A new ordonnance transposing European directive on anti-money laundering regulations has extended the scope of the trust reporting obligation. « Business relationships » with France is a new criterion that trustees will have to review to ensure they are compliant with trust filing in France. Additional information will also have to be disclosed in the trust returns. A new penalty could apply in case the information provided to the French tax authorities is non-accurate and incomplete.
Directive 2015/849 on anti-money laundering and terrorist financing has been transposed in France by the Ordonnance of February 12th, 2020 modifying Article 1649 AB of the French Tax Code related to trust reporting requirements.
Three important amendments have been implemented in the Article 1649 AB of the French tax code:
1. Additional disclosure requirements for trustees established or resident outside the European Union
Any trustee established or residing outside the European Union who (i) acquires real estate assets in France, or (ii) who enters into a “business relationship” in France (pursuant to the French Monetary and Commercial Code provisions) should now be liable to Trusts reporting in France.
As a consequence, a trustee established in the UK, Jersey, Guernsey or Switzerland may enter into this new scope and therefore reviews whether additional reporting should be filed.
The expression “entering into a business relationship in France” could lead to uncertainty to determine the scope of the reporting obligations. The French Monetary and Financial Code provides that a business relationship exists when a professional or commercial relationship is initiated and is expected to last for a certain period of time.
2. Additional information to be disclosed in the Trust return
On top of disclosing personal information on the three mains actors of the trust, i.e. settlor/deemed settlor, trustee and beneficiary, trustees would also have to declare:
- any protector; and
- any individual exercising an effective control over the trust assets
This additional reporting requirement reminds us the Common Reporting Standard rules that are already referring to this concept.
3. Amendment of the Trust register consultation
In 2013, public trusts register has been set up. This trust register is no longer public since the French “Conseil Constitutionnel” has declared it unconstitutional for breach of privacy rights in 2016. However, the trust register is still accessible to listed competent authorities.
In the scope of anti-money laundering, the new provision grants access to the trust register to financial institutions. Any discrepancy noticed should be reported to the French tax authorities and may raise investigations against trustees. In some case, a 20 000 euros additional penalty may be due.
This new provision could have consequences on Trustees liability regarding reporting obligations. Besides the risk to be applied penalty in case of non-compliance of the trust reporting obligation, the French tax authorities could apply another penalty if the information provided in the trust returns are not complete and accurate.
Conclusion
These new provisions are raising many questions. We are waiting for the publication of the “Décret d’application” as well as the updated version of the Trusts returns and the French tax authorities’ general guidelines on these topics.
