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French Taxation

Court Judgement Ends Social Charges Saga

Tuesday 09 July 2019

A legal decision in France ends the controversy over the liability of EEA residents to social charges and opens the door for new reimbursement claims to be made.

The liability of EEA residents to the social charges (prélèvements sociaux) on capital income and gains has been an issue that we have covered in these pages over many years.

The controversy has centred on whether social charges are a tax or a social security contribution.

The French government have argued in favour of the former, but successive court rulings in France and in the European Court have rejected this interpretation.

These cases have confirmed that the imposition of social charges in France on taxpayers already affiliated to a compulsory social security system in an EEA country (or Switzerland) was considered to be contrary to the principle of unity of social security legislation within the meaning of European law.

As a result, EEA residents who are not affiliated to the French social security system are not liable for the social charges on their capital income and gains, or on pension income.

This exemption has been more readily accepted by French tax offices on the pension income of EEA retirees in receipt of an S1 certificate of entitlement, as it derives from separate legislation in France, but the liability of capital income to the charges has been maintained, for both residents and non-residents.

Last year, the government finally caved in to the inevitable and abolished social charges on the capital income and gains (revenus du patrimoine) for eligible individuals, albeit substituting in their place a 'solidarity tax' (prélèvement de solidarité) at the rate of 7.5%. The proceeds of this new tax are allocated to the general budget, not directly to social or health expenditure.

The changes were operative for income earned in 2018 and capital gains arising from 2019.

As a result, eligible individuals who paid social charges in 2018 on the sale of a property in France can now make application for a refund of the charges on any capital gain they may have made.

In addition, this month the government lost a case in the Conseil d'Etat, arising from a judgement in the Court of Appeal sitting in Nancy in 2018, 

This definitive ruling means that claims for 2017 can also now be made.

Prior to this date claims are time expired, although those who have previously made a claim should be eligible for a reimbursement. 

If you seek assistance with making a claim then most of the legal cases brought in this dispute have been made by avocats Goffin Van Aken, a bi-lingual cabinet based in Strasbourg, who have a page on their website where you can fill in an English language on-line form to make a claim.

On capital income and gains for 2016 and 2017 the social charges were at the rate of 15.5%, but they were increased to 17.2% in 2018. Lower rates apply on pension income.

The ruling does not apply to those who live outside of the EEA, as the French Constitutional Council has previously ruled that only those covered by EEA are eligible.

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