Court victory on social charges

REIMBURSEMENT of French social contributions levied on non-residents – and cancellation of the charges in the future – is now expected as France’s top administrative court backed a decision by the European Court of Justice (ECJ).

This comes as the European Commission has also started formal infringement procedures against France for levying the charges on non-residents.

The Conseil d’Etat has confirmed the application in France of an ECJ ruling earlier this year that someone who is subject to another country’s social security regime should not have to pay the 15.5% of French charges (CSG, CRDS, prélèvement social and contribution additionnelle) on income from property.

Those who are eligible for refunds and who have not yet lodged claims are advised to do so as soon as possible.

Legally, claims can be made until the end of the second year when the levy was made, for example the end of this year for levies paid on property capital gains in 2013 or for levies paid in 2013 on income from rentals in 2012 (see Page 25 of the August edition of The Connexion for more on how to claim).

Strictly speaking, the Conseil’s ruling relates to one man, Gérard De Ruyter, who is a French resident but works abroad and is subject to another country’s social security system. However, experts believe it will almost certainly apply to non-residents, who have been paying the charges on their French property income since 2012.

The Conseil’s ruling acknowledges the ECJ’s assessment that the social contributions are ‘real social charges’, linked to financing the French social security system, not just taxes (as usually claimed by France), so it is not appropriate for them to be charged to people who fall under another country’s system.

A senator for French expats, Richard Jung, said in a statement: “I am delighted by this decision, which was eagerly awaited. Now it’s up to the government to work out the impact as far as non-residents are concerned.”

He said it is understood that a special unit in the Finance Ministry will be set up now to process the reimbursement requests. The government is understood to have set aside half a billion euros over two years for repayments, though Mr Jung believes the full amount could come to even more.

The government will also have to specify if the decision applies equally to non-residents who live outside the EU. Though the ECJ ruling related especially to EU law, Lawyers have told Connexion that on principle refunds are likely to be made to people everywhere.

The government will also now have to make legal changes relating to the levying of the charges, which are expected to be worked out this autumn. Mr Jung said the simplest approach would be to annul the earlier law which made non-residents subject to the charges.

He said the matter also makes it urgent that the nature of the social contributions be reviewed generally, since France’s interpretation of them is in conflict with the EU. It is a major issue – the main charge, CSG, alone, brings in €90 billion (more than income tax) – and France has been reviewing a possible amalgamation of income tax and social charges.

This comes as the European Commission also attacked the charges, specifically in the case of non-residents.

It had started preliminary action against France but put it on hold pending the outcome of the De Ruyter case. Now MP for the French in Switzerland Claudine Schmid, who has long campaigned against the charges on non-residents, has received confirmation that an official letter putting France on a warning was sent last month.

The letter gave France two months to present any arguments justifying its policy, which is the first stage in a process that can lead to a country being sued in the European Court.