Some continental jurisdictions, lacking a history of trust law and practice, are still on a learning curve when it comes to taxing income arising within a discretionary trust.
The Administrative Court of Appeal (CAA) of Paris has recently confirmed that the beneficiary of a discretionary trust does not hold an "interest in an entity" and therefore should not be subject to income tax unless an actual distribution has been made to them.
Russell-Cooke senior associate Patrick Delas writes in Private Client Business that, although the decision is welcomed with enthusiasm by trust and estates practitioners, it may not be the end of the troublesome relationship between the French revenue and trusts.
French Income Tax on Discretionary Trust Income was published in the first issue of 2021 of Private Client Business and is free to read here.
Patrick is a Solicitor (England & Wales) and Avocat au Barreau de Paris. His specialist work is private international law and includes advising on French and cross-border tax issues (Inheritance Tax, Capital Gains Tax, Wealth Tax and trust reporting obligations).