The French administration may have bitten off a good deal more
than their computer system can chew in the modification of the tax
basis from the ISF, which comprised both movable and immovable
assets to the new Impôt sur la Fortune immobilère.
To put one area of possible concern to one side, the declaration
as to existence, modification or termination of a deemed trust
interest or trust, Cerfa 21081 Trust1 and its parent articles
1649AB and Article 344 G sexies remain in force and have not been
amended, as these are aimed mostly at deemed succession and gift
- Trustees and the 1.5% levy:
It is regrettable that there has been no attempt made by the
French Finance Ministry to address the mismatching of the 2017
millésime Cerfa 2181 Trusts2 with the new IFI.
What is clear is that the French fiscal "definition" of a trust,
which is not, yet, a legal one, has now parted ways
with the English concept, which as a property law matter, resists
any definition, and what is more the Hague Convention upon which
the French attempt was based.
The disease has spread to French lax lawyers who, following an
idiotic statement in a commentary by a conseiller to the Conseil
Constitutionnel are now referring to a "contrat de trust" rather
than to a "convention de propriété". The legal and equitable
principle that no trustee can charge a fee unless expressly
permitted by the Trust Deed appears to have been wrapped up and
concealed from view in a neo-cartesian fallacy.
Those advising beneficiaries and other individuals with French
immovable assets held through intermediate entities will be aware
that with the change has come a set of valuation issues which may
arise in relation to the indisponibilité or lack of uninhibited
disposal of such indirectly held immovable assets, the issues of
minority interests, loan deductions and other similar "movable"
effects on a full market valuation of the underlying asset. This is
not merely limited to the articles expressly addressing valuations
of professional asset in the texts.
It is against this background that the Trustee annual
declaration defined at articles 990J, 1649AB and in particular, the
unmodified article 344 G septies are now a cause for concern. There
has been no attempt made to redraft the forms which appeared to be
required in place of the previous Cerfa 2181 Trusts2 now the ISF
has been struck from the Code général des impôts.
However, the position as to that limbo has to be resolved by
reference to the text of article 344 G septies Annexe II CGI, which
remains in force and was adjusted slightly in 2018.
As it is possible that any French resident beneficiary or
bénéficiaire réputé constituant will be charged to the levy at the
full rate of 1.5% owing to a lack of declaration by 15th June from
the foreign Trustees, the amended 990J which contains a new
charging mechanism holding these persons liable to the levy in the
case of a declarative default by their trustees need particular
The issue will not arise where the person concerned has included
the trust assets in their own IFI declaration, provided that the
"non bis in idem" decision by the French Conseil Constitutionnel
over an "interest" in discretionary trust being declared a a
nominal amount remains applicable within the IFI, which logically
In the intervening period, compliant French residents and
non-residents will already have taken advice on valuations through
intermediate holding entities and will have filed as appropriate
their 2042-IFIs and annexes.
This leaves their trustees with the valuations and identification
of the assets which they hold, and which have already been declared
by their Constituants or deemed Constituants, or which are under
the €1.3 million threshold of each individual concerned, Issues of
loan finance and other like allowances will already affected
whether these items will be carried to the French administration's
Those trustees who have opted to pay the prélèvement of 1.5% -
identical to the full IFI rate - so as to release their
beneficiaries will therefore find themselves in a position where
they might wish to attempt to reduce the basis by reference to the
IFI allowances. Care is needed here, as the declaration replacing
the 2181 Trust2 has yet to be published, and it is possible that
the administration may attempt to forestall such opportunities
arising under the new format of the IFI tax base in the new
declaration and the notices which will follow on in due course by
insisting on a separate valuation method so as to extract the full
market value and thus undermine any valuation placed on the assets
by their beneficiaries' advisors.
I would suggest that the time is ripe for asserting that English
trusts of land, as immovable rights per se under the lex situs, are
not caught by the French trust definition as a result of the prior
abolition of the doctrine of conversion in 1996, and allow the
French resident taxpayer to declare their interest as an immovable
asset with suitable allowances for non-availability. If advice is
needed on how to assert this, and thus remove any registration
requirement that might rear its ugly head in France, please contact
Whilst the article defining the content of the declaration has
been changed to accommodate the IFI's tax base to immovable
property, the only Cerfa 2181 Trusts2 available on the Website is
the 2017 Millésime which is structured to deal with two categories
of wealth: movable and immovable.
As at 11th June, i.e. 3 full working days before the filing date
of midnight 15th June, it seems therefore that, given article 344
septies of Annexe III CGI, in the absence of any express derogation
or even extension of time, as has been the case for the individual
IFI returns, in order to address the separate levy or prélèvement,
which is set out in a different section of the tax code, trustees
will need to file on a 2017 form as the annual filing requirement
still stands on the statute.
Whilst is is unlikely that any trustees will hold land directly,
certainly not French, they will not be able to file easily using
the 6B or 7B sections of the form, which are those for movable
I stress there is no declarative opt out under article 344
septies. It is regrettable that there has been no attempt made by
the French Finance Ministry to address the mismatching of the 2017
millésime Cerfa 2181 Trusts2 with the new IFI or take the risk of
not declaring, on the basis that there is no declaration available,
for the prélèvement as it stands.
The issue is that whilst shares or interests in corporates
owning immovable are declarable, the overseas trustee could be
pardoned for not knowing, in the absence of any administrative
guidance or instruction as to where to put the asset. If it is
treated as being an immovable, then how does one address the issue
of allowable loans, other than declaring a net value, which is not
in fact permitted by the form itself or does one treat the shares
as being shares and declare them either in section 6 B or section 7
B? The response to that has to be that the declaration is of the
market value of the asset, be it movable in the case of shares, or
immovable, and the capacity of the individual paying the IFI to
declare loans on their own return, due now by 15th June. In other
declarable on 6B or 7B of the form.
Whilst the Conseil Constitutionnel has upheld the principle of
non bis in idem in a decision last year, the tax administration has
changed the persons liable for the prélèvement of 1.5% from the
trustee to the constituant or deemed constituant of the trust. It
is possible that this change will be used to assess the prélèvement
upon French residents, despite the ruling, whee the trustees
declaration is challenged.
The compliant approach has to be to declare the corporately held
assets as movables in 6B, if you are paying the prélèvement, or 7B
if the French resident is either exempt or declaring the asset for
IFI, and then carrying the French cumulated net asset value for
those shares to the column chargeable.
Here there is a further obligation on the trustee to certify the
amount and characteristics of loans concerning the immovable
property to the French or foreign IFI taxpayer.
The allowablility of loans under the IFI régime is certainly wider
than under the old ISF.
Insofar as corporate intermediaries are concerned, which have
financed the acquisition or other aspects of the immovable through
loans, trustees are advised that there is a specific mechanism for
determining the amount of the value of the shares to declare which
has been borrowed from the 3% tax on immovable property holding
There is no ability to declare a corporate holding of foreign or
French immovable property, other than in the movables section B of
either sections 7 or 6 on the 2181 Trusts2…