France’s highest administrative court has requested a European court ruling on the liability of certain foreign income of residents to social charges.
Over the past months we have carried several articles in our Newsletter concerning the liability of residents and non-residents to social charges (prélèvements sociaux) on their income.
The issue remains a contentious one, as the European Commission is taking infringement proceedings against France whom they consider to be in breach of European regulations in imposing the charges on the property income of non-residents.
In addition, local tax offices regularly and incorrectly impose the charges on the government service pensions, foreign rental income and pension income of expatriates in France, despite a raft of national and international regulations to the contrary.
A new twist has now emerged on this whole saga, for the French supreme administrative court, the Conseil d'État, recently considered a case concerning the imposition of social charges on a foreign life annuity (rente viagère) received by a Dutch salaried national who was resident in France.
The tax authority in France had imposed social charges of 15.5% on this income, despite the fact that it had already been subject to social security charges in the Netherlands.
A legal challenge to this assessment was made by the claimant, and in two separate judgements made by the court of appeal sitting in Marseilles in 2009 and 2010, he was successful in his claim.
However, in a case brought before the Conseil d'État in July the government appealed against these rulings.
In considering the case the Conseil d'État accepted that European regulations prevented the imposition on social charges on salaried or business income, where these were already subject to imposition in another Member State.
This was in line with Article 13 of European Regulation No 1408/71 of 14 June 1971, which states that an EEA resident could only be subject to the social security legislation of one Member State.
However, what remained unclear to the court was whether unearned income (revenus du patrimoine) was within the ambit of these regulations.
Within French law, such income includes rents, dividends, capital gains, as well as purchased annuities of the kind considered in this case.
The decision of the Conseil d'État was to annul the judgements of the lower courts, thereby making the life annuity income subject to the social charges, but to order a stay of proceedings on enforcement of the judgement pending a decision by the European Court of Justice (ECJ), to whom they have referred the matter.
The question sent the ECJ is as follows:
Des prélèvements fiscaux sur les revenus du patrimoine ......, présentent-ils, du seul fait qu'ils participent au financement de régimes obligatoires français de sécurité sociale, un lien direct et pertinent avec certaines des branches de sécurité sociale énumérées à l'article 4 du règlement du 14 juin 1971......... et entrent-ils ainsi dans le champ de ce règlement. '
Those waiting for an early response to this question may need to be patient, as it is likely to be two to three years before the ECJ gives its decision.