Frustratingly for those advisers and trustees with clients living in France who have UK personal pensions, the French authorities have consistently failed to clarify the matter, advisers and trustees have told International Adviser.
Efforts to obtain answers by this publication were also unsuccessful.
As of yesterday evening, questions emailed and followed-up over the phone to the French Embassy in London’s press office went unanswered.
The Loi de Finances Rectificative pour 2011, which took effect on 31 July 2011, introduced a range of measures that oblige trustees to report on the trust’s French assets, their French beneficiaries, and/or any French settlors.
It has been described as a French “FATCA for trusts”, because it aims to collect information for the purposes of ensuring the payment of taxes.
As reported, under the new law, all trustees of foreign trusts whose beneficiaries (or the “beneficiary deemed settlor”, in cases in which the original settlor has died) have until 17 June to declare the market value of the assets, rights or capitalised income of all trusts that were in existence as of 1 Jan 2013.
The deadline in situations in which the settlor or the beneficiary is a non-French tax resident, but the trust includes assets situated in France, is 2 September.
Advisers and tax experts note that one of the problems with the new law is that trusts are an Anglo-Saxon, common law concept, and thus unfamiliar to the French way of legal thinking, which is based on civil law.
‘No exemption’
The confusion for pension trustees and advisers arises from the text of the law, which can be read as granting an exemption from the reporting requirements to employer-sponsored pension schemes – but, say pension experts and advisers – makes no mention of personal pension plans.
Among those who have been most persistent in their quest for clarification from the French authorities has been the Spectrum IFA Group’s Daphne Foulkes.
Foulkes is an expert on pensions and trusts, in addition to being a seven-year resident of France and fluent in its language, but she admits to being frustrated by the lack of answers coming from the Paris tax authority’s offices in rue de Bercy.
She said Spectrum has written to three different people at the French tax ministry over the last few months, but as of 23 April, had “heard nothing”.
Nevertheless, she added, “at this stage we are not advising our clients to report on their personal pensions, because it is our firm conviction that these do not fall under this trust legislation.”
Roger Berry, managing director of Guernsey’s Concept Group, a QROPS and pensions provider, said it was his reading of the situation that the French authorities simply may not have considered the fact that their new regulation would cover pension trusts.
“Nonetheless, the law as it currently stands covers personal pension trust schemes such as SIPPs, QROPS and QNUPS among others,” he added.
"There really is no defence in hoping that the French authorities will provide a further exemption to personal pension trusts.
“[As a result], any prudent pension trustee, administrator, or adviser must surely report as required under the law.
“Unpopular though it might be, like FATCA and other recent regulations, the Loi de Finances Rectificative pour 2011 is not going away, and it has to be addressed.
“The [only] options appear to be to pay for case-specific professional tax advice, or, to report.”
Implications for 401Ks, IRAs
Advisers with clients living in France who have British personal pensions are not the only ones asking questions, meanwhile. Some experts believe that if no clarification is forthcoming from le Fisc, the new trust law could also end up applying to American personal pensions, such as 401Ks and IRAs.
David Treitel, managing director of London-based American Tax Returns, said that if clarification from the authorities is not ultimately forthcoming, this could well end up being the case, although he has no clients currently living in France who might be affected by the new law, and so has not had cause to investigate the matter in depth.
But if the law ultimately were deemed to apply to American personal pension plans, he added, some trustees of 401Ks and IRAs might well decide that the reporting requirements “are too onerous, and discontinue looking after Americans resident in France” altogether.
After the passage of the Foreign Account Tax Compliance Act (FATCA) by the US in 2010, many foreign financial institutions decided to stop looking after Americans, to avoid the need to report to the US authorities on these clients’ accounts.
