Deeds, Trusts & Dividends: Ask the Experts

Matthew Cameron tackles some tricky questions…

The short answer is that nothing needs to be done to the deeds. Residents of rural France will no doubt be well acquainted with the typical format of addresses in a small village. These are often extremely scant in detail, often without street names. Such references will also appear in the title deeds to the property (acte authentique, titre de propriété or acte de vente).

This is clearly an important document, as it constitutes the owner’s proof of title to their home in France. So, it would seem reasonable to expect that this should be updated to ensure the details remain correct. Yet that is not a requirement. At the time of a future transaction relating to the property, the notaire will include confirmation of the original address details, along with an explanation of how the address was changed. This will allow for any future owner to be able to trace the history of the property correctly.

In a similar manner, the land registry references to a property, the ‘cadastral’ references, can occasionally be changed unilaterally. Amendments to these references usually arise when a plot of land is split into two or more parts, in which case each new part is attributed a new reference number. However, the register can sometimes be updated for different reasons, with a whole area being conferred with new numbers. In such cases, the notaire would update the title deeds in the same way at the time of a future transaction.

Also bear in mind that the original of the title deed is retained at the notaire’s office. Notaires have an obligation to ensure the safekeeping of land registry documents. The version of the document held by any owner will at best only be a certified copy.

Given that France takes a sceptical view of trusts, it is likely that structuring the ownership in this way is to be discouraged. The French state recognises that trusts exist, but there is an intention to establish who the actual beneficial owner of a property really is. After all, while trusts are often established with a view to the tax-efficient holding and transfer of assets within a family, they can also be used to hide the identity of the eventual owner.

There are strict requirements to declare the existence of any trust with a link to France. For example, the residence of the person who set up the trust, the trustees or the beneficiaries; or where the trust includes a property in France as one of its assets. Failure to declare the existence of a relevant trust can give rise to penalties, while declaring the trust can generate tax liabilities.

Such planning should only be undertaken with professional advice from people with knowledge of the tax and legal implications in France and any other relevant jurisdiction.

Anyone buying a property in another jurisdiction must give full consideration to the legal and financial implications arising in both countries. What might be beneficial in one country can be disadvantageous in the other. This general warning can certainly apply to a proposal to buy a French property through a UK based company.

First of all, a French property owned in a non-French company is likely to be treated as a wasting asset of that company. This means that the value of the property would be reduced at the time of its sale, resulting in a greater exposure to French capital gains tax. If the property is rented out then it would be for the company to declare any rental income in France, which can result in complex overseas. There is a requirement for non-French companies to file all details about the company (such as the shareholders, overall share capital and registered office) and to keep them updated, at risk of an annual penalty of 3% of the property value. A well-intended exercise in tax planning can result in various problems, including complications when any shares are transferred.

Matthew Cameron heads the French legal services team at Ashtons Legal incorporating Heslop & Platt

Tel: 0330 1914450

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