Are foreign trusts, private foundations etc recognised?
Private Client (2nd edition)
Israeli law does not provide specific rules for foreign trusts. Foreign trusts are recognised as legal entities, but courts are yet to rule on the applicability of foreign laws. The trustees are treated as owning the trust assets themselves, but in certain cases, in particular where the assets are domestic real estate, it is possible to include a notice, according to which the relevant properties are held in trust.
Foundations are not recognised in Ireland. If a foundation was established outside of Ireland, the relevant law of the civil law jurisdiction where the foundation was established would need to be examined.
Foreign trusts are recognised in Ireland, provided that they comply with certain formalities and contain the essential elements of a valid trust in accordance with Irish law. Where the trust holds real property, the trust must be evidenced in writing, signed by a person who is able to declare the trust (as referred to in Question 19, the three certainties must exist for the trust to be valid).
Although Belgium does not have its own trust law, foreign trusts are recognised. Trusts will be governed by the law of choice of the settlor. When no choice of law is made, or if that choice is invalid, the trust will be governed by the law of the state where the trustee has/had his habitual residence at the time it was created.
Unlike trust law, Belgium does have its own legislation regarding private foundations. A foreign foundation will be recognised in Belgium and will be governed by the law of the state where its main establishment is located.
Foreign trusts are recognized but are disfavoured. There is a heavy reporting burden for US Persons who establish or are beneficiaries of a foreign trust. Foreign private foundations are recognized, but are taxed differently depending on whether they are charitable foundations or are privately-owned.
Foreign trusts and foundations are recognised.
Under civil law foreign trusts or foreign private foundations are recognised in Austria but in a transparent trust or in a transparent foreign private foundation the corresponding shares and/or income are allocated to the beneficiaries.
Foreign trust, private foundations and the like are governed by the law of the state in which they are established. Therefore, they are recognized in Bulgaria.
Argentina has not signed the Convention on the Law Applicable to Trusts and on their Recognition (July 1st 1985). However, there have been court precedents recognizing the existence and enforceability of foreign trusts, providing that Argentine public order is not infringed (mainly, the forced heirship rules). This was then included in Section 2651, Subsection e) CCC. Therefore, Argentina recognizes both foreign trusts and private foundations. The property contributed to the structure will be owned by the Trustee in its fiduciary capacity. Notwithstanding the foregoing, the tax treatment will vary depending on the characteristics of the mentioned structures. In certain cases fiscal transparency will apply as seen in Question 23 below.
In 2007, Monaco has acceded to the 1985 Hague Convention on the Law Applicable to Trusts and on their Recognition. The Code on Private International Law confirms the recognition of foreign trusts in accordance with the Hague Convention on the Law Applicable to Trusts and on their Recognition.
Foreign trusts are therefore fully recognised in Monaco.
Foreign private foundations are also recognised in Monaco.
Foreign law trusts are recognised pursuant to the Hague Convention on the Law Applicable to Trusts and on their Recognition (hereinafter “the Hague Convention”), which was ratified by Italy in 1989. Foreign family foundations are recognised too.
Bermuda recognises foreign trusts. Bermuda law does not provide for foundations at this time. However, Bermuda law will recognise foreign law foundations where the foreign law is applicable under its conflict of law rules.
English law recognises trusts (§19.2) and private foundations established under non English law.
There are no civil or commercial regulations regarding the establishment of common law trusts or private foundations in Colombia. However, common law trusts are recognised by Colombian law and tax authorities.
The Cayman Islands is not a party to the Hague Trusts Convention. However, despite this, the courts of the Cayman Islands recognise most trusts established under foreign law. We are aware of no decided case dealing with the recognition of foreign foundations but they feature in many Cayman structures and it is generally considered that these would normally be recognised.
Foreign trusts are not recognised by German law. Furthermore, Germany did not ratify the HCCH Convention on the Law applicable to Trusts and on their Recognition 1985. As a consequence, German property law does not recognise the transfer of assets located in Germany to a foreign trust. It depends on the terms of the trust whether those assets are considered to remain the property of the settlor or the trustee for German civil law and tax law purposes.
Foreign private foundations are recognised in Germany if their structure is comparable to the structure of a German foundation as provided for in the German civil code.
Given that foundations are a civil law concept, private foundations are not available as a succession planning tool in Singapore.
A trust governed by foreign law is recognised in Singapore.
Although trusts are not recognized in Portugal, trusts are considered separate legal entities for Portuguese tax purposes. The Portuguese tax authorities have ruled that trusts shall not be considered as persons for double tax treaties purposes unless specifically covered by the relevant treaty.
Although it is impossible to create a trust under French law and France has not ratified the Hague convention on the recognition of trusts, French courts recognise the effects in France of common law trusts, provided they comply with the mandatory provisions of French law.
However, because there is no distinction in French law between legal and equitable ownership acquiring an asset located in France by a trustee may entail difficulties.
The real estate registry (“registre cadastral”) cannot register the acquisition of a French real estate by an individual or a corporate acting in her/his/its capacity as trustee. This can be achieved by interposing at least one company between the French real estate properties and the trust represented by its trustee.
The ownership of French movable assets may also entail difficulties as the trustee is treated as the apparent owner of any trust’s assets located in France. This is the additional reason why the authors strongly recommend to interpose at least one company between the French movable assets and the trustee representing a foreign trust.
Yes, foreign trusts and private foundations are recognised in Liechtenstein.
Liechtenstein is a party to the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition (‘HTC’).
Article 13 of the Mexican Federal Civil Code establishes that legal situations validly created in a foreign State in accordance with their right, must be recognized.
Derived from the foregoing, foreign structures validly created under foreign law are recognized for Mexican legal purposes, so in principle, foreign trusts and private foundations should be recognized in Mexico (as long as they have been validly created in their country of incorporation), and they will receive the legal treatment that corresponds to them depending on the legal nature that they have in their place of incorporation.
Thus, if in its place of incorporation the trust is considered as a legal entity with legal personality and its own assets, in Mexico it will also be considered as a legal entity, receiving the legal treatment corresponding to that nature.
On the other hand, if the trust is considered in its place of incorporation as a contract, that same nature must be respected in Mexico. In this case, it is important to mention that in accordance with the same article 13, the legal effects of the contracts will be governed by the law of the place where they should be executed, so if the effects of such foreign trusts will be executed in Mexico, they shall be subject to Mexican legislation.
In the same line of thought, private foundations are recognized in Mexican law, having the corresponding effects depending on their legal nature according to their place of incorporation.
According to the Brazilian Civil Law, private foundation is an organization established through an endowment dedicated to a public interest cause and as such is not a succession vehicle.
As a civil law jurisdiction, Brazilian law does not have a specific regulation for trusts. On the other hand, a Brazilian resident might set up a trust in another jurisdiction provided that the originating funds come from legal sources. Consequently, the legal effect from the foreign trust must be respected by the Brazilian authorities.