Shares placed in a US Trust may be regarded as held by natural persons

15 July 2020

Article 235 ter ZC of the French Tax Code exempts from the 3.3% social security contribution on corporate income tax, companies whose turnover is less than €7.63 million and whose capital is held continuously, for at least 75%, by individuals or by a company meeting the same conditions whose capital is held, for at least 75%, by individuals.

SAS Ponthieu Rabelais availed itself of this exemption because the percentage of its capital held by individuals reached the required level, taking into account securities belonging to a family trust under American law.

In a decision of 20 March 2020, the Conseil d’Etat noted that under the terms of the trust deed, the trustee, a natural person, had to act for the uses and purposes set out in the deed, and more particularly in the interest of the beneficiaries in order to allocate to them the net income of the trust’s assets and the corresponding capital. To this end, he held, in his capacity as trustee, the trust assets, managed them, invested and reinvested the income and allocated the net income and the corresponding capital. He took part in the general meetings of Ponthieu Rabelais and exercised his voting rights. He had discretionary power to pay dividends to the beneficiaries of the trust or to put them in reserve.

It follows that the rights available to the trustee, a natural person, in the interest of the beneficiaries, who were also natural persons, made it possible to consider the condition relating to the holding of capital required by Article 235 ter ZC of the FTC to be fulfilled.