Technical article
How Six Countries Decide Where a Trust Lives: United States, United Kingdom, Germany, Canada, Australia, France
The return instructions say a trust is non-resident if no trustee lives in Australia, or control is not exercised from Australia.
Imagine a family trust with a trustee in the Cayman Islands. The person who set it up lives in Toronto, and the children live in Spain. The trustee is foreign. Whose trust is it for tax?
The answer depends on which country asks. Six countries, six tests. The test is almost never about where the heirs live.
| Country | How it decides where the trust lives | Tier |
|---|---|---|
| United States | Two tests, both needed: a US court can supervise it, and US persons control all the important decisions with no outside veto | A |
| United Kingdom | For trusts created from 6 April 2025: non-UK if no trustee lives in the UK, or if trustees are mixed and the settlor was not a UK resident when the trust was set up or funded | A |
| Germany | Where it is managed, or where it has its seat. It counts as foreign only if both are outside Germany | A |
| Canada | Where central management and control sit; the trustee's residence is a factor but does not decide | C |
| Australia | The tax office's return instructions point to two things: a resident trustee and control exercised from Australia | A, low confidence |
| France | No trust-residence test. The tests are the settlor's or heir's home, where the assets are, and where the administrator lives | A |
What each test looks at
United States. A trust is a US person only if both tests are met. The court test is met if the document does not direct foreign administration, the trust is in fact run only in the United States, and it has no clause that moves it automatically. The control test looks at every person with authority, not only the trustees. Whether and when to distribute, picking a beneficiary, ending the trust, suing, replacing a trustee and investment decisions all count. Any other trust is foreign. If a death, resignation or move changes the answer, there are 12 months to fix it and keep the old status.
United Kingdom. Domicile no longer counts since April 2025. The trustees are treated as one body, and a trust resident for part of a year is treated as resident for the whole year.
Germany. A trust with both its seat and its management outside Germany is a foreign family foundation for the yearly attribution rule. If its management or seat is moved into Germany, it becomes a German body.
Canada. The Supreme Court decided in Fundy Settlement (2012) that residence follows central management and control. Separately, a trust abroad is treated as Canadian if it has a Canadian-resident contributor, or a resident beneficiary connected to a contributor. Contributions made more than 60 months before or after someone's period of Canadian residence are left out.
Australia. The return instructions say a trust is non-resident if no trustee lives in Australia, or control is not exercised from Australia. The sources differ on whether both must hold together or either one, so the reading is open.
France. The French rules start from people and assets. Duties follow a French-domiciled settlor on all trust assets worldwide. If settlor and heir both live abroad, only French assets are reached, unless the heir has lived in France six of the last ten years.
Why the answers can differ
The same trust can be foreign to one country and tied to another. A Canadian contributor can make a trust abroad Canadian in Canada's eyes, while the same trust, run by a trustee in Cayman, can be non-UK for the United Kingdom and foreign for the United States. Each country counts for its own tax.
Residence also decides the paperwork. A foreign trust in US terms files Forms 3520 and 3520-A, with a penalty of the greater of US$10,000 or 35% for missing the first. A trust with a UK tax liability registers with the Trust Registration Service within 90 days. A Canadian trust files a T3 within 90 days of its year end.
Who it touches
The settlor, whose residence can decide the answer. Trustees, who keep the records. Heirs, who file where they live.
If your family trust sits in one place and the family lives in several, which country do you expect to ask first? Share it here. Another family may be working out the same sequence.
Figures are estimates for planning, based on public data. Date read: October 2026.
Sources
- Internal Revenue Code s.7701(a)(30) and (31) and Treasury regulations on trusts (A)
- HMRC guidance on trust residence for trusts created from 6 April 2025 (A)
- German Foreign Tax Act s.15 and Inheritance Tax Act s.2 (A)
- Fundy Settlement v Canada, Supreme Court of Canada 2012, as summarised on taxpage.com (C)
- CRA folio S6-F1-C1 and Income Tax Act s.94 (C)
- Australian Taxation Office trust tax return instructions (A)
- French General Tax Code s.792-0 bis and Bofip guidance (B)
- Chambers trusts guides for Germany, Canada and France (B)
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