Non-residents’ CSG ruled illegal

FRANCE’S policy of levying the 15.5% social contributions on income from non-residents renting out or selling French homes has been deemed illegal by the European Court.

The ruling from the court today should have a knock-on effect on French law, paving the way for possible reimbursements and potentially halting further levying of the charges – Connexion will be investigating the impact further for our April edition.

A spokeswoman for the central tax authority said today however it was too early to say exactly how the decision will be put into practice in France. “Decisions will have to be taken as to how it is applied and whether or not it will be considered retroactive,” she said.

The policy of charging non-residents dates from August 17, 2012 for property capital gains and from January 2012 for rental income, and the question of its legality was initially raised by an MP for French expats in Switzerland, Claudine Schmid.

Follwing her lobbying, the European Commission initiated infringement action against France which was, however, halted when France’s Conseil d’Etat took a case to the European Court. This asked the court to rule on the link between the social contributions and the French social security system, especially with regards to ones levied on income from property.

The issue revolved around whether levies like the Contribution Social Généralisée (CSG) and Contribution au Remboursement de la Dette Sociale (CRDS) are - in relation to EU law – ‘real social charges’ with a strong link to France’s social security system. If so, non-residents should not pay them because EU rules state that people should only be subject to these in one country.

The court had previously ruled this to be the case with regard to contributions levied on income from work. Today’s ruling extends this to other kinds of income, including property income, as well.

The court stated today that where someone is subject to the social security scheme of one member state they should not also have to pay social security levies in France.

The most urgent effect will be on people about to sell a French home, who will wish to take legal advice about whether the charges will be levied on the sale by the notaire.

Regarding possible reimbursements, if you have already applied speculatively to the tax office for overseas residents for reimbursements of previous payments, as we suggested doing in September’s issue, today’s decision will have strengthened your case.