J'ai sollicité les services de Maître Uzan dans le cadre d'un retour en France après une expatriation de plusieurs années au UK puis en Thailande. Mon dossier a été traité de manière très professionnelle avec des réponses claires et structurées, je referai appel aux services de Maître Uzan et recommande ses services.
Trusts UK
By Marc Uzan, French tax lawyer in Paris
UK trusts: how are the settlor and the beneficiaries taxed in France?
Tax lawyer in Paris – discretionary trusts, interest in possession trusts and Franco-British estates
Key points
- All English trusts are covered: discretionary trusts, interest in possession or life interest trusts, will trusts… in principle fall within the French trust regime (article 792-0 bis of the CGI) as soon as a settlor or a beneficiary is domiciled in France, or an asset is located in France.
- Inheritance tax: on the settlor’s death, the trust assets are in principle taxed in France, in the cases provided for by law, according to the family relationship with each beneficiary. The 1963 France–UK treaty may, however, in certain cases, override this rule and allow an exemption in France for all or part of these assets, which only an analysis of the situation by a lawyer can determine.
- Distributions: treated as investment income in France (article 120, 9° of the CGI), in principle at the 31.4% flat rate in 2026; any return of capital must in principle be proven.
- 1963 treaty: it covers estates only. For transfers into a trust during the settlor’s lifetime, article 784 A of the CGI may, subject to conditions, allow the foreign tax to be credited in France.
Summary
The United Kingdom is the birthplace of the trust. Many Franco-British families hold assets through a trust created by will or during lifetime, often to protect a spouse (life interest) or to pass assets on to children flexibly (discretionary trust).
When the settlor or a beneficiary moves to France, the trust in principle comes within the scope of French taxation: annual filings by the trustee, inheritance tax on the settlor’s death, taxation of distributions.
How does France treat a UK trust?
France applies its own definition (article 792-0 bis of the CGI): a settlor (constituant) places assets under the control of an administrator (trustee) for the benefit of beneficiaries. The English distinction between legal ownership and beneficial ownership (equitable interest) is disregarded: the assets are in principle attributed to the settlor or, after the settlor’s death, to the beneficiaries, who are deemed to be settlors.
| Type of trust | Features | Point to watch in France |
|---|---|---|
| Discretionary trust | The trustee freely decides when and to whom to make distributions. | Distributions to be classified (income or capital); tax on the settlor’s death to be analysed by a lawyer, in particular in the light of the 1963 treaty. |
| Interest in possession / life interest trust | One beneficiary (often the spouse) receives the income for life; the capital then passes to the children. | Income in principle taxable in France for the resident beneficiary; question of taxation on the death of the income beneficiary. |
| Will trust | Created by will, for example to protect the surviving spouse. | In principle, the transfer follows French inheritance rules; the continuing trust remains subject to the filing obligations. |
| Bare trust | The beneficiary has an absolute right to the assets; the trustee is merely a nominee. | Characterization to be analyzed case by case; in practice, the assets are attributed to the beneficiary. |
| Pension trusts (pension schemes) | Retirement savings linked to employment or professional activity. | Possible exemption from the article 990 J levy, extended to individual plans by the Conseil d’État (CE, 7 May 2026, No. 511615). |
Which taxes apply in France?
1. Inheritance and gift tax
Trust assets are in principle taxable in France in the cases set out in article 750 ter of the CGI: settlor domiciled in France (all assets), asset located in France (for example a Paris apartment held by the trust), or beneficiary domiciled in France for at least 6 of the last 10 years.
- On the settlor’s death: tax in principle according to the family relationship between the settlor and each beneficiary (up to 45% in the direct line after an allowance of €100,000 per child). The France–UK treaty of 21 June 1963 may, however, in certain cases, override this rule and allow an exemption in France for all or part of the trust assets: only an analysis of the situation by a lawyer can determine whether this is the case.
- Distribution of capital during the settlor’s lifetime: in principle taxable as a gift according to the family relationship.
2. Income tax
Income distributions to a beneficiary domiciled in France are in principle treated as investment income (article 120, 9° of the CGI), taxed in 2026 at the 31.4% flat tax, unless the taxpayer opts for the progressive scale. Returned capital is not income, provided it can be substantiated (trust deed, trustee resolutions, accounts separating capital and income). The France–UK income tax treaty of 19 June 2008 may, depending on the case, limit double taxation of UK-source income, which needs to be checked by a lawyer, case by case.
3. IFI and the 1.5% levy
Real estate held by the trust is in principle included in the IFI (French property wealth tax) of the settlor or of the beneficiary deemed to be the settlor who is domiciled in France (article 970 of the CGI). Failing this, the annual 1.5% levy under article 990 J applies, as a general rule, to the trust’s real estate assets, payable by the trustee before June 15, with the settlor and the beneficiaries jointly and severally liable.
What filings and what penalties?
- 2181-TRUST1: creation, amendment or termination of the trust, within one month (article 1649 AB of the CGI);
- 2181-TRUST2: value of the assets as of January 1, each year before June 15;
- Filing upon transfer: introduced by the Law of 25 June 2026 on combating social and tax fraud (identity of the beneficiaries and information used to calculate the tax).
Penalties: depending on the case, a €20,000 fine per failure (article 1736, IV bis), an 80% surcharge on the tax evaded (article 1729-0 A), now applicable to all trust assets. Being compliant in the United Kingdom does not in principle exempt the trust from French filings. These penalties are explained in detail, with diagrams and worked examples, in the article undeclared trust: what penalties in France?.
How to avoid double taxation?
- On death: the France–UK treaty of 21 June 1963 allocates taxing rights (real estate taxable where it is located, other assets according to the deceased’s domicile) and provides for a tax credit; only an analysis of the situation by a lawyer can determine whether, and to what extent, it can reduce French tax.
- During lifetime: the treaty does not cover gifts or transfers into a trust. A transfer into a trust may, depending on the case, be taxable in France; article 784 A of the CGI allows, subject to conditions, the foreign tax paid on assets located outside France to be credited.
- Taxes paid in the United Kingdom during the life of the trust: crediting them against French tax is not guaranteed; only an analysis of the situation by a lawyer, case by case, can determine whether it is possible.
Are you a beneficiary of a British trust living in France? The guide for the beneficiary of a British trust living in France takes you step by step through your obligations: the trustee’s returns, distributions, the death of the settlor, with worked examples.
What I see in my cases
The British trusts I come across are set up and managed abroad, with some of the beneficiaries living in France. The French returns specific to trusts, forms 2181-TRUST1 and 2181-TRUST2, remain very little known, sometimes even to the tax authorities. Yet the tax authorities are paying increasing attention to trusts, in a tight budgetary context: clear returns and a file ready to explain the structure of the trust then take on their full importance.
Why use a tax lawyer?
- Analysis of the trust instruments (trust deed, letter of wishes) under French tax law.
- Reporting or regularisation of the trust in France, limiting penalties as far as possible.
- Characterisation of distributions and preparation of evidence of capital.
- Coordination with UK solicitors and trustees, particularly before a move to France or a departure from the United Kingdom.
FAQ
I am moving to France and am a beneficiary of an English discretionary trust: what are my obligations?
The trustee must in principle declare the trust in France (Forms 2181-TRUST1 and 2181-TRUST2), even if it is already compliant in the United Kingdom. The income distributions you receive will in principle be taxable in France. On the settlor’s death, the assets passing to you may be subject to French inheritance tax, depending on the settlor’s domicile and your own, and subject to the 1963 France–UK treaty, which may, in certain cases, allow an exemption in France. It is necessary to have your situation analysed by a lawyer, ideally before you move, in particular to find out whether or not the treaty allows this exemption.
Is a life interest trust for my spouse advantageous in France?
In France, the surviving spouse is in principle exempt from inheritance tax, but the trust remains subject to the filing obligations and the income received by the spouse is in principle taxable. It may be useful to plan in advance the transfer of capital to the children on the spouse’s death. An analysis with a lawyer before the will is drafted is recommended.
Does the France–UK tax treaty apply to trusts?
The treaty of 21 June 1963 applies to estates, including, in principle, where part of the estate is held in trust, but it covers neither gifts nor lifetime transfers into a trust. For these transactions, only the credit provided for by article 784 A of the CGI may, subject to conditions, limit double taxation. On death, it is necessary to have the situation analysed by a lawyer to find out whether or not the treaty leads to an exemption in France for all or part of the trust assets.
The trustee has not reported the trust in France: what are the consequences?
Before taking any step, it is advisable to consult a lawyer to analyse your situation: depending on the case, a regularisation may be an appropriate solution (filing the missing returns, calculating any 1.5% levy that may be due, checking the income reported by the beneficiaries). The fine is in principle €20,000 per missing return, and the settlor and, after the settlor’s death, the beneficiaries deemed settlors may be held jointly and severally liable for it. A voluntary disclosure, prepared with a lawyer, may help limit the risk.
Glossary
Settlor (constituant): the person who creates the trust.
Trustee (administrateur): the person or company that manages the trust assets.
Discretionary trust: a trust in which the trustee freely decides on distributions.
Interest in possession: a beneficiary’s right to receive the trust income.
Further reading
- Articles 750 ter, 784 A, 792-0 bis, 970, 990 J, 1649 AB, 1729-0 A and 1736 of the CGI.
- BOI-DJC-TRUST and BOI-ENR-DMTG-30: French tax authorities’ guidelines.
- France–United Kingdom tax treaty of 21 June 1963 (estates) and treaty of 19 June 2008 (income taxes).
- See also: France – United Kingdom inheritance, US trusts, USA or UK / France inheritance.
About the author
Maître Marc Uzan has been a tax lawyer at the Paris Bar since 2008 and practices tax law exclusively. A graduate of the Master's program in taxation at Université Paris XII and of ESSEC, and holder of the DSCG, he assists individuals and families with their international tax matters: cross-border inheritance and gifts, foreign accounts, impatriation, tax audits.
Page updated on October 29, 2026. The information above is general in nature and does not replace an analysis of your personal situation.
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