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Social Charges Exemption Procedures

New declaration procedures have been put in place to claim exemption from social charges on capital income and gains.

As regular readers of our pages will be aware, last year the French government finally conceded to a succession of rulings in the French courts and in the European Court of Justice that the imposition of social charges on certain income of EEA households who were not affiliated to the French social security system was illegal.

The social charges in question are the Contribution Sociale Généralisée (CSG) and the Contribution au Remboursement de la Dette Sociale (CRDS), imposed at the rate of 17.2%.

Article 26 of the loi de financement de la sécurité sociale 2019 states that EEA residents, whether or not domiciled in France for tax purposes, covered by a social security scheme within the EEA or Switzerland are exempt from these charges on their capital income and gains.

The change was operative from Jan 2018 for capital income, such as rental income, savings and dividends, and for capital gains on property and shares arising from January 2019.

In place of the social charges there is a solidarity tax at a rate of 7.5%, the proceeds of which are allocated to the general budget.

In the case of savings and investment income and capital gains, at the present time a deduction at source of social charges is made by the banks and financial institutions.

The Government have now published a decree which specifies the procedures to be adopted to obtain exemption from deduction at source:

i. Income - In relation to capital income it is necessary to produce a sworn declaration (attestation) to banks and financial institutions to permit them grant the exemption from the social charges in capital income. 

The declaration is valid for three years, provided you are still exempt.

The fact that an investor may be able to produce an S1/A1 certificate, which confirms their affiliation to another EEA social security system, will not be sufficient evidence for the financial institution to exempt them from deduction at source. The sworn statement is required.

It is anticipated that the bank will produce their own versions of this declaration.

ii. Gains - In the case of capital gains on investment products the S1/A1 forms or other official statement can be accepted as proof of evidence to obtain deduction at source on such gains, without the need for an accompanying sworn declaration. 

Whilst the two forms should be easily accomplished, non-residents may find it difficult to supply appropriate evidence that they are affiliated to the social security system of their home country. Such statements are not readily issued by the authorities, and a social security number does not appear to be adequate proof.

To deal with deductions at source already made, there is provision in the legislation for the beneficiary to advise the financial institution, who are then able to make a retrospective refund, or for the household to produce it to the tax authority, who can do the same.

A significant omission from the decree is the procedure to be adopted by notaires in the deduction at source of social charges on capital gains from the sale of real estate. The decree only covers 'produits de placement', ie, investment products. Notaires may therefore be obliged to make their own decision as to whether they deduct at the standard rate of 17.2% or accept the evidence provided. The indications to date are that they are deducting at the standard rate, with the need for their client to then claim a refund from the tax office. 

In relation to rental income received in France, which is also exempt from social charges, no declaration is required under the decree as there is no deduction at source. 

Your recent mails to us do also indicate that where you have made application for exemption on such income for 2018 it has been granted by the tax authority, who have imposed a 7.5% solidarity tax charge.

Nevertheless, with publication of the new decree, it can be anticipated that the nuances of it all will be lost on some tax offices, who may require you produce such a declaration.

The declaration requires that the person is able to provide (if requested) either an S1 or A1 certificate, or a statement from their social security authority.

The model declaration is shown below, which it is anticipated will be produced by the banks and financial institutions for their client to sign. However, it is quite likely that in most cases the client will need to initiate the process.

ATTESTATION SUR L’HONNEUR


(Articles L. 136-7 du code de la sécurité sociale, l’article 16 de l’ordonnance n° 96-50 du 24 janvier 1996 relative au remboursement de la dette sociale, et D. 136-1 du code de la sécurité sociale)

Je soussigné

demeurant xxxxxxxxxxx

Demande à être dispensé du prélèvement de la contribution sociale généralisée (CSG) prévue à l’article L. 136-7 du code de la sécurité sociale et de la contribution au remboursement de la dette sociale (CRDS) prévue par l’article 16 de l’ordonnance n° 96-50 du 24 janvier 1996 relative au remboursement de la dette sociale.

J’atteste sur l’honneur que, par application des dispositions du règlement (CE) n° 883/2004 du Parlement européen et du Conseil du 29 avril 2004 sur la coordination des systèmes de sécurité sociale, je relève d’une législation soumise à ces dispositions, et que je ne suis pas à la charge d’un régime obligatoire de sécurité sociale français.

Je relève, depuis le …/…/ (date d’ouverture des droits), dans l’Etat de (préciser l’Etat d’affiliation ou adhésion au Régime commun de l’Union européenne), de la caisse de protection sociale (préciser l’organisme d’affiliation), en qualité de (rayer les mentions inutiles) : Travailleur salarié / travailleur non-salarié / titulaire d’une pension ou d’une rente (retraite, invalidité, accident du travail et maladie professionnelle) / autre (préciser)

J’atteste être en possession de l’une des pièces suivantes, en cours de validité à ce jour et m’engage à la produire à toute demande de l’administration :

1° Le formulaire S1 « Inscription en vue de bénéficier de prestations de l’assurance maladie » délivré en application des règlements européens (CE) n° 883/04 et (CE) n° 987/09 et mentionnant l’affiliation de la personne auprès de l’un des États membres de l’Union européenne, de l’Espace économique européen ou en Suisse ;

2° Le formulaire A1 « Certificat concernant la législation de sécurité sociale applicable au titulaire » délivré en application des règlements européens (CE) n° 883/04 et (CE) n° 987/09 ;

3° Une attestation d’affiliation équivalente aux formulaires visés aux 1° et 2°, délivrée par l’institution auprès de laquelle la personne est affiliée ;

4° Une attestation d’affiliation au régime commun de sécurité sociale des institutions de l’Union.

Je m’engage à signaler à l’établissement payeur tout changement dans ma situation en matière de sécurité sociale, dans le mois suivant celui-ci, et à régulariser spontanément, en tant que de besoin, ma situation en matière de prélèvements sociaux dans le cadre de ma déclaration de revenus.

Je m’engage également à tenir à la disposition de l’administration toute pièce justificative visée ci-dessus, en cours de validité pour la période au titre de laquelle je demande à être dispensé des contributions susmentionnées.

J’ai conscience que la présente attestation est valable pour une durée maximale de trois ans et qu’à l’issue de cette période, le maintien de la dispense des contributions susmentionnées est conditionné à la transmission d’une nouvelle attestation, toutes conditions de fond par ailleurs remplies.

Je certifie l’exactitude des informations portées sur ce document.

J’ai conscience que cette déclaration m’engage et que toute fausse déclaration, ou tout manquement à l’obligation de signaler un changement de situation, est susceptible de m’exposer, outre le paiement des impositions éludées, à des majorations fiscales et, le cas échéant, à des sanctions pénales.

Fait à xxx, le (Signature)

Related Reading:

This article was featured in our Newsletter dated 10/09/2019




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