{"id":6889,"date":"2023-04-06T11:15:24","date_gmt":"2023-04-06T09:15:24","guid":{"rendered":"https:\/\/www.altertax-avocats.com\/how-should-canadian-trust-assets-be-taxed\/"},"modified":"2024-07-30T15:28:32","modified_gmt":"2024-07-30T13:28:32","slug":"how-should-canadian-trust-assets-be-taxed","status":"publish","type":"post","link":"https:\/\/www.altertax-avocats.com\/en\/how-should-canadian-trust-assets-be-taxed\/","title":{"rendered":"How should Canadian trust assets be taxed?"},"content":{"rendered":"

[et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” collapsed=”off” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_row use_custom_gutter=”on” gutter_width=”1″ _builder_version=”4.18.0″ _module_preset=”default” locked=”off” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”|40px|||false|false” global_colors_info=”{}” theme_builder_area=”post_content”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font=”Quicksand||||||||” text_text_color=”#11677A” link_text_color=”#666666″ global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n

For several years now, the French tax authorities have been looking into a number of cases of potential tax fraud involving large French fortunes. They are said to have used Canadian trusts, via the Blue Bridge wealth management company, to evade French wealth tax.<\/strong><\/p>\n

However, in ruling no. 21\/10189 of February 6, 2023, the Paris Court of Appeal held that the assets of a Canadian trust were only taxable in Canada and not in France, thus ruling out the possibility of tax fraud. Explanations.<\/strong><\/p>\n

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The facts behind the case<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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During a tax audit, the DGFIP found that a French taxpayer had set up a trust in Canada in 1986. It therefore notified him of a proposed rectification for the years 2012 to 2015 in respect of the taxation of assets making up a trust governed byarticle 990 J of the French General Tax Code<\/a> (CGI).<\/p>\n

Following the trustee’s challenge, the case was brought before the Paris court. The latter, in a ruling dated March 5, 2021, followed the reasoning of the DGFIP and ordered the trustee to pay the sui generis levy under article 990 J of the CGI.<\/p>\n

As a reminder, the sui generis levy on trusts was created by the Loi de finances rectificative pour 2011 n\u00b0 2011-900<\/a> of July 29, 2011 and has been applicable since 2012. It therefore post-dates the Franco-Canadian Tax Convention of May 2, 1975.<\/p>\n

It is designed to penalize failure to declare assets placed in a trust for wealth tax (ISF) purposes. The amount of the levy depends on the net market value of the assets and rights making up the trust on January1 of<\/sup> the tax year, and the rate of the levy, which corresponds to the highest rate of the ISF, now replaced by the IFI(article 977 of the CGI<\/a>).<\/p>\n

In ruling no. 21\/10189 of February 2, 2023, the Paris Court of Appeal overturned this decision and applied the Franco-Canadian Convention of May 2, 1975<\/a> on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital.<\/p>\n

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French-Canadian tax treaty or general tax code?<\/h2>\n

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Article 55 of the Constitution of October 4, 1958<\/a> provides that: “Treaties or agreements duly ratified or approved have, from the time of their publication, an authority superior to that of laws, subject, for each agreement or treaty, to its application by the other party”.<\/p>\n

International law therefore takes precedence over national law. Where an international tax treaty exists, such as the Franco-Canadian Convention, it must be applied, provided that the situation in question falls within the scope of the international text.<\/p>\n

The Convention between France and Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital applies:<\/p>\n