We have previously commented upon the illegality of France’s stance on
imposing social charges on Capital Gains Tax, (and other forms of income), for
non-residents.
Now, the European Commission has started “infringement” proceedings
against France because of the imposition of social charges on the property
income of non-residents.
In a recent test case, a Swiss couple have won their
case against the French Government, after they had been charged the higher rate
of tax + social charge on their sale of a ski property. They believed that under European law (Article 56 on free circulation of
capital) they should have been entitled to the lower rate, and so they sought a
reimbursement of the overpaid tax, which was subsequently refused by the French
tax authorities. This has now been overturned in their favour, and the French court has been judged discriminatory the imposition of a higher
rate of capital gains tax on a non-resident.
In a previous landmark judgement in
February 2000, the European Courts confirmed that individuals should only be
required to pay social charges in the country in which they were resident. This
judgement was ignored by the French Constitutional Council.
Since 2012,
non-residents with property in France have been liable for these social charges
(prélèvements sociaux) on the capital gains from the sale of property / real
estate and also rental income.
The rate of
capital gains tax on the sale of property / real estate in France differs
according to whether or not you are EEA resident. For those who are resident in
France or another country of the EEA, the basic rate of tax is 19% at present,
and for those outside of the EEA the rate is 33.3%. In addition to this basic
rate France is adding the social charges at the rate of 15.5%.
In a recent reply
to a question from a MEP, the Commission stated that "the French
authorities have been consulted on the conformity with European law of the
extension of CSG and CRDS on the property income received by non-residents. After
a deep analysis of the response of the French authorities, the Commission are
of the opinion that social levies on unearned income are allocated specifically
and directly to financing social security in France and therefore have a
sufficiently relevant link the laws of the branches of social security within
the meaning of Article 3 of Regulation (EC) No 883/2004. An infringement
procedure has been opened and a letter of formal notice is being
prepared."
In the meantime, those who face liability
to these charges will continue to be obliged to pay them, although they are
equally entitled to contest the charge through the formal complaints
procedures, and ultimately lodge an action in the French courts.
