A recent French law (Loi de Finances Rectificative ) which took effect on 31 July 2011, requires pension fund trustees to report UK personal pension vehicles that have French tax-resident beneficiaries to the French fiscal authorities.
The new law obliges trustees of foreign trusts whose beneficiaries are French tax-resident, and/or any French settlors, to declare, before 17 June 2013, the market value of the assets, rights or capitalized income on all trusts which have been in existence since January 1 of this year. Investors in possession of a QROPS in France need to give this due consideration.
The wording of the law has resulted in some confusion on the part of financial advisors and pension fund administrators, as it can be interpreted as granting an exemption from the reporting requirements to employer-sponsored pension schemes. The text however makes no mention of private pension plans. Some experts have suggested that it appears as if the French tax authorities had not considered pensions to be anything other than something that are provided by employers. It is also possible that they may not have considered the fact that the new regulation would cover pension trusts.
At this stage of proceedings, it appears that the new law would apply to personal pensions, whether they are based in the UK, or Qualified Recognized Overseas Pension Schemes (QROPS); the declaration of SIPPS and QNUPS would also fall under the new law requirements.
There has been some discussion by experts as to the nature of the confusion; one thesis being put forward is that trusts are in effect an Anglo-Saxon concept based on common law, and thus alien to the French legal structure, which is based on civil law. Despite attempts by various tax advisors to have the situation clarified by French tax authorities, no definitive answer has yet been forthcoming.
The new legislation appears to be part of a wider campaign to clamp down on undeclared wealth in France. In another move to generate much-needed cash, the French government is also looking to increase property taxes on holiday homes. UK expats living in France …stay tuned for more on this!