France’s new on line Register of Trusts – opening a Pandora’s Box
This article is for general information only. French law is a highly specialised area and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case. This article is for general information and does not constitute investment advice. Always consult an IFA.
France’s national register of trusts was due to go on line from 30th June 2016 though as at 4th July 2016 cannot be accessed. It is anticipated it will go on line very shortly. It is a novel experiment in tax transparency the first of its kind in the world. France does not have a law of trusts but non-French trusts can have legal and tax effects in France. Trusts which broadly have French resident settlors, French resident beneficiaries or French assets are required to file a return with the French Tax authorities on an annual basis regardless of whether any tax is due.
What’s on the Register
The on line register will reveal (1) the names and dates of birth and death of all settlors, trustees and beneficiaries, (2) company details including company number of all settlors, trustees and beneficiaries (3) the type of trust, the date it was set up and the date it ended.
Who can inspect
It is bizarre that only people with a French tax number can inspect the Register. If you are by definition a non-French trustee and information about you is published on a French government website why can you not access it direct? Would a French person who access it and then publishes the information to you commit an offence? The stated object of the French government is international tax transparency so why not let everyone view it?
Why should a person with a French tax number resident in New York be able to inspect the Register whilst a retired American resident in France without a tax number cannot do so?
People who think they may appear on the register should check that their details are shown correctly. The register is likely to be consulted by other countries’ tax authorities and law enforcement agencies who may ask residents and nationals in their countries for more information. The French government accepts no liability in respect of any information on or missing from the Register.
Tax morality is the cornerstone in any economy. Usually the focus is on the taxpayer’s morality but tax authorities have to behave with high moral standards in order to keep the public’s confidence. Keeping tax information confidential is in the author’s view a key element which has been undermined by the register. Information has been given which taxpayers thought was confidential. These people will feel betrayed by the French government. It is a very dangerous step as it stigmatise non-French individuals as tax dodgers. Why start with perceived wealthy foreigners rather than publish tax information about French people who run mainly cash businesses, or French people with previous convictions for tax evasion? Two of the most famous three words in the world égalité and fraternité have sadly been cast aside by the heirs to the Republican Revolution.
Lots of problems
The potential problems from opening this Pandora’s Box are many and some are as follows:-
- How is access going to be controlled? If a fictitious tax number is put in using someone else’s computer there will be no way of knowing who has actually accessed the database.
- What are the penalties for unlawfully publishing information? You would have to show the information had been obtained from the database and not elsewhere. Would a non-French court grant an injunction stopping publication?
- What about information which is wrong on the database?
- What do financial institutions do if they know their client is a trust which should be on the register but which for whatever reason does not appear on the register. If they know the existence of the trust has not been revealed can they continue with the trust as their client?
- The aim of the register is greater tax transparency. However divorcees may decide to check the online register to find out if their former spouse has concealed assets in trusts during earlier divorce proceedings. Would aggrieved former spouses publishing information about earlier concealment commit an offence? Would it make any difference that their former spouses had earlier on lied to the divorce judge?
- What about banks and other creditors who discover that debtors have put assets into trust without revealing the same in any insolvency proceedings.
- Similar considerations for institutional trustees who know that a beneficiary is French resident and that the trust should be on the register. Will they have to resign if the beneficiary does not agree to the French tax authority being informed?
- Should notaires acting in a French property transaction inspect the register if they receive funds into their account from a trust or are asked to pay money to a trust account?
- Foreign law enforcement agencies may use the register to check whether there has been a breach of foreign exchange control laws.
- What happens if new trustees are appointed who are not aware that in the past the trust has had French assets and has not been registered? New trustees should take warranties from previous trustees if any French involvement is known.