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This page is intended to keep our nonresident contacts informed of pertinent legislative developments or new legal precedents concerning international affairs which may impact their operations and require preemptive action.

Published on Wednesday 03/06/2015

1) Matrimonial property regime in an international context

 

Matrimonial property regime ("régime matrimonial") is a civil law concept. It governs the property, administration and power to dispose of the property of the spouses. Its rules apply between the spouses but can also be opposed to third parties.

 

Common law and Muslim law countries ignore this concept: each spouse is deemed the owner of his own property and has the administration and the power to dispose of them.

 

We also remind that each country has its own tax and legal rules and own proper law rules, which can lead to a conflict of laws.

 

Thus, when people from different nationalities marry or when spouses with the same nationality live abroad or buy property abroad, they must be careful regarding the regime of their property.

 

 

2) Permanent matrimonial property regime or change of the matrimonial property regime

 

The possibility to change matrimonial property regime is not always granted, depending on the country.

 

In civil law countries, the change of matrimonial property regime in the said country, requires the intervention of a "notaire" ("acte notarié"), to which might add, depending on the country, a court authorization and/or some actions to inform third parties.

 

As far as international private law is concerned, the change of matrimonial property regime is subject to specific rules.

In French international private law, a distinction is made between spouses married before or after September 1st, 1992:

- For couples married before this date, the matrimonial property regime is set once and for all, as a general rule, in the state where the couple fixed its first domicile after the marriage, if they have not drafted a marriage contract,

- For couples married after the entry into force of the Hague Convention of 14 March 1978 (1 September 1992) and if they have not designated an applicable law, French citizens or residents are exposed to an eventual automatic change of the matrimonial property regime, i.e. it will be governed by the law of the country of their residence, either after 10 years when they dwell in a country other than their country of common citizenship, or right away if they move in their country of common residence.

Ex. 1: a couple of French citizens has always lived in the USA after their marriage and move back to France a few years afterwards. The spouses divorce. In this case, there are two consecutive matrimonial property regimes: the first one subject to American law from the marriage until they move back in France (property acquired during this time frame will belong to either one of the spouses according to American law), and the second one from once they move in France onwards (property acquired during this time frame will belong to either one of the spouses according to French law).

Ex. 2: A couple of married Swedish citizens decide to come to France and stay there for more than 10 years, after first living in Sweden. Here again, in case of a divorce or death of a spouse, there will be two successive matrimonial property regimes: the first one from their marriage until they move to France, and the second one from when they move to France onwards, since they stayed in France more than 10 years.

 

The proposal of European Regulation of March 16th, 2011, if it is voted as is, will put an end to the automatic change of the matrimonial property regime. Thus, the law governing the matrimonial property regime will be set once and for all unless the parties agree otherwise. The law governing the matrimonial property regime will be determined depending on objective criteria such as (i) the first residence of the spouses after the marriage, (ii) their common nationality or (iii) the law of the State with which, taking all circumstances into account, it is most closely connected.

 

 

3) Fixation of modification of the matrimonial property regime with a choice of the spouses

 

An express choice of the spouses will allow them to fix or change their matrimonial property regime.

 

French spouses who decide to marry of live abroad or the non-French citizens who decide to reside in France after their marriage must (i) either, at least designate the law that will govern their matrimonial property regime or (ii) draft a marriage contract which form and content will be governed by the designated law. The choice of the applicable law is not allowed: only the law of the citizenship or residence can be designated.

 

Non-French citizens who decide to buy real estate property in France can designate French law in order to govern only this real estate property. We would like to specify that this can be very useful and that foreign buyers tend too often to buy real property in France assuming that the inheritance will follow the rules of their country of residence.

 

French citizens or residents for more than 10 years, regardless of the date of their marriage, can designate the law applicable to their matrimonial property regime according to the same citizenship or residence criteria, which will have the advantage to apply to all their property, not only for the future but also for the past (from their marriage until the change, which is not the case for automatic change). They can make as many change as they want.

 

For more information, see the Website of the European Commission on this subject (available in 27 languages), the Convention of The Hague on matrimonial property regime (in English and in French) and the interview Bruno Bédaride gave to the Groupe Les Echos (in French).

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Tags : Expatriation International law Real estate investment


Published on Thursday 20/11/2014

French and Luxemburgish authorities signed on 5th September of this year a fourth addendum to their common tax treaty of 1st April 1958, in order to avoid double non taxation in case of transfer of shares in companies which assets are mainly composed of real estate.

 

Another codicil signed on 24th November 2006 and entered into force on 1st January 2008 allowed France to tax income and capital gains resulting from the transfer by a Luxemburgish tax resident of real estate property located in France, on the condition for the real estate to be held directly by the Luxemburgish tax resident or through a tax transparent company.

 

On the contrary, capital gains resulting from transfer by a Luxemburgish resident of shares in companies – the assets of which are composed of a majority of real property or rights/interests attached to real property – were not taxed by France, except if those shares could be linked to a permanent establishment in France. In application of the provisions of the tax treaty, those capital gains were supposed to be taxed by Luxembourg, but in pratice, capital gains were not taxed at all.

 

5th September codicil puts an end to this situation allowing France to tax capital gains resulting from the transfer by a Luxemburgish tax resident or company of shares in companies the assets of which are composed of a majority of real property or rights/interests attached to real property located in France and not used for the company’s activities.

 

The addendum should enter in force on the 1st January following the both states ratification process, so the 1st January 2015 or 2016.

 

However, transfers realized before the entering in force of the addendum might attract the attention of the French tax authorities, if operations exclusively aim at obtaining a tax advantage.

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Tags : International tax law Taxation Real estate investment


Published on Thursday 20/11/2014

Although French lax and tax law do not fully recognize the effects of trusts, trusts are liable to a specific tax or declarations since 2012.

 

The decree n° 2014-1372 of November 17th, 2014, modifies the declaration in order to comply with the law of December 6th, 2013 (read our previous article on the subject).

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Tags : Real estate investment Trust


Published on Wednesday 22/10/2014

The Cour de cassation (French supreme court) recently reminded that French notaires have an obligation to inform the parties to a contract, the extent, the consequences and the risks of the contracts he drafts. In this case, the Cour de cassation sentenced a notaire who had not invited his non French-speaking client to require the assistance of an interpret during the signature of the contract (Cass. 1e civ., May 13th, 2014, n° 13-13.509).

 

When the office drafts a contract for a non French-speaking client, we make sure he has a complete understanding of the situation by:

 

-          Drafting a preliminary study from a legal and tax point of view. Clients are advised to submit this study to their councils in the country of residence in order to check the local consequences of their project,

 

-          Drafting under our liability, an explained summary of the contract which will be annexed to the contract in French. This allows to lower the translation costs while keeping the client perfectly safe, and to make sure that the client fully understands the contract he signs.

 

These documents are translated into the language chosen by the client (translations in English are done by the office; professional translators are required for other languages).

 

This is done according to a letter of engagement signed prior to the beginning of our mission.

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Tags : Apartment Family office International law Loan Personal wealth Real estate investment Rental Sale Société civile immobilière/SCI


Published on Wednesday 20/11/2013

Tax

Since the French tax law of July 29th, 2011, a special tax applies when real estate property is held by means of a trust (Art. 990 J of the French Tax Code).

The settler, the trustee and the beneficiary are jointly liable for the tax. If they are not French tax residents, the tax is due yearly at the highest rate applicable for wealth tax (currently, 1.50%), assessed on the value of the estate and the eventual capitalized rents on the 1st January of the tax year.

This tax does not apply to charitable trusts, nor to those set up in order to manage acquired retirement pension rights, provided the trustee is located in a country which has signed a cooperation agreement for tax purposes with France.


Declaration

The taxpayer is exempted from the tax if he has declared the assets for the assessment of the wealth tax.

If the taxpayer is not liable to wealth tax, he can be exempted by making declaring the goods to the French Tax Services (Art. 1649 AB of the French Tax Code). It is noteworthy that if the absence of declaration for wealth tax results from an exemption in an international tax convention, no declaration pursuant to art. 1649 AB has to be made.

Art. 1649 AB of the French Tax Code states that the trustee has to make two declarations:

-    Declaration of the setting up, the modification or the termination of the trust, as well as its terms and conditions. The declaration of the modification or termination of the trust has to be made within one month following the event triggering the declaration (Art. 344 G sexies, Ann. III of the French Tax Code). The corresponding tax return is the form N° 14805*01.   

Modification of the trust is understood as:   
. any change in the terms or way in which the trust is operated,    
. any change in the settlor, beneficiary reputed to be a settlor, beneficiary or trustee or the death of one of the aforementioned,    
. any new item put into the trust or any item taken out of the trust of goods or rights, any goods, rights or products of the trust that have been awarded or passed on,   
more generally, any modification of the rights or facts likely to affect the economy or operation of the trust concerned.

-    Declaration of the market value on the assets taxable in France on the 1st of January on the taxation year. The declaration has to be made before the 15th of June of each year (Art. 344 G septies, Ann. III of the French Tax Code). The corresponding tax return is the form N° 14807*01.

The decree of October 23rd, 2013, provides that the forms here above are now mandatory. They have to be filled in French.

If these declarations are not subscribed, the trustee is liable for a fine or amount equal to 12,5 % (prior to the law of December 6, 2013 it was 5%) of the goods folded into the trust and their capitalized income, with a minimum of 20 000 Euros (prior to the law of December 6, 2013 this amount was 10 000). The trustee, the constituent and the beneficiary reputed to be a constituent are jointly liable for the payment of the fine.

 

On top of the existing system the law of 6 December 2013 on tax fraud created a special organ, called the public registry of trusts designed to identify the declared trust, the name of the settler, trustee, beneficiary and to verify the date of the trust's formation. This registry is managed by the General Directorate of Public Finances and can be consulted only by authorised employees of the tax administration.  

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The interdisciplinary expertise of the Selarl Bruno Bedaride, notaire in Paris covers the following areas: corporate law, international contracts law, legal and tax advice, advice for international transmission, real estate law, family office, real estate and company finance law. We offer more particularly our services to non residents or foreign company who wish to invest, move or create a business in France.