Civil Law Countries and Trusts

Trusts have been in existence since the 11th century and are commonly used in, and recognised by, common law countries (e.g. the UK).

However, such recognition and use of trusts by civil law countries (e.g. Spain and most of Europe) does not currently exist.

The fact that a trust is a common law principle complicates the possibilities in civil law countries.

A step towards the recognition of trusts in civil law countries was the 1985 The Hague Convention on the Law Applicable to Trust and on their Recognition.

This accepted the basic concept of trusts as being separate legal entities where trusts are not now within domestic jurisprudence.

On 20 December 2006, Switzerland joined the only other two civil law countries that have ratified the Convention so far; the Netherlands and Italy. It became fully effective in Switzerland on 1 July 2007.

However, the ratification of the Convention does not necessarily result in a clear treatment and position of a trust by the tax authorities concerned, unlike in common law countries.

This much is evident from various court cases which have taken place since the ratification of the Convention.

Additionally, even where a trust is recognised under a jurisdiction‚ the civil law, it does not imply that it is recognised under its tax law as well.

Although it may seem from this that common law trusts could not be tax beneficial in a civil law situation, a desirable outcome remains possible with careful planning and timing.

We have extensive experience in using trusts for non-nationals now residing in civil law jurisdictions.

Note that UK tax law relating to domicile, particularly in relation to trusts, changed in 2006. Click here for full details.

To discuss how we can help you, please email us or telephone us on Gibraltar (+350) 200 42686 and ask for a member of the Trust and Companies Team.