You bought the stone house near Sarlat in 2006, and your English solicitor did what English solicitors always do: he placed it in a discretionary trust for the family, with you and your late husband as settlors, a Jersey company as trustee, and the children as beneficiaries. In England that arrangement is routine. In France it is a red flag. France has no domestic law of trusts, yet since 2011 it taxes them relentlessly, and the French tax office now pursues British families who never filed a single French trust return. The typical first contact is a letter proposing rectification, followed by three bills at once: a fixed fine for each missing return, an annual levy on the trust capital, and the threat of a 3 per cent yearly tax on the value of the house.<\/p>\n
Brexit made that position worse, not better. A Jersey or Guernsey trustee is now unambiguously outside the European Union, and a UK-resident trustee sits in a third country too, so every exemption that depends on European paperwork must be re-examined. The good news is that the system is mechanical: two returns, two levies, one succession regime, and a well-marked court route when the administration overreaches, as it did in a Paris judgment of March 2026 that cut a Jersey trustee’s bill by two thirds. This guide works through each layer in order: what your trustee must declare every year, what silence costs, how France taxes the house when the settlor dies, and how to regularise the position and challenge an excessive assessment.<\/p>\n
French tax law defines the trust in deliberately wide terms, so that no English, Jersey or Isle of Man structure escapes by clever drafting. Article 792-0 bis of the General Tax Code (Code g\u00e9n\u00e9ral des imp\u00f4ts, the French tax code) provides: “on entend par trust l’ensemble des relations juridiques cr\u00e9\u00e9es dans le droit d’un Etat autre que la France par une personne qui a la qualit\u00e9 de constituant, par acte entre vifs ou \u00e0 cause de mort, en vue d’y placer des biens ou droits, sous le contr\u00f4le d’un administrateur, dans l’int\u00e9r\u00eat d’un ou de plusieurs b\u00e9n\u00e9ficiaires ou pour la r\u00e9alisation d’un objectif d\u00e9termin\u00e9.”<\/a> In plain English, any arrangement created under foreign law by which a settlor (constituant) places property under the control of a trustee (administrateur) for beneficiaries (b\u00e9n\u00e9ficiaires) counts as a trust. A revocable American living trust, an English discretionary family trust and a Jersey purpose trust all fall inside that definition, whether or not the word trust appears in the deed.<\/p>\n The reporting duty sits on the trustee, not on the family, and it is triggered by surprisingly little contact with France. Under Article 1649 AB of the tax code, as the tax administration’s official guidance explains: the trustee files an event return whenever a trust is created, amended or wound up, plus an annual return giving the market value at 1 January of the trust assets and their capitalised income (Filing declarations relating to trusts<\/a>). The same guidance lists four alternative triggers, and meeting any single one suffices: French tax residence of the settlor or deemed settlor at 1 January, French tax residence of at least one beneficiary, French location of at least one trust asset, or French tax residence of the trustee himself (official triggers described here<\/a>). For British readers the third trigger is the decisive one: a Dordogne farmhouse held through a Jersey trust must be declared every year even if the whole family still lives in Surrey, because the asset itself is in France.<\/p>\n Both returns go to a single office, the Recette des Non-R\u00e9sidents (the non-residents’ tax receipt office) at Noisy-le-Grand, which handles foreign trusts for the whole country. The event return, form 2181-TRUST1, is a return to be filed within the month following the creation, amendment or termination of the trust (official form page<\/a>). Every appointment of a new trustee, every addition of a beneficiary and every distribution of capital in principle counts as a modification, so trustees who treat the deed as a drawer document and never report changes accumulate one breach per event. The annual return, form 2181-TRUST2, photographs the trust capital at 1 January each year with a valuation of every asset, and it is the document on which the yearly levy described below is computed. Trustees should diary both dates separately, because filing one never excuses missing the other.<\/p>\n Do not neglect the British side of the paperwork either. A trust that still has British connections may need registration on HM Revenue and Customs’ Trust Registration Service. HMRC guidance requires registration of a UK-resident trust that is liable to capital gains tax, income tax, inheritance tax or the land-transaction taxes on British assets or income, and it also catches some non-UK resident express trusts with British links such as UK land or a UK-resident trustee in a business relationship (official HMRC guidance<\/a>). A Jersey trust holding only a French house with no British assets or income will often fall outside registration, but a trust that kept a London flat, receives UK rental income or has a UK-resident trustee needs both registrations running in parallel. Keep proof of each filing, because the French administration regularly asks for it during audits, and a trustee who can produce ten years of 2181-TRUST2 receipts negotiates from strength.<\/p>\n The first bill for non-compliance is a fixed fine, and it bites per breach. Article 1736, IV bis of the tax code states: “Les infractions \u00e0 l’article 1649 AB sont passibles d’une amende de 20 000 \u20ac.”<\/a> Every missing event return and every missing annual return is a separate breach, so a trust that never filed anything for five years faces one fine for the creation return plus five fines for the five annual returns, before a euro of tax is even computed. Trustees sometimes assume the fine stays theoretical for honest families; it does not, and the Paris courts apply it to Jersey trustees as readily as to anyone else. The only safe answer is to file, even late, because spontaneous regularisation always reads better than a return extracted under audit.<\/p>\n The second bill is the famous 3 per cent tax, and it is the one that concentrates minds. Article 990 D provides: “Les entit\u00e9s juridiques : personnes morales, organismes, fiducies ou institutions comparables qui, directement ou par entit\u00e9 interpos\u00e9e, poss\u00e8dent un ou plusieurs immeubles situ\u00e9s en France ou sont titulaires de droits r\u00e9els portant sur ces biens sont redevables d’une taxe annuelle \u00e9gale \u00e0 3 % de la valeur v\u00e9nale de ces immeubles ou droits.”<\/a> Any legal entity, including a foreign trust (fiducie) or comparable institution, that owns French property directly or through a chain of companies owes 3 per cent of the open market value (valeur v\u00e9nale) every year. On a house worth 600,000 euros that is 18,000 euros a year, every year, for as long as the structure stays opaque. The Cour de cassation confirmed the mechanics in a 2024 ruling concerning a Liechtenstein foundation holding French property through a chain: “Il r\u00e9sulte de la combinaison de ces textes que toute entit\u00e9 est redevable de la taxe de 3 % sur la valeur v\u00e9nale des immeubles qu’elle poss\u00e8de en France, sauf \u00e0 justifier relever d’un des cas \u00e9num\u00e9r\u00e9s par le dernier.”<\/a> The appeal was dismissed, “REJETTE le pourvoi”<\/a>, and the foundation paid. The reasoning applies word for word to a Jersey or English trust, because the statute expressly names trusts among the entities caught.<\/p>\n There is an escape hatch, but it must be used every single year. Article 990 E exempts entities that disclose, including those “qui d\u00e9clarent chaque ann\u00e9e, au plus tard le 15 mai, au lieu fix\u00e9 par l’arr\u00eat\u00e9 pr\u00e9vu \u00e0 l’article 990 F du pr\u00e9sent code, la situation, la consistance et la valeur des immeubles poss\u00e9d\u00e9s au 1er janvier, l’identit\u00e9 et l’adresse de l’ensemble des actionnaires, associ\u00e9s ou autres membres qui d\u00e9tiennent, \u00e0 quelque titre que ce soit, plus de 1 % des actions, parts ou autres droits, ainsi que le nombre des actions, parts ou autres droits d\u00e9tenus par chacun d’eux”<\/a>. Declare each year by 15 May the position, composition and value of the French property held at 1 January, with the identity of everyone holding more than 1 per cent, and the 3 per cent tax does not apply. Article 990 F adds the machinery: “Les redevables ainsi que les entit\u00e9s juridiques mentionn\u00e9es aux d ou e du 3\u00b0 de l’article 990 E doivent d\u00e9clarer au plus tard le 15 mai de chaque ann\u00e9e la situation, la consistance et la valeur des immeubles et droits immobiliers en cause.”<\/a> Miss one 15 May deadline and the exemption for that year is lost, which is why trustees must treat mid-May as immovable. Note the seat condition in the same article: the disclosing entity must have its seat in France, in the European Union, or in a state that has signed an administrative assistance convention with France. Since Brexit, a UK or Crown Dependency trustee should verify that condition against the current treaty list rather than assume it, and file the disclosure in any event, because an unnecessary return costs nothing while a missing one costs 3 per cent.<\/p>\n The third bill is the yearly trust levy itself, the pr\u00e9l\u00e8vement sui generis of Article 990 J, and it applies even to a trust that files everything correctly. The statute provides: “Les personnes physiques constituants ou b\u00e9n\u00e9ficiaires d’un trust d\u00e9fini \u00e0 l’article 792-0 bis sont soumises \u00e0 un pr\u00e9l\u00e8vement fix\u00e9 au tarif le plus \u00e9lev\u00e9 mentionn\u00e9 au 1 de l’article 977.”<\/a> The levy tracks the top rate of the wealth-tax scale in Article 977, whose table currently peaks at 1.50 per cent for net taxable wealth above 10 million euros: “Sup\u00e9rieure \u00e0 10 000 000 \u20ac 1,50”<\/a>. It is declared and paid by the trustee by 15 June each year: “La consistance et la valeur des actifs mentionn\u00e9s \u00e0 l’article 965 plac\u00e9s dans le trust sont d\u00e9clar\u00e9es et le pr\u00e9l\u00e8vement est acquitt\u00e9 et vers\u00e9 au comptable public comp\u00e9tent par l’administrateur du trust au plus tard le 15 juin de chaque ann\u00e9e.”<\/a> If the trustee defaults, the settlor and the beneficiaries are jointly liable, so the family cannot hide behind an uncooperative Jersey company. There are only two ways out of the levy: include the trust assets in someone’s French wealth-tax return (imp\u00f4t sur la fortune immobili\u00e8re) with proper disclosure, or qualify for the narrow exemptions for charitable and pension trusts, and both routes require the returns to be perfect.<\/p>\n A March 2026 Paris judgment shows how these bills combine in real life, and how a determined trustee can cut them down. A Jersey trust company administering a family trust had filed its annual 2181 Trust 2 returns for 2013 to 2017, but the administration treated one beneficiary as a deemed settlor, added the whole trust capital to his wealth, and issued a collection notice (avis de mise en recouvrement) for 954,511 euros, comprising 827,702 euros of duty and 126,809 euros of late interest, after applying the levy at 1.5 per cent. The trustee challenged the rejection of its claim and asked for full discharge. The tribunal judiciaire de Paris, 9th chamber, 25 March 2026, RG 23\/02366, refused a full write-off but granted partial relief, ordering the whole assessment to be recalculated on one third of the trust capital only, matching the beneficiary’s real economic share rather than the whole fund. The lesson is practical and encouraging: the administration’s arithmetic is reviewable line by line, and a trustee who filed the returns, kept the valuations and sued on time can save hundreds of thousands of euros even when the principle of the levy survives.<\/p>\n Death does not make the trust invisible; it triggers French transfer duties (droits de mutation \u00e0 titre gratuit) on the assets inside it. The territorial rule is Article 750 ter, which expressly names trusts in both of its branches: “Sont soumis aux droits de mutation \u00e0 titre gratuit : 1\u00b0 Les biens meubles et immeubles situ\u00e9s en France ou hors de France, et notamment les fonds publics, parts d’int\u00e9r\u00eats, biens ou droits composant un trust d\u00e9fini \u00e0 l’article 792-0 bis et produits qui y sont capitalis\u00e9s, cr\u00e9ances et g\u00e9n\u00e9ralement toutes les valeurs mobili\u00e8res fran\u00e7aises ou \u00e9trang\u00e8res de quelque nature qu’elles soient, lorsque le donateur ou le d\u00e9funt a son domicile fiscal en France au sens de l’article 4 B”<\/a>, and second, French-situs assets, including trust assets, “lorsque le donateur ou le d\u00e9funt n’a pas son domicile fiscal en France au sens de l’article pr\u00e9cit\u00e9.”<\/a> Two consequences follow for British families. If the deceased settlor was French tax resident, the whole trust capital worldwide can be caught; if he lived in Britain, the French house is still caught because it sits in France. Residence spreads the net, situs guarantees the catch, and the Franco-British succession convention of 1963 only grants a credit against double taxation, it never exempts the French house from French duty. Readers facing the wider succession picture should also read our guides to inheriting a French house as a British heir and to English wills: British Heir of a French House After Brexit<\/a> and My English Will and My French House After Brexit<\/a>.<\/p>\n The rate then depends on whether the trust deed identifies who gets what. Article 792-0 bis lays down the order of battle: “La transmission par donation ou succession de biens ou droits plac\u00e9s dans un trust ainsi que des produits qui y sont capitalis\u00e9s est, pour la valeur v\u00e9nale nette des biens, droits ou produits concern\u00e9s \u00e0 la date de la transmission, soumise aux droits de mutation \u00e0 titre gratuit en fonction du lien de parent\u00e9 existant entre le constituant et le b\u00e9n\u00e9ficiaire.”<\/a> Where each beneficiary’s share is fixed at death, duty follows the family link between the settlor and that beneficiary, at the normal scale. Children each enjoy the 100,000 euro allowance of Article 779: “il est effectu\u00e9 un abattement de 100 000 \u20ac sur la part de chacun des ascendants et sur la part de chacun des enfants vivants ou repr\u00e9sent\u00e9s par suite de pr\u00e9d\u00e9c\u00e8s ou de renonciation”<\/a>, before the progressive table of Article 777 applies, which runs from 5 per cent to 45 per cent in the direct line: “Au-del\u00e0 de 1 805 677 \u20ac 45”<\/a>. A house left through the trust to the settlor’s two children is therefore taxed much like a house left by will, provided the deed and the valuations are in order.<\/p>\n Discretionary trusts, where nobody owns anything fixed at death, pay the price of their flexibility. The statute continues: where a defined share goes globally to the settlor’s descendants as a class, “cette part est soumise \u00e0 des droits de mutation \u00e0 titre gratuit par d\u00e9c\u00e8s au taux applicable \u00e0 la derni\u00e8re tranche du tableau I de l’article 777”<\/a>, the top direct-line rate of 45 per cent with no allowance; and the remaining capital is taxed “au taux applicable \u00e0 la derni\u00e8re tranche du tableau III du m\u00eame article 777”<\/a>, the stranger rate, whose table peaks at 60 per cent between non-relatives: “Entre parents au-del\u00e0 du 4e degr\u00e9 et entre personnes non-parentes 60”<\/a>. In the worst case a 600,000 euro house passing through an opaque discretionary trust can therefore attract 360,000 euros of duty, against a fraction of that if the same house passes to identified children. Families who set up discretionary trusts for English inheritance-tax reasons should have the deed reviewed for French purposes, because the English flexibility that saves tax in London creates the top rate in Paris.<\/p>\n Timing matters as much as rates, and the Cour de cassation has fixed the starting point. In a case about a revocable trust created in 1964 whose assets were distributed after the deaths of the settlor and then of her daughter, the commercial chamber held, for the pre-2011 law, that “le fait g\u00e9n\u00e9rateur des droits de mutation \u00e0 titre gratuit est constitu\u00e9 par le transfert de propri\u00e9t\u00e9, qui, s’agissant de biens plac\u00e9s dans un trust, s’op\u00e8re par l’effet de la distribution de l’actif du trust au b\u00e9n\u00e9ficiaire final, au jour de sa cl\u00f4ture, laquelle peut \u00eatre post\u00e9rieure au d\u00e9c\u00e8s du constituant”<\/a>. The chargeable event is the transfer of ownership through distribution when the trust closes, which may come well after the settlor’s death. The court quashed the appeal decision and sent the case back, and the ruling, Cass. com., 18 November 2020, no. 18-14.242, remains the reference on how old trusts unwind. For deaths on or after 19 July 2011 the 2011 statute and Article 792-0 bis apply directly, with the trustee paying the top-rate duties within the succession time limits. Those limits are Article 641: “De six mois, \u00e0 compter du jour du d\u00e9c\u00e8s, lorsque celui dont on recueille la succession est d\u00e9c\u00e9d\u00e9 en France m\u00e9tropolitaine; D’une ann\u00e9e, dans tous les autres cas.”<\/a> A settlor who dies in London gives the family twelve months to file, a settlor who dies in France gives six, and the trustee, not the grieving children, must move the file forward.<\/p>\n One final warning belongs here even though it needs its own advice: French forced heirship (r\u00e9serve h\u00e9r\u00e9ditaire) can reach into a trust on death. Children who receive less than their protected share may bring a reduction claim against lifetime gifts routed through the structure, and a trustee who distributes everything to one child the week after the funeral may have to answer for it. The trust does not defeat the r\u00e9serve; at best a well-drafted deed anticipates it. Raise the point with your lawyer before anyone dies, not after the distribution, because unwinding a completed distribution costs a multiple of planning it.<\/p>\n Regularisation starts with paper, not with money. Instruct the trustee to file every missing 2181-TRUST1 event return and every missing 2181-TRUST2 annual return with the Recette des Non-R\u00e9sidents, with valuations supported by an estate agent’s appraisal or a notaire’s price opinion for each 1 January. File the 15 May disclosure for the 3 per cent tax at the same time, and pay the 990 J levy for each open year with the return. Late filing still triggers the 20,000 euro fine per breach and late interest, but a complete voluntary file transforms the negotiation: the administration can check arithmetic instead of reconstructing concealment, penalty remission (remise gracieuse) becomes arguable, and the criminal risk of persistent organised non-disclosure falls away. Send everything by tracked post and keep the receipts, because limitation and proof of filing decide half of all trust disputes.<\/p>\n When the assessment (avis de mise en recouvrement) arrives and the figures look wrong, pay first and fight second if enforcement threatens, marking the payment as made under protest (sous toutes r\u00e9serves) so that a later discharge produces repayment with interest. Then file the formal claim, the r\u00e9clamation, without delay. Article R*190-1 of the tax procedure book requires the prior claim: “Le contribuable qui d\u00e9sire contester tout ou partie d’un imp\u00f4t qui le concerne doit d’abord adresser une r\u00e9clamation au service territorial, selon le cas, de la direction g\u00e9n\u00e9rale des finances publiques ou de la direction g\u00e9n\u00e9rale des douanes et droits indirects dont d\u00e9pend le lieu de l’imposition.”<\/a> Address it to the office that issued the notice, identify each disputed item with its legal ground, attach the trust deed, the filed returns, the valuations and the proof of payment, and ask expressly for full or partial discharge (d\u00e9gr\u00e8vement) plus repayment. The Jersey trustee in the March 2026 case followed exactly that path, claiming in December 2022 against a November 2019 notice, and even though the claim was rejected in January 2023, it opened the door to the court, where the base fell to one third. A rejected claim is not a defeat; it is the ticket to the judge.<\/p>\n Before the court, three weapons do the heavy lifting. First, the administration’s own published doctrine binds it. Article L80 A of the procedure book provides: “Lorsque le redevable a appliqu\u00e9 un texte fiscal selon l’interpr\u00e9tation que l’administration avait fait conna\u00eetre par ses instructions ou circulaires publi\u00e9es et qu’elle n’avait pas rapport\u00e9e \u00e0 la date des op\u00e9rations en cause, elle ne peut poursuivre aucun rehaussement en soutenant une interpr\u00e9tation diff\u00e9rente.”<\/a> If the tax office’s published guidelines (BOFiP) described the 990 J base or the 2181 valuation method in terms your trustee followed, the office cannot substitute a harsher reading afterwards, so quote the guideline paragraph by paragraph. Second, attack the arithmetic the way the Paris tribunal did: real economic shares instead of the whole fund, correct 1 January values instead of a later sale price, deemed-settlor status only where the statute supports it, and the right kinship rate where shares are fixed. Third, watch the clock on every appeal. Against an administrative refusal, the general rule of Article R421-1 of the administrative justice code gives two months: “La juridiction ne peut \u00eatre saisie que par voie de recours form\u00e9 contre une d\u00e9cision, et ce, dans les deux mois \u00e0 partir de la notification ou de la publication de la d\u00e9cision attaqu\u00e9e.”<\/a> Tax assessments go to the tribunal judiciaire after the rejected claim, as the Jersey trustee’s summons of February 2023 shows, but the discipline is identical: calendar every deadline on receipt, because a perfect file served one day late is worthless.<\/p>\n A UK trust holding a French house is not illegal, and it is not even expensive if it is run properly: two returns a year, a mid-May disclosure that neutralises the 3 per cent tax, a mid-June levy that usually costs far less than the tax it replaces, and succession duties at normal kinship rates where the deed identifies the beneficiaries. The disasters all come from the same source, years of silence that stack a 20,000 euro fine per missing return on top of a 3 per cent yearly tax and top-rate death duties. The March 2026 Paris judgment proves the other half of the picture: an administration that overreaches on the base, the rate or the deemed-settlor label loses in court, line by line. File the returns, value the house honestly, pay under protest where you must, claim in writing, and sue on time. Handled that way, the English trust and the French house can coexist peacefully for another generation.<\/p>\n Trustee asking for papers, a 990 J notice on the doormat, or a settlor’s death with a French house inside the trust? Our office offers a telephone consultation within 48 hours with a lawyer of the firm to review your deed, your returns and your assessment. Call +33 6 46 60 58 22<\/a> (Ma\u00eetre Reda Kohen) or write via our contact page<\/a> with a copy of the trust deed, the last valuations and any notice received. We advise British families across Paris and \u00cele-de-France, and remotely throughout France, in English.<\/p>\n","protected":false},"excerpt":{"rendered":" British family trust holding a French house? French disclosure returns, 20,000 euro fines, 3 per cent tax, yearly levy and death duties explained, with the court route to challenge the bill.<\/p>\n","protected":false},"author":251031309,"featured_media":4178,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"federated","footnotes":""},"categories":[80312,80314],"tags":[],"class_list":["post-2125254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-british-desk","category-decryptage"],"yoast_head":"\nB. What does silence cost: the 20,000 euro fine, the 3 per cent tax and the yearly levy?<\/h3>\n
II. When the settlor dies: French death duties on the trust house and how to fight the assessment<\/h2>\n
A. How France taxes the French house held in trust at death: kinship rates or top rates?<\/h3>\n
B. How to regularise the trust and challenge the bill: back filings, payment under protest and the court route<\/h3>\n
Conclusion<\/h2>\n
Need a quick opinion on your case<\/h2>\n