Non-residents can claim refunds on social charges

A long-running saga about social charges for non-residents and others who are not part of the French social security system is coming to an end with a reduced rate of 7.5%.

The issue concerns social charges on non-residents’ capital gains on second homes and income from renting out property in France.

Social charges are applied in addition to tax and were previously at a set rate of, for example, 15.5% for rental income.

It can also relate to people who live here but are not affiliated to French social security, in relation to capital gains and also investment income such as shares or bank interest.

This is the case with British state pensioners who have their healthcare paid for by the UK under the EU’s S1 scheme.

The reduced rate takes effect this year and it is possible to claim refunds for previous years.

The issue dates to a case – De Ruyter – at the European Court of Justice (ECJ) where it was found that someone should not have to pay social charges in more than one EU country.

This was confirmed by the French courts and those affected obtained refunds of charges paid in previous years.

Then, from 2016, France changed the way money from the social charges (notably CSG and CRDS) was used, making it fund non-contributory benefits.

It considered that this change resolved the problem.

The next change came in summer 2018 (see when Nancy’s administrative appeal court ruled that the charges were still linked to social security, apart from one small part, on which it asked for clarification from the ECJ.

The government appealed to France’s top administrative court, the Conseil d’Etat, and a ruling is awaited.

Avocat Clint Goffin van Aken, who specialises in this area, said it is highly likely the Conseil d’Etat will confirm the ruling and refund payouts can be made from then.

He said that in March this year the ECJ confirmed that France should not have levied any of the charges, including the contested part.

The rulings concerning the illegality of the charges relate only to people who live in an EU or EEA state, or Switzerland, or who live in France and are affiliated to the social security system of another such country.

Any Britons concerned are advised to apply for refunds as soon as possible to avoid complications due to Brexit, after which they will become non-EU citizens.

Refunds may still be possible for Britons later but Mr Goffin van Aken said it is less legally certain. This issue may pose less of a problem if the UK leaves with a deal, he added.

From this year, in an attempt to resolve the problem once and for all, France has axed the main social charges for property/investment incomes for the group concerned, though there remains an amount of 7.5% called prélèvement de solidarité.

Mr Goffin van Aken said this is probably not contestable as it is more an ordinary tax than a real social charge linked to funding social security.

You can claim refunds up to the end of the second year after the one when the charges were levied, so you have until the end of this year to make claims for charges on property sales in 2017 or money you paid in 2017 on incomes from 2016 (eg. from rental income you declared).

There is a minor exception in the case of property sales at the end of 2016, where charges were only paid at the start of January.

Interest can also be claimed. Mr Goffin van Aken said this amounts to 2.2% per year on the amount of the social charges claimed since the day they were levied.

Refund claims, whether made alone or with the help of a professional, are made to your local tax office (or the non-residents’ tax service) or the one for the place where the property is situated in the case of capital gains.

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