French Social Charges and Non-Residents

The Court of Justice of European Union has ruled that it was illegal for France to charge social charges on the income and capital gains of non-residents from within the European Economic Area.

In the French system of taxing income from assets and capital gains, the taxpayer does not only pay income tax, but also social security contributions (“prélèvements sociaux”) called “Contribution Sociale Généralisée” (CSG) and “Contribution au Remboursement de la Dette Sociale” (CRDS) that are currently at a rate of 15.5%, that come on top of the income tax of 19%, bringing the total to 34.5%.

It was only in 2012 that non-residents, including Belgian residents, had to start paying these social security contributions, from 1 January 2012 on rental income from properties and from 17 August 2012 for capital gains.

A Dutch national who lived in France but worked for a Dutch company had received annuities from Dutch insurance companies. The French tax authorities considered those annuities as “unearned income” and charged CSG and CRDS. The Dutch national was subject to the social security scheme in the Netherlands, argued that in accordance with EU Regulation No 1408/71 regarding the coordination of social security systems within the EEA, he could be subject to only one social security system. Since his income had already been liable to social security in the Netherlands, they could not be subjected to any social security again in France.

France has always argued that the social charges were part of the more general system of taxation, a view that has not been accepted by the ECJ.

The Conseil d’Etat referred the question to the Court of Justice which decided that

Regulation No 1408/71 must be interpreted as meaning that levies on income from assets, such as those at issue in the main proceedings, have, when they contribute to the financing of compulsory social security schemes, a direct and relevant link with some of the branches of social security listed in Article 4 of that regulation and thus fall within the scope of the regulation, even though those levies are imposed on the income from assets of taxable persons, irrespective of the pursuit by them of any professional activity.

So the court stated that:

The same conclusion must follow with regard to the levies at issue in the main proceedings, which are not imposed on the employment income and substitute income of workers, but which are imposed on income from assets, since it is not in dispute that the proceeds of those levies are allocated specifically and directly to the financing of certain branches of social security in France or to the discharge of their debts.

In other words, the CSG and the CRDS cannot be charged on the income from assets of a French resident, if he is liable to the social security scheme of another State of the Union.

Similarly, income from French real property received by French non-residents, who are liable to social security in another EU Member State also escape CSG and CRDS. That is good news for Belgian residents who have real property in France. And those who have recently sold their second home in France, and had to pay the social security contributions, they may still have time to file a complaint against that the social security contributions.

As a general rule, a claim for refund of overpaid taxes can be brought up to two years following imposition. The deadline to appeal in respect of the charges paid in 2013 is 31 December 2015.

De Ruyter (numéro C-623/13)

Author: Marc Quaghebeur

Marc Quaghebeur is a Belgian tax lawyer with Cabinet DAVID specialising in international tax issues and cross border estate planning. He is a member of the Brussels Bar and the Society of Trust and Estate Practitioners. He

Leave a Reply

Your email address will not be published. Required fields are marked *