Foreign owners of property in France could be in line for a tax rebate – and it’s all thanks to a Dutchman.
Gérard de Ruyter was working in France between 1997 & 2004 for a Dutch company and received his salary in his native Netherlands. After declaring his income to the French tax authorities, he was sent a bill for social security contributions because he received income from life annuities he’d bought. It seemed irrelevant to the French taxman that de Ruyter was already paying tax on this income in the Netherlands.
A Landmark Decision
Mr de Ruyter took the taxman to court and won on appeal. The French state then contested the decision at the Conseil d’État (Supreme Court), who asked the European Court of Justice (ECJ) in 2013 as to whether the charges were against EU regulations and freedoms (C-623/13).*
It is estimated that the French government received €250 million a year thanks to claiming such social security charges from non-residents through this tax measure.1 The government made the move under the premise that the CSG and CRDS social contributions were legally considered as a ‘tax’ because they weren’t paid in return for rights to social benefits. As income from property in France is subject to tax, it provided an opportunity for the state to charge those with French property but not earning in the country.
In fact the treasury was looking for ways to recoup tax money, as over 35,000 households** were estimated to have left the country in 2011, 62% more than in 2010.2 This situation wasn’t helped by a number of high-profile public figures leaving in 2012 to avoid heavy tax bills: such as actor Gérard Depardieu who moved to a village 1 km inside Belgium; Bernard Arnault – head of luxury brands conglomerate LVMH; and Alain Afflelou, founder of the French opticians chain that bears his name.3
In stipulating who is liable to pay income tax, the French tax authorities’ website states that even if someone is not domiciled in France, they should still complete an income tax declaration if they own one or more homes there. However, it goes on to say that taxation of such people only applies according to international conventions to which France has signed.4
The end of the line was reached at the end of February this year, when the Luxembourg-based ECJ ruled that the French authorities did not have the right to subject the property income of people who paid salaries outside France to its social contribution charges.
The ECJ’s decision is based on an EU Regulation5 which prohibits different EU members’ social security systems from overlapping. The court decision goes on to say that this prohibition stands irrespective of the pursuit of professional activity, so applies to both active and passive income. That means that those who contribute to another EU country’s social security system are not – and should not have been in the past – subject to French social contribution charges.
Implications
The Ruyter decision has far-reaching consequences. Since 2012, the estimated 350,000 people who cross borders to work (and therefore are paid outside France), as well as around 60,000 non-residents6 who own property in France, have had to pay French social contributions of 15.5% on income from rent or capital gains made.
Those who contribute to other EU-countries’ social security systems should, in theory, qualify for a reimbursement of the French social contributions they have had to pay between fiscal years 2012 and 2014.7 What remains to be seen, however, is how the ECJ decision will be applied to those living outside the EU, and whether they will also qualify for a refund of the 15.5% social contribution charge.
On a positive note there is a precedent: in October last year France’s Conseil d’État ruled, in a case involving Swiss taxpayers, that that there should not be a higher tax on property capital gains for non-EU residents than for those living in EU member states. The court decided that the 33.33% rate – as opposed to the 19% rate applied to EU-residents – was incompatible with the EU principle of freedom of movement of capital8 and the double taxation avoidance agreement (DTA) between France and Switzerland.9
As France’s Supreme Court applied EU principles to those living outside the bloc and given that France has DTAs with 108 countries and territories around the world, this could mean that the same will apply to refunds for the illegal social charges.
Getting a Rebate
This possibility has yet to be tested; but if you are resident outside the EU and have paid social contributions on property in France, it may be worth applying for the refund anyway.
To apply to get your money back, contact the Tax Office for Non-Residents:
e-mail: sip.nonresidents@ dgfip.finances.gouv.fr
Tel.: +33 1 57 33 83 00
Postal address: Service des impôts des particuliers – Non-résidents
10 rue du centre
TSA 10010
93 465 Noisy le Grand Cedex
France
Further Information
Of course, every case is different; so there are no guarantees of whether you will qualify for a refund and, if so, how much. With that in mind, it’s best to seek advice.
The European Commission provides free information on taxes in all EU countries at the following address: http://europa.eu/youreurope/citizens/work/taxes/index_en.htm
You can also e-mail a specific question to them at: http://europa.eu/europedirect/index_en.htm
* The full ECJ decision is available at the following addresses:
English version:
http://curia.europa.eu/juris/document/document.jsf?text =
&docid=162537&pageIndex=0&doclang=EN&mode=r
eq&dir=&occ=first&part=1&cid=180664
French version:
http://curia.europa.eu/juris/document/document.jsf?
text= &docid=162537&pageIndex=0&doclang=
FR&mode= req&dir=&occ=first&part=1&cid=180664
** Households, not individuals, as married couples/official partners count as one fiscal entity in France.
Footnotes:
1 www.lesechos.fr/21/11/2014/LesEchos/21819-015-ECH_
fiscalite-des-non-residents—paris-sous-la-menace-d-une-
condamnation.htm?texte=fiscalit%C3%A9%20des%20non-
r%C3%A9sidents#gCT7X0YW6eVQDm0z.99
2 http://lexpansion.lexpress.fr/actualite-economique/qui-
sont-ces-contribuables-qui-quittent-la-france_1432775.html
3 http://www.lepoint.fr/economie/exil-fiscal-arnault-depardieu-
afflelou-a-qui-le-tour-22-12-2012-1605343_28.php
4 http://www.impots.gouv.fr/portal/dgi/public/particuliers.impot?espId=
1&pageId= part_impot_revenu&impot=IR&sfid=50 (then click Qui paie l’impôt)
5 Regulation (EEC) No 1408/71 of the Council of 14 June 1971
6 http://www.lesechos.fr/economie-france/social/0204186339545-fiscalite-
des-non-residents-la-cour-de-luxembourg-donne-tort-a-la-france-1096998.php#
7 http://www.lesechos.fr/journal20150227/lec1_france/0204186892578-la-
cour-de-justice-de-luxembourg-contraint-bercy-a-rembourser-de-la-csg-et-de-la-crds-1097261.php#
8 Article 63, TFEU, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:12008E063
9 www.legifrance.gouv.fr/affichJuriAdmin.do?oldAction=rechJuriAdmin&idTexte=
CETATEXT000029614374&fastReqId=922148356&fastPos=1
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