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September 25, 2020
France implements new rules impacting French trust reporting requirements
The French Government published, on 12 February 2020, Ordinance
This Ordinance follows the requirements mandated by the European Union (EU) Directive 2018/843 of 30 May 2018, amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (referred to as the Fifth Money Laundering Directive).
The Fifth Money Laundering Directive makes amendments to the Fourth Money Laundering Directive on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing. These amendments and new provisions will further strengthen transparency and the existing preventative framework, while ensuring that the French AML/FT framework adheres to the international standards set by the Financial Action Task Force (FATF).
Due to COVID-19, the French Tax Administration has announced an extension of the deadline to file the annual tax return (Form 2181-Trust 2) to 30 September 2020 (instead of 15 June 2020).
This Alert summarizes the key changes impacting trusts.
Extension of the scope: a new French nexus that triggers a trust reporting requirement
Prior to the Ordinance, Trustees had reporting obligations towards the French Tax Administration in the following two situations:
The Ordinance introduces a third situation that triggers French nexus and then a reporting obligation by the trustee according to Article 1649 AB of Code Général des Impôts (CGI): this happens when (a) the trustee is established or resident outside the EU and (b) it acquires real estate or enters into a business relationship in France.
The notion of “business relationship” refers to a professional or commercial relationship which is supposed to be, at the time when contact is established, for a certain amount of time. The business relationship can be set up by an agreement according to which several successive operations will be carried out between contracting parties or which places continuous obligations on them. A business relationship is also established when, in the absence of such agreement, a client regularly benefits from the assistance of professionals to perform several operations or one operation with a continuous nature.
New sets of data to be filed in the trusts returns (annual and monthly returns)
The following additional information should be reported:
As of publication of this Alert, the new French trust forms are not available.
Controls from the French tax authority
Accessibility of the French trust registry
Trustees should review the new rules and take action to:
For additional information with respect to this Alert, please contact the following:
Ernst & Young, Société d’Avocats, Paris
Ernst & Young LLP (United States), Financial Services Desk, New York