Trusts, Foundations and the French 3 % Tax: Who Must Be Disclosed

If you administer a trust or a foundation that owns property in France, one question decides everything: whose name goes on the annual French return?

Get it right and the structure pays nothing. Get it wrong, or leave it blank, and the entity owes 3 % of the gross market value of the property, every year, with the French authorities able to reach back six years.

The principle that resolves most cases

The 3 % tax exists so that the French authorities can identify who would be liable to French wealth tax on the property.

So the question is always the same: in whose estate would this asset be taxed?

That is the person to disclose. The Cour de cassation said so expressly in July 2026.

Are trusts and foundations within the scope at all?

Yes. The tax was designed in 1983 precisely for structures of this kind, and the Conseil d'État has confirmed that trusts fall within its scope as institutions comparable to the French fiducie, despite having no separate legal personality (CE, 9 May 2019, no. 426431).

Article 990 D of the French Tax Code applies to legal entities, defined as companies, organisations, fiducies and comparable institutions. French official guidance confirms that entities without separate legal personality fall within the scope where they hold French real estate directly or indirectly (BOI-PAT-TPC-10-10). The Conseil d'État has upheld that reading: a trust is a comparable institution for these purposes.

Who is treated as liable depends on the structure:

• For a fiducie, the corporate settlor is liable in respect of the rights it holds over the assets placed in the fiducie, which is treated as transparent. The fiduciaire may discharge the filing obligations if authorised.

• For a trust, the trust itself is liable in respect of the French property it holds. The trustee files as its legal representative, or another authorised member does. Where nothing is filed, the French authorities may treat the trustee as the person who must discharge the filing and payment obligations.

• For an investment fund, the fund is liable, and the members may appoint one of them, in practice the management company, to file. Corporate unit holders are separately liable in respect of their own rights.

• A foundation with separate legal personality is simply a legal person, under the ordinary regime.

The default rule for trusts

French guidance sets out a starting point that every trustee should know.

Where a trust claims the filing-based exemptions, it must identify on the return the members of the trust who are the real holders of rights over the French property, assessed case by case for each trust. As a general rule, and subject to the terms of the trust deed, that means the settlor where the trust is revocable, and the beneficiaries where it is irrevocable. The other members are listed for information, and the allocation of rights must also appear on the return (BOI-PAT-TPC-10-10).

Three qualifications matter in practice.

The rule is a default, not a command. The guidance says « as a general rule and subject to the trust deed ». An irrevocable trust whose terms leave real economic control with the settlor is not treated like a textbook irrevocable trust.

It is administrative guidance, not statute. It directs the analysis; it does not bind the court.

And it can be challenged. The French authorities may require production of the trust deed and may dispute the status of the persons disclosed.

The July 2026 judgment, and why it helps

A recent decision gives a principled answer for the cases the guidance does not resolve, and its reasoning reaches well beyond the fiducie it concerned.

A company had disclosed a single shareholder holding its entire capital, adding for some years a handwritten note naming a third party as « fiduciary holder », and had produced the fiducie agreement, the letter establishing the disclosed shareholder's status as settlor, and the deed terminating the arrangement. The court of appeal held that the company had failed to justify the identity of its shareholders.

The Cour de cassation set that decision aside (Cass. com., 8 July 2026, no. 25-12.737). Its reasoning runs in three steps:

• The purpose of articles 990 D to 990 G is to let the authorities determine whether, among the persons identified, any are liable to French wealth tax.

• Assets transferred into a fiduciary estate are, for that tax, included in the estate of the settlor and not of the fiduciaire.

• It follows that the fiduciaire, whose estate does not include those assets, cannot be treated as a shareholder for the purposes of article 990 E.

So the settlor was the right person to disclose, and the company that had disclosed him had been right all along.

For a trustee, the practical lesson is reassuring and precise. Where legal title and economic burden sit with different people, disclose the person in whose estate the asset would be taxed, name the legal holder alongside, and keep the deeds available. Nominee and bare trust arrangements do not defeat the exemption; silence about them does.

One caveat of method: the reasoning was given under the provisions of the former French wealth tax, which applied to the years in dispute. How it transposes to the current wealth tax on real estate has not yet been settled, though the logic of the scheme is unchanged.

The real difficulty: structures with no designated beneficiary

This is where trustees of discretionary structures should pay close attention, because no amount of careful drafting on the return will solve it.

A Liechtenstein foundation owning French property had named a hypothetical future beneficiary on its returns, litigation then being pending over the ownership of its assets. The Cour de cassation held that only real economic beneficiaries at 1 January of the tax year can be treated as shareholders, members or participants, to the exclusion of contingent beneficiaries, and that the foundation could not therefore claim the filing-based exemption (Cass. com., 10 May 2024, no. 21-11.230).

That does not mean a trust or a foundation is excluded by its nature. French courts have long accepted that an economic beneficiary may be treated as the holder of the shares. What fails is the inability to name a present beneficiary.

But the consequence is severe for certain structures. A fully discretionary trust where no appointment has yet been made, a foundation whose beneficiaries crystallise only on a future event, an entity whose rights are frozen by litigation: none of them has anyone to disclose at 1 January. They will pay the tax, not because anything is hidden, but because on that date there is nothing to reveal.

Where this is identified, the answer lies upstream: in the terms of the deed, or in how the French property is held. Both are matters to address before the filing deadline, and ideally before the acquisition.

The threshold question: where is the structure established?

Before any of this, the entity must satisfy a condition relating to its seat, failing which none of the exemptions is available.

For trusts, fiducies and investment funds, French guidance presumes establishment in the State or territory of the law governing them (BOI-PAT-TPC-20-20). The Conseil d'État has held that the presumption does not prevent an entity from proving the contrary and displacing that connecting factor (CE, 9 May 2019, no. 426431). It is therefore rebuttable, but the burden lies with the entity.

Two points deserve particular care where the entity has no separate legal personality.

Where exemption is claimed under a treaty providing for administrative assistance, it must be checked that the treaty covers entities without legal personality, or that its exchange-of-information clause is not confined to persons covered by the treaty. Otherwise the condition is not met.

Where it is claimed under a non-discrimination clause, that clause must expressly extend to the form of entity concerned. Few treaties go that far.

That said, the list of States opening these exemptions was replaced on 8 October 2025 and is markedly wider than before, while the guidance on the 3 % tax still refers to the old one. A structure previously ruled out on this ground is worth revisiting. See Which Jurisdictions Still Allow Exemption From the French 3 % Tax.

Do not confuse this with the other French trust obligations

A trust holding French property falls under a separate set of obligations, which neither replaces the 3 % tax return nor is replaced by it.

• The event-based and annual trust declarations required of the trustee, backed by a specific penalty. They cover the creation, modification and termination of the trust, and then the market value of the assets at 1 January.

• A sui generis levy on real estate assets placed in trust, which applies in substitution for French wealth tax where the assets have not properly been subjected to it.

• The 2746 return for the 3 % tax, due by 15 May.

No provision treats one filing as discharging another, and the deadlines differ. A properly administered trust files all of them, and the point where files are most often lost is the coordination between the trustee's own advisers and French counsel.

Frequently asked questions

Should the trustee be disclosed?

The trustee is listed among the members of the trust, for information. But the trustee is not the person to name as the real holder of the rights, unless the deed gives them an economic position over the assets. The July 2026 reasoning, which excludes the fiduciaire on the ground that the assets do not form part of their estate, points the same way.

My trust is irrevocable and fully discretionary. What do I file?

This is the hardest case. The default rule points to the beneficiaries, but they must be ascertained at 1 January. If they are not, the filing-based exemption is out of reach for that year, and the question has to be addressed on the terms of the deed rather than on the return.

Can a family foundation ever be exempt?

Yes, if it meets the condition relating to its seat and can identify real economic beneficiaries at 1 January. The 2024 judgment does not shut the door on foundations; it shuts it on those that can name only a contingent beneficiary.

Who pays if the trust does not?

The authorities may treat the trustee, as legal representative of the trust, as the person who must discharge the filing and payment obligations. In addition, every entity interposed between the taxpayer and the property is jointly liable for payment, and the French Treasury has a statutory mortgage over the French property itself.

We have never filed anything. What now?

French guidance allows a first-time regularisation without the tax becoming payable and without penalties, provided it covers all non-time-barred years and is made before or within thirty days of a formal notice. It operates once only, so it should be used deliberately and with the evidence prepared.

How we work

Sassi Société d'Avocats has acted for more than thirty years in international tax and French tax audits for families and international structures holding property in France, including through our Paris Legal Family Office practice.

For structures of this kind, our work begins with the deed: determining who must be disclosed, confirming the seat condition under the rules currently in force, aligning the 2746 return with the separate trust obligations, and defending the position taken if it is challenged.

We do not establish offshore structures. We work on structures that exist, and on what can be defended before the French authorities.

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