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Brexit - Non-Residents and Social Charges

Wednesday 10 February 2021

There is every indication that UK residents with income earning assets in France remain partially exempt from the social charges.

Until the 31st of December 2020, which marked the end of the transition period, non-residents from the UK could obtain a refund of social charges on their capital gains and rental and investment income in France.

This action on the basis of EU law is no longer open to them since the 1st January 2021 due to the UK's exit from the European Union.

However, under the terms of the Trade and Cooperation Agreement (TAC) signed on the 24th December 2020 between the EU and the United Kingdom, there may be an alternative legal basis for UK non-residents to obtain an exemption from the charges, and be eligible for a refund if they have paid them.

Social Security Agreement

The TAC includes a Protocol on Social Security Coordination.

Just like European Regulation 883/2004, which served as a basis for the claim for reimbursement, the Protocol lays down the principle of single applicable legislation, with Article SSC.10 stating:

“Persons to whom this Protocol applies shall be subject to the legislation of a single State only. Such legislation shall be determined in accordance with this Title.

Under these provisions, persons employed, self-employed or retired in the United Kingdom can only be covered by United Kingdom social legislation.

If so, that raises the question of whether they are required to pay French social charges.

As a result, income from the assets would not have to be subject to social security contributions at the overall rate of 9.70%, although they would remain liable for the solidarity tax of 7.5%.

This conclusion is based on the same reasoning that the European Court of Justice followed in its famous "De Ruyter" decision.

This case law was based on the "direct and relevant link" between levies on income from assets (such as CSG and CRDS) and the financing of compulsory social security schemes.

However, the Protocol on social security coordination in the TAC covers exactly the same social security branches as European Regulation 883/2004 (excluding family benefits).

Article SSC.3 of the Protocol thus reproduces almost word for word Article 3 of Regulation 883/2004.

In the same way, Article SSC.10 corresponds exactly to Article 11 of Regulation 883/2004 on single applicable law.

Unlike other third countries, the United Kingdom is thus bound to the European Union by a Protocol on Social Security Coordination, which sets as a guiding principle the uniformity of applicable legislation.

While the United Kingdom would become a third state not subject to European Regulation 883/2004, the continuation in the Protocol of the guiding principle of this regulation, i.e. the single applicable legislation and the identical listing of the same social security branches, which have a "direct and relevant link" with the CSG-CRDS levies, should lead to the exemption from these social contributions of those falling under British social legislation.

Legal Challenge

The United Kingdom wished to guard against any direct effect of the agreement, which is designated as a treaty under international law not subject to European law and relevant clauses are included in the TAC.

Nevertheless, Article SSC.67, contained in the Protocol on Social Security Coordination, provides an exception concerning individual rights:

1. The Parties shall ensure in accordance with their domestic legal orders that the provisions of the Protocol on Social Security Coordination have the force of law, either directly or through domestic legislation giving effect to these provisions, so that legal or natural persons can invoke the said provisions before domestic courts, tribunals and administrative authorities.

2. The Parties shall ensure the means for legal and natural persons to effectively protect their rights under this Protocol, such as the possibility to address complaints to administrative bodies or to bring legal action before a competent court or tribunal in an appropriate judicial procedure, in order to seek an adequate and timely remedy.

It is, therefore, up to each State to ensure that the Protocol has the force of law, either directly or through legislative provisions transposing it. The aim, in any event, is to enable litigants to avail themselves of the provisions of the Protocol before national administrations and courts.

Under these provisions, the British taxpayer should be entitled to invoke the content of the law-binding protocol to obtain restitution of the CSG and the CRDS.

The Strasbourg-based law firm GOFFIN VAN AKEN has successfully carried out mass actions on behalf of UK taxpayers to obtain on their behalf the reimbursement of social security contributions on their income from assets in France.


Clint Goffin Van Aken, Avocat


Related Reading:
  • Guide to French Income Tax
  • French Tax News
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