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ISSUE NO.4 THE FRENCH SOCIAL CHARGES WHEN YOU SELL

22 Sep 2015

They are still on.  Sean O'Connor expects them to come off. Here's where we are on them.

Since August 2012, British Vendors of properties in France have had to pay, based on the amount of their French Capital Gain, French Social Charges totalling 15.5%.

 

The Social Charges consist of :

 

General Social Contribution

8.2%

Contribution to the Repayment of the Social Security Debt

0.5%

Social Deduction

4.5%

Solidarité Autonomie [helping disabled people to move around on mobility scooters]

0.3%

Financement du Revenu de Solidarité (RSA) [helping the State to pay the minimum wage

2.0%

TOTAL

15.5%

French Capital Gains Tax is at 19%. The Social charges bump up what you have to pay to 34.5%.

The French CGT is deductible for UK tax purposes under the Doubletax Treaty. The Social Charges are not.

In its Judgment of 26 February 2015 in the "Gerard De Ruyter" case, the Court of Justice of the European Union at Luxembourg ruled that the imposition of the French Social Charges on sales of French properties by British Vendors resident in the UK is contrary to European Union law.

Regulation (EEC) No. 1408/71 of the Council of the European Communities of 14 June 1971 has as its general purpose to bring it about that if during your working career you worked in say half a dozen countries of the European Union, and land up in let us say Spain, all of your contributions in the six different countries are cumulatively totted up, and Spain pays you your state pension accordingly. Under Article 13 of the Regulation : "Persons to whom this Regulation applies shall be subject to the legislation of a Single Member State only". So you can only be charged Social Contributions in one country at a time.

 

Gérard de Ruyter was employed by a Company in the Netherlands and paid his Social Security Contributions there. However, he resided in France and he also had investments in the Netherlands. France tried to hit him with Social Security contributions on those investments. The French Government asserted the payments demanded were not in fact Social Contributions at all but were taxes. That arguement failed.

It was also argued that Regulation 1408/71 only applied to contributions on a worker's salaried or self-employed income, not income from investments. That argument also failed. The European Union Court ruled that Mr de Ruyter could not be hit with the French Social Contributions because he was paying Dutch Social Contributions in the Netherlands where his employer was located. To hit Mr de Ruyter with contributions in both countries at once was contrary to Regulation 1408/71, Article 13. 

The French Council of State [Le Conseil d'Etat] is the highest administrative Court in France. By a Decision of 27 July 2015 the Council of State has implemented the decision of the European Court in the Gérard de Ruyter case, and has released Mr de Ruyter from the French Social Charges. 

 

The said Decision of the Council of State also accepted that the

de Ruyter Judgment applies to Capital Gains as well as to investment income.

 

The result of all this has been that the French Government has had to pay back Social Charges collected from UK Resident British Vendors of French properties during the period 2012 - 2015.

Under French Law, you must lodge your demand for repayment of Social Charges by 31 December of the second year next following the year in which they are paid. So if you paid in 2014, then you must lodge your claim for repayment by 31 December 2016. Obviously if you paid the Social Charges in 2015, you have until 31 December 2017 within which to lodge your demand for repayment.

If you have not done so, I suggest that you contact me whereupon

I will get you fixed up. Depending on how much you were initially ripped off, you will be seeing big bucks back.

 

Note that they are not repaying the 2% Christmas bonus mentioned above. So you only get 13.5% back, not 15.5%.

 

Now please draw a deep breath : the French Government have rejigged their system since 1 January 2016 to the effect that the Social Charges, although still levied, are not paid into the French social Security pot. By a sleight of hand therefore, they have got round "de Ruyter". They are now levying the Social Charges again on UK resident British Vendors of French properties. So if you are selling in 2016 or thereafter, bad luck, you have got to pay the Social Charges which, theoretically at least, are no longer 'Social'.