over to the same
date from 15th May, which is questionable, given that the trustees
only had a week from the issuing of the BOFIP instruction on 8th
June to digest the implications for their declaration, which
remained due on 15th June.
Whilst it is understandable that the administration were under
significant time pressure to implement the new IFI and its
ramifications such as the prélèvement, this is clearly abusive from
the perspective of the non-resident trustee.
These are mainly neither French speaking and by definition
unused to the French approach to trusts. That French approach is
based on what has become a statutory fiction, and a degree of
deliberate misunderstanding of the trust concept so as to convert
it into something that is more easily taxable, as a fiction.
The administrative commentary in the BOFIP on the relationships
between article 344 septies Annexe III defining the 2181
Trusts2, and article 964 et seq, 990J and 1649AB
of the CGI were only published on 8th June.
The link to the BOFIP section on the prélèvement can be found
The article 344 septies definition the Trustees' declaration
refers back to a declaration enacted in 6th paragraph of article
1649AB. That paragraph does not mention any declaration. The
reference to a declaration in 1649AB CGI was replaced by the
wording implementing the Trust Register in 2013. That
fundamental error notwithstanding, the administration will probably
not consider that lapse in the drafting of the legislative
implementation to be an obstacle preventing it from issuing
penalties for any absence of a declaration, from foreign
Those trustees who have not been able to meet the deadline will
need to take stock of whether any of the defined allowances the
articles following article 964 CGI can be applied and how to
declare these on a late filing basis.
Also, the declaration of shares in property holding companies
used in professional activities, normally other than bare or
residential lettings, will need to be carefully considered so as to
extract the maximum advantage of loans and other finance methods
for the individual(s) otherwise liable for the prélèvement, under
the changed charging régime. Whilst the administration considers
the trustee to still be responsible for the payment of the levy,
under article 990J, that article has been amended to render payment
of the levy to be the responsibility of the constituant or the
bénéficiare réputé constituant so as to circumvent the recent
Conseil Constitutionnel's decisions in 2017 in this area.
The changes in the legislation in France alone are going to give
rise to significant subjectivity in individual's IFI declarations,
as the majority of French property owners will endeavour to
classify their ownership as professional, and valuation issues of
property held directly or indirectly will inevitably occupy the
litigators for some time ahead.
However, until the IFI is repealed, which, given that it is a
political tax rather than an economic one, is possible, trustees
indirectly holding French immovable property or immovable property
interests should ensure that their declarations are in order to
give their beneficiaries and settlors the maximum clearance.
The problem with the French administration's and Parliament's
attitude towards trusts is that, rather than respecting the prior
French legal understanding of a trust as a matter of property law
and at best a "convention" over property, they are attempting to
retreat it as if it were a personal contract, giving rise to
personal rights (propriété virtuelle) against an administrateur
which it is not. They have therefore constructed a tax treatment
around a fallacy. That fallacy has not been sufficiently challenged
by the French Bar or legal academia, which has shown a degree of
complacency, or fear of social acrimony in this area. That now
means that the administration is now considering its fiction to be
a legal not a fiscal reality, and acting accordingly.
Contact Peter Harris if as a trustee, or a Constituant of
a bénéficiaire réputé constituant, you are in difficulty.
French residents with British immovable property will need to
take advice on any trust holding of realty to which they may be