Trusts and French tax obligations

Trusts are common in families with ties to the United States or the United Kingdom, but they remain poorly understood in France. Their French declarative obligations are even less well known. Misunderstanding them can be costly, even when no tax has been evaded.

Two distinct declarations

Two distinct declarations are required: declaration number 2181-TRUST1, called event-based, to be filed within the month following the creation of the trust, each of its modifications, and its termination. Declaration number 2181-TRUST2, annual, which concerns the market value as of January 1 of the properties, rights, and capitalized income composing the trust, and must be filed no later than June 15.

Additional obligations

These are in addition to the declarations of foreign-held accounts and life insurance contracts. Since June 27, 2026, a new obligation applies upon the death of the settlor. When inheritance taxes are due on the trust's property, their payment must be accompanied by a detailed declaration from the administrator (trustee).

Administrator abroad

In the most frequent situation, the administrator (trustee) is based abroad, often in the United States or the United Kingdom, while one or more beneficiaries reside in France. The administrator (trustee) may not always be aware of the French obligations, and the French tax administration may find it more difficult to act against them.

Solidarity of settlors

The law has provided for solidarity. The settlor and the deemed settlors (those deemed to be settlors) are jointly liable with the administrator (trustee) for the payment of the fine. A beneficiary is deemed to be a settlor upon the death of the settlor. The administration can therefore claim the fine from these people in France, even though the breach is that of the administrator (trustee).

Fines for non-compliance

A fine of 20,000 euros per breach. Failure to comply with these obligations is sanctioned by a flat fine of 20,000 euros. The amount is the same for both declarations. What matters is the number of breaches: a fine per event not declared under TRUST1; a fine per year not declared under TRUST2.

Prescription periods

Four years for the fine, ten years for the tax. One often reads that in the matter of trusts, everything prescribes after ten years. This is true for taxes: when the declarative obligations of trusts have not been respected, the administration can correct the income tax, the IFI, or the taxes on gratuitous transfers for ten years.

Surcharge on taxes

The 80% surcharge: another logic. When the administration corrects taxes due to assets held in an undeclared trust, the recalled taxes may be accompanied by an 80% surcharge. This surcharge does not add to the fine: it replaces it, and cannot be less than 20,000 euros. It follows the fate of the recalled taxes and can therefore apply for ten years.

Example of a long-standing breach

An example: a trust created ten years ago, never declared. Let's say a trust created in October 2016, whose settlor has been a French tax resident since the beginning. No declaration has ever been submitted: neither the TRUST1 of creation, nor any TRUST2. No other event has occurred: no addition of assets, no distribution, no change of administrator (trustee).

Fines and prescription timeline

The 80% surcharge has recently been expanded to cover all assets in a trust. According to preliminary comments, this extension applies to breaches committed from June 27, 2026 onwards. The administration’s clarifications are still awaited. The period for claiming fines runs from the year in which the deadline for submission expired.

Real-world situations

What I see in my files. The most frequent situation is that of a trust created and managed abroad, often in the United States or the United Kingdom: the administrator (trustee) is abroad, and one or more beneficiaries reside in France. The declarations 2181-TRUST1 and 2181-TRUST2 are often forgotten, especially since the available information on the subject is frequently contradictory.

Recent changes in enforcement

Recently, the administration seems to be asking, in this situation, for a complete ten-year regularization file, similar to that required for foreign-held accounts. The process becomes more intrusive, and the stakes in terms of recalls and sanctions are clearly higher. More broadly, for anything coming from abroad, the administration, in my experience, is becoming increasingly demanding, even intransigent.

Legal advice and regularization

In practice. Each situation is particular. Before any action, it is preferable to consult a lawyer, whether it is to respond to the administration or to voluntarily reveal the existence of a trust. The aim is to identify the actual breaches exposed, the people who may be liable for the fine, the impact of the prescription, and the most appropriate approach.

Future regularization efforts

The Government has also announced in September 2026 its intention to reopen in 2027 a regularization regime for undeclared assets. Its modalities and the place it will reserve for trusts remain to be specified.