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French Taxation

Non-Europeans and Social Charges

Tuesday 04 April 2017

The French Constitutional Court has ruled that non-Europeans are obliged to pay social charges on investment income.

The legal dispute surrounding the imposition of social charges on non-residents/non-affiliates rolled into the French Constitutional Court last month, when the court was asked to rule on the question of whether the imposition of social charges on non-Europeans was legal.

The issue is one that affects both residents and non-residents alike, as it turns on whether or not they are affiliated to the French social security system.

Previous rulings in the European Court of Justice and within France have confirmed that EEA nationals not affiliated to the social security system in France were not liable for the charges on their investment and property income and capital gains.

Nevertheless, the government had been unwilling to apply the same principle to non-Europeans, stating that they intended to treat differently Europeans and other nationalities: "Sous réserve de justifier qu'ils sont bien concernés par cette décision de justice, les contribuables bénéficieront du remboursement des sommes acquittées pendant qu'ils étaient affiliés dans un autre État de l'Union européenne."

However, in considering the liability of EEA nationals the French courts made no reference to their country of residence, merely using as the basis for their ruling whether the individual was affiliated to the French health system.

The referral to the Constitutional Council arose precisely on this point, with a couple owning property in Provence-Alpes-Côte d'Azur arguing that the difference in treatment was discriminatory and in breach of the Constitution.

However, last month the court ruled that European law was not applicable outside of Europe and that:

En revanche, le règlement européen du 29 avril 2004 n'étant pas applicable en dehors de l'Union européenne, sauf accord international le prévoyant, ses dispositions ne font pas obstacle à ce qu'une personne relevant d'un régime de sécurité sociale d'un État tiers soit assujettie à cette contribution.

In coming to their view they stated that the principle of equally before the law did not imply that lawmakers had to treat everyone the same, stating:

Le principe d'égalité ne s'oppose ni à ce que le législateur règle de façon différente des situations différentes, ni à ce qu'il déroge à l'égalité pour des raisons d'intérêt général, pourvu que dans l'un et l'autre cas, la différence de traitement qui en résulte soit en rapport direct avec l'objet de la loi qui l'établit.

As the European law had been put in place to within the specific framework of the operation of the social security system across Europe it had no bearing on nationals living outside of the EEA.

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