EU resident individual taxpayers who have paid French social taxes (contribution sociale généralisée (CSG), contribution au remboursement de la dette sociale (CRDS) and prélèvements sociaux) on France-originating real estate income or capital gains for years 2012 onwards, and are subject to social security contributions in another EU jurisdiction, should consider submitting a claim to obtain a refund of the French social taxes, no later than 31 December of the second year following the year during which the social taxes were paid.
Extended Scope of French Social Taxes
Since 2012, in addition to applying withholding taxes, France has levied social taxes (CSG, CRDS and prélèvements sociaux) on France-originating real estate income and capital gains received by non-French resident individuals, at the aggregate rate of 15.5 per cent.
The French tax authorities generally consider that French social taxes are within the scope of the relevant tax treaties entered into by France. If, however, the tax authorities of the individual’s jurisdiction of residence do not agree, those French social taxes do not give rise to any tax credit to be offset against the tax owed by the individual in his or her jurisdiction.
Compliance With EU Rules
EU Regulation 883/04 of 29 April 2004 generally provides that employment income received by an individual in various EU Member States is subject to social security contributions in just one EU Member State. This is usually the State where the individual performs his or her professional activity, or the State where he or she resides, if he or she performs at least part of the employment activity in that State.
The French tax authorities generally consider that these EU rules do not apply to French social taxes, as they consider them to be “taxes” and not social security “contributions”, regardless of whether or not the individual is affiliated with another EU social security regime.
The Court of Justice of the European Union (CJEU) ruled in 2000 however, that French social taxes on employment income are within the scope of EU Regulation 1408/71 of 14 June 1971 (replaced by EU Regulation 883/04 of 29 April 2004, which came into force as of 1 May 2010), as they are used to finance the French social security system (CJEU, 15 February 2000, 169/98 and 34/98).
In 2013, the French Supreme Administrative Court submitted to the CJEU a reference for a preliminary ruling in a case where French social taxes were levied on Netherlands-originating life annuities payments, even though the beneficiary, a Dutch citizen and French tax resident, worked exclusively in the Netherlands and was subject to Dutch social security contributions in respect of those payments, (CE, 17 July 2013 n° 334551 and 342944, de Ruyter).
The Advocate General (AG), Ms Eleanor Sharpston, published her opinion on this reference at the end of last year. Ms Sharpston believes French social taxes on investment income should also be within the scope of EU Regulation 1408/71. She considers that, even though investment income is not related to any professional activity, the EU Regulation should be applied to all the taxes intended to finance the social security systems of the various EU Member States.
Implications and Next Steps
If, as expected, the CJEU follows the AG’s opinion when it gives its ruling later this year, EU resident individuals who are subject to social security contributions in another EU Member State, e.g., because they are working in that State, should be exempt from French social taxes on France-originating investment income under EU Regulation 883/04, which follows the same general principles as those in Regulation 1408/71.
As a result, EU resident individuals who have paid French social taxes on France-originating real estate income or capital gains with respect to years 2012 onwards, and are subject to social security contributions in another EU Member State, may be eligible for a refund. They should submit their claims to the French tax authorities no later than 31 December of the second year following the year during which the French social taxes were paid, i.e., no later than 31 December 2015 for social taxes paid in 2013.
If the French tax authorities reject the claim, or do not reply within a six-month period (a deemed refusal), the taxpayer will be entitled to bring the claim before the competent administrative lower court during a two-month period following the notification of the refusal or, in case of a deemed refusal, following the end of the six-month period, but without any filing delay.
Lower courts decisions are generally rendered within two years following commencement of the action.
If the court decision is not satisfactory, an appeal can be brought before the competent administrative court of appeal and, ultimately, before the Supreme Administrative Court in case of a breach by the court of appeal of a rule of law.