A campaign has been launched against the imposition of social charges on the French property income of non-residents.
Retired UK resident Jane Elliott-Sturdee, who owns rental property in France, has started an on-line citizens petition against the imposition of social charges on the rental income of non-residents. Jane owns an unfurnished rental property in France, on which the 15.5% social charges have been imposed.
She faces this charge in addition to the basic 20% standard rate of taxation that is imposed on the rental income on non-residents, a total tax rate of 35.5%.
Her petition to the Prime Minister of France argues that the imposition of social charges ignores the fact that non-residents do not benefit from welfare services in France, that it is unjust, and that it is contrary to European regulations.
The petition goes on to argue that:
Ces mêmes non-résidents doivent acquitter leurs cotisations sociales dans leur pays de résidence. Les personnes concernées sont d’honnêtes citoyens, acceptant totalement la nécessité de payer l' impôt sur le revenu en France. Elles sont, par contre, très en colère contre cette obligation injuste de payer ces cotisations sociales, et voudraient attirer votre attention à leur détresse.
Since the petition was started earlier this year it has gathered nearly 500 signatories from around the globe. Many of them are French nationals living abroad who have rental property in France, which they let out. Indeed, French expatriates have been amongst the loudest critics of this tax.
Claiming a Refund
A further sign of the widespread discontent about this issue is a call by international tax and wealth management advisors 'Equance' for non-residents to submit a claim to their tax office against the payment of these charges.
The company do so on the basis that, even though it is likely the European Court will later this year find against France on these charges (see our article European Court to Sit on Social Charges), it is unlikely that there will be any retrospective application of the law. So it may not be possible to reclaim social charges paid up to the date of the judgement.
The consultants state: "il y a aujourd’hui fort à penser que la mesure qui impose aux non-résidents d’être soumis à des prélèvements sociaux sur leurs revenus fonciers et leurs plus-values immobilières, sera rendue inapplicable au regard de la jurisprudence de la Cour européenne de justice et notamment celle du 15 février 2000 qui avait condamné la France pour avoir appliqué la CRDS aux travailleurs transfrontaliers. Toutefois, cette suppression n’aurait pas d’effet rétroactif, ce qui signifie qu’elle ne serait valable que pour l’avenir et qu’aucun remboursement des prélèvements déjà acquittés ne pourra être demandé. Nous orientons donc nos clients vers une contestation, particulièrement en ce qui concerne les revenus fonciers, déclarable annuellement."
The company makes the point that there are time limits when such a claim (réclamation) can be made, time limits which differ for capital gains and rental income.
A claim for a refund of social charges on capital gains would need to be made before 31st December of the first year of imposition, whilst for rental income two years following the imposition of the charges is permitted.
In practice then, for claims against the imposition of the charges in 2013, non-residents should submit their claim following receipt of their tax notice (avis d'imposition) later this year.
More generally, there remains the issue of the different rates that apply on capital gains of non-residents of France. For those within the EEA the basic rate is 19%, whilst for everyone else it is 33%.
When social charges are added, that gives a basic rate of nearly 50%, to which may also be added the supplementary tax for large gains.
Several court decisions in France have gone against the French tax authority on this issue, yet non-EEA owners continue to be imposed at the higher rate.
The French courts have argued that differential rates of taxation go against the Treaty of Rome, which prohibits "all restrictions on the movement of capital between Member States and between Member States and third countries".
On this basis, non-residents outside of the EEA who have been imposed at the higher should also seek a refund of the overpaid taxes.
Furnished and Unfurnished Lettings
There continues to remain some uncertainty about the application of social charges to furnished lettings, but the growing evidence from you seems to be that non-resident landlords of furnished lettings are escaping the charges, which are only being imposed on unfurnished accommodation (revenus fonciers).
We would be very interested to hear from you on the social charges issue, and if you seek professional support in making a tax claim, then drop us a line at firstname.lastname@example.org and we will endeavour to point you in the right direction.