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ECJ offers favourable decision in relation to French social charges for non-residents

The European Court of Justice recently offered a favourable decision that will impact whether non-French residents owning French real estate will be subject to French Social contributions.

As many people know, since 2012, French non-residents have been subject to French social contributions (at a rate of 15.5%) on their French source rental income and their French capital gains.

In the case of a UK resident and domiciled individual this meant that they would be subject to French income tax and French social contributions on rental income generated in France. Under the UK-French double tax treaty, an individual is able to offset income taxes paid in both jurisdictions, but they are unable to offset the French social contributions.

On 26 February, the ECJ heard a case related to a Dutch national resident in France who argued that his requirement to pay French social contributions on his Dutch income were unjustified as this income was already subject to social contributions in the Netherlands. He argued that the French legislation triggered a double social charge on the same income which contradicted an existing EU state regulation which stated that a resident of an EU state may only be subject to social contributions in a single Member state. The French Supreme Court asked the ECJ for a preliminary ruling to understand if the levies on investment income had a direct link to the existing EU state regulation and in its ruling, the ECJ confirmed this link. As a result, they stated that French levies on investment income was against the EU regulation and that France unlawfully applied social contributions to the French resident on his Dutch income.

The ECJ ruling can be interpreted as removing the application of social charges to French non-residents. It remains to be seen what position France will take in reaction to the ruling. However, if you are affected by this, you should look into claiming a refund for social contributions paid in past years related to your French rental income or capital gains arising from real estate.

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