During the two-term Administration of President Obama, we have seen a consistent and focused effort for transparency in regards to Americans working, living and investing overseas. With the robust transparency reporting of foreign bank accounts and investment accounts overseas as well as interests in foreign companies and foreign property investments, now the French are gearing up to publically list the names of individuals who are involved in any trusts, whether foreign or domestic, that are economically invested with France, in the trust positions of:
- Trust Assets;
- Trust’s Investments;
There will be an immediate creation of a public French registry of trusts, expected to go on-line within the next 30 days. The title of this on-line registry will be called “Public Register of Trusts”. This is an unprecedented initiative by France. The official intention is to avail this information to the public of personal information held by tax authorities that may have been submitted by accountants, attorneys and wealth advisors under a tax information compliance procedure.
It is expected that the public dissemination of past confidential information between the Trust advisors and the French Government, now to be immediately made public, is going to become even more detailed for publication to the public, which would also allow foreign governments the same public access when looking at their own citizens’ compliance with trusts, income taxation, gift taxation and structures of planning for income reporting, gift tax liabilities, estate taxation and penalties for non-domestic reporting such as the following which are just the tip of the iceberg for U.S. Reporting forms to the U.S. Government:
- Gift Tax Reporting on Federal Form 709
- Death Tax Reporting on Federal From 706
- Controlled Foreign Corporations Reporting on Federal Form 1120CFC
- Foreign Trust Reporting on Federal Form 3520 & 3520A
- Foreign Bank Account Reporting on Federal Form 114
- Non-Resident Alien Income Tax Return on Federal Form 1040NR
- Foreign Corporations with U.S. Shareholders Reporting on Federal Form 5471
Remember from my past Article on U.S. Citizens, U.S. Green-Card Holders (permanent residents) and U.S. Residents…not filing your tax returns and disclosures of foreign bank accounts should consult with us for determining the correct options to pursue; information from the new French Public Register can be used by the I.R.S. in its examinations of your tax years as well as a reason to disallow your filing under the current amnesty procedures which would move you directly to the Criminal Investigation Division of the U.S. Treasury or the DOJ, Department of Justice, for prosecution. As I mention in all of my articles, please call us if you have any concerns about any tax exposure and how best to proceed. Our conversation are legally priviledged and confidential as opposed to C.P.A. and Enrolled Agents.
Below is the continuation of my article for more depth on the new public disclosure policy:
- TWO REPORTS DUE TO THE FRENCH AUTHORITIES:
Reporting requirements under French law for trusts with connections to France’s above legislation imposes reporting requirements on trustees and changed the treatment of trusts for purposes of income, gift, succession and wealth tax, and established a new special trust tax (prélèvement sui generis). The rules relating to tax treatment of trusts are set out in the French Code général des impôts (“CGI”) and in official interpretation published by French tax authorities.
Two kinds of reports required:
- Annual report, which for 2016 in most cases was due on 15 June 2016; and
- Event-based report, which is due within one month of creation, modification or termination of a trust.
The above noted Annual Reports was due from trustees for the year 2016 and is concerned disclosure with the following:
- Distributions to beneficiaries;
- Wealth tax due from the settlor or beneficiaries and the special trust tax;
- Identification of the settlor and beneficiaries deemed settlors;
- Identification of other beneficiaries;
- Identification of the trustee; and
- Identification of the trust;
- Content of trust terms (including those in the trust deed and any additional terms governing its operation);
- Indication of whether or not it is revocable;
- Indication of whether or not the trust is discretionary;
- Indication of the rules governing the allocation of assets and rights placed in trust and products including income;
- Indication of whether the settlor or any beneficiary was a French tax resident as of January 1st of the relevant year; and
- Detailed inventory and net asset value of all assets in the trust.
Of course the above is not a detailed analysis of the two new reporting requirements as to thresholds of reporting, liabilities for not reporting between the settlor and beneficiary and many other items of import to the above noted individuals. However, this disclosure is public which means that;
- Your family members can see this report,
- Your ex-spouse can see this report,
- Ex-bankruptcy trustee can see this report where you have disclosed all of your assets to the bankruptcy reporting subject to perjury,
- Filing of tax returns where you sign subject to penalty of perjury that the return is true and correct,
- Applying for Tax Amnesty wherein the application will be terminated if you are not open and truthful in the information you disclose to the U.S. Treasury,
- Dissolution of Marriage and Divorce Decree wherein you attest to the full disclosure of all financial information.
The French government and the French people are very proud of their privacy, just look at what they caused Facebook to change in relation to what France perceived as invasion of privacy, see http://www.reuters.com/article/us-facebook-france-privacy-idUSKCN0VH1U1. If this public disclosure is the beginning of public internet disclosure, then most, if not all, European countries will also begin this type of disclosure not only on a government-to-government level, but to the general public. It is truly just a matter of time before transparency will catch up with Americans, Permanent Residents and U.S. Residents at many levels as I discussed above. If you have any concerns about your particular situation, please contact us to set up a private call.
Michael B. Nelson, Esq.
July 12, 2016