Tax memo: Asset management industry tax issues

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France's new filing requirements and Canada's prohibited investment rules

Memo No. 2012-33

This Tax memo discusses two recent tax items of interest to those in the asset management industry. First, new French filing requirements that could affect trustees of Canadian trust funds are outlined, followed by recent changes to the prohibited investment rules.

The French parliament adopted the Amended Finance Bill for 2011 on July 31, 2011, which provides new rules regarding the taxability of trust assets for wealth tax purposes and related reporting requirements. The purpose of the new French Tax Reform is to clarify and complete existing tax provisions as they apply to trusts. The legislation was enacted to plug holes in the taxation of trusts that the administration discovered during its voluntary disclosure program in 2010. The new provisions apply as of January 1, 2012.

Article 1649AB of the French General Tax Code introduced an obligation for a trustee to report to the French tax administration certain information relating to the trust. The administration released its Instruction on July 18, 2012. This indicated that it will be formalizing the contents of the reporting obligations in a decree in the “near future,” but this decree has not yet been released.

Based on the information that has been released, there are new filing requirement(s) if you are a trustee of certain trusts and if any of the following fact-specific criteria applies:

  • the grantor/settlor is a French resident;
  • at least one of the beneficiaries is a French resident; or
  • the trust has assets located in France.

Exceptions are expected, which could apply to Canadian investment trusts. However, the final form will not be released until the decree is released.