Open a Trust in France

The French Civil Law covers a wide area of legal matters, among which the recognition of trusts. Until a few years ago, the French legislation had no specific provisions related to the creation of trusts, nowadays, however, French law still does not allow trusts as such, but offers the similar fiducie (Law no. 2007-211 of 19 February 2007), while foreign trusts are recognised, whether set up by French citizens or foreigners residing here.

The main law which contains specific provisions about trusts in France is the Tax Code.

If you plan on setting up a trust and need guidance, our lawyers in France can help you create one. We also specialize in business registration and our services are dedicated to investors interested in doing business in France.

What is a trust, according to the French legislation?

Trusts are acknowledged worldwide as legal vehicles created with the purpose of protecting personal assets. The same principle applies to France, which is why those who want to create trusts in this country can only use a French fiducie or a trust governed by a foreign law (France has not ratified the 1985 Hague Trust Convention).

Also, foreign trusts are recognized by the French authorities. A mandatory condition is for the trust to be legally set up in the country of origin of the settlor in order to be recognized in France.

There are several types of trusts which can be created, among which:

• –          private trusts;
• –          charitable trusts which resemble foundations or non-profit organizations in France;
• –          discretionary trusts;
• –          business trusts;
• –          revocable and irrevocable trusts;
• –          living trusts.

Our French lawyers can explain the differences between the types of trusts acknowledged by the law.

The main elements of a trust in France

Those who want to open trusts in France should know that these must comprise a set of compulsory elements. These are:

• –          the settlor which is represented by the person creating the trust;
• –          the assets which are mentioned in the trust deed – the main document used to create the trust;
• –          the beneficiary or beneficiaries who are the persons in whose name the assets are held;
• –          the trustee who is the person in charge of administering the assets on behalf of the beneficiaries.

In order to understand how a trust works, our attorneys in France explain below the role of each party in a such a vehicle.

The settlor is represented by the body creating the trust. Natural persons, public authorities and companies, including French companies, can set up trusts. Their main role is to prepare the trust deed through which specific assets are left in the custody of the trustee. It is the settlor’s right to impose certain conditions related to the release of the assets to the beneficiary(ies).

The assets can take the form of real estate property, money or any other personal belongings, at the discretion of the settlor. Then, the trustee is appointed by the settlor as a fiduciary. The main role of the trustee is to administer the assets on behalf of the settlor and for the benefit of the beneficiaries until the conditions for transferring the assets to the beneficiary are met.

The main responsibilities of the trustee are the duty of care, loyalty, and impartiality.

The main steps for creating a trust in France

Opening a trust in France is quite simple and the procedure can be completed a short period of time. The main steps are:

1.        draft the trust deed which must contain information about all the parties in the trust;
2.        register the fiducie contract with the tax office within one month (otherwise it is void) and in the national register of fiducies;
3.        set up a bank account if the assets consist in a specific amount of money;
4.        file tax returns with the French authorities, although the trust or fiducie is not a separate legal entity.

Our law firm in France can help with the creation of a trust deed if you plan on setting up such a structure. We can also help if you want to open a business in France.

Taxation of trusts in France

As mentioned above, trusts fall under the French tax legislation because they are used for tax planning and wealth management purposes. The following taxes need to be considered when opening a trust in France:

• –          the income tax;
• –          the inheritance tax;
• –          the gift tax.

The settlor will be subject to the income tax in France. The trustee, on the other hand, will be responsible for filing tax returns if he or she, the settlor or the beneficiary is a French tax resident. There are two forms which need to be filed with the tax authorities in France.

A French fiducie cannot be used to make gifts or bequests (it is void if made for gratuitous purposes, art. 2013 Civil Code), so testamentary trusts cannot be created under French law (foreign testamentary trusts with French links are taxed under special rules).

For full information and assistance in creating a trust in France, please feel free to contact us. Our French lawyers are also at your disposal with information and guidance in setting up companies. We can also help you if you want to open a company in Ukraine or in Egypt through our local partners.