Technical article

France: 31.4% on Trust Payouts Unless the Heir Proves It Was Not Income

France treats a trust distribution to a French resident as foreign-source investment income, taxed at a flat 31.4%.

By Neil Solomon · 3 min read

Imagine a family where a mother in the United States has a trust for her daughter, and the daughter has lived in Lyon for several years. Each year the trustee sends her a payment. The daughter asks the question many heirs in France ask: how does France see this money?

The sources give a plain answer for payments received since 1 January 2026. France treats a trust distribution to a French resident as foreign-source investment income, taxed at a flat 31.4%. The taxpayer must prove that an amount is not income. Baker McKenzie, tier B, reports a decision of the Conseil d'Etat of 13 March 2026 behind this reading. The same page says a distribution can also be recharacterised as a gift, case by case.

The 31.4% is made of two parts. The flat tax has an income tax part of 12.8% and a social-charge part. PwC, tier B, says the social charges on most investment income total 18.6% for 2026, which brings the flat tax to 31.4%.

Some earlier sources give 30%, and that needs a word. A 2023 guide from a French practice (tier C) gives 30%, made of 12.8% plus 17.2%. A 2026 guide (tier C) gives 31.4%, made of 12.8% plus 18.6%. The two agree on the income tax part. They differ on the social charges, and PwC's 2026 page shows why: the social charge rose.

Gift and inheritance tax is a second layer. France reaches worldwide assets if the donor or the person who died lived in France, or if the recipient was resident in France for at least 6 of the last 10 years. A child has a EUR 100,000 rebate (about US$110,000). A direct-line scale of 5% to 45% applies after that, according to the government's own page (tier A). A guide to trusts says transfers from a trust can go as high as 60% in some cases, such as a trust created after 11 May 2011 by a French-resident settlor, or a trustee in a state France lists as non-cooperative. That guide is unofficial and says so itself, so we count it as tier U.

Then the filing. The trustee files an annual return, 2181-TRUST2, by 15 June if any party is French resident, and the government's page (tier A) confirms the duty. The guide says the beneficiary also reports distributions on the French return. Sources differ on the penalty for missing a filing: 10,000 euros or 5% in a 2012 article, 20,000 euros or 12.5% of the trust in a government document, and a fixed 20,000 euros in a 2026 guide.

You might say: "My daughter's payout is a gift from her mother, not income." That is the argument the rule asks her to make. France starts from income and she is asked to show otherwise, with the trust deed, the trustee's letters and the accounts behind each payment.

You could ask the trustee for a letter with each payment saying what it is made of: income, capital gain or return of capital. You could also ask whether the trust has a French-resident beneficiary on the trustee's own list, since that sets off the trustee's June return.

This reaches the whole family. A grandchild may meet a different rebate. A spouse who is French resident for six of ten years brings worldwide assets into the inheritance tax.

Has someone in your family lived in France on trust payments? Share what the tax office asked for. Another heir may be gathering the same papers.

Figures are estimates for planning, based on public data. Date read: October 2026.