French social charges: the chances of success

 In Comment

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This article is an update to the position provided in Florence’s article “Sale of French properties:  Franco-British Capital Gains Tax considerations”.  It relates to further EU law and development in French internal Law since the original article was written in January 2015

The chances of success of your clients’ claims for a refund are increasingrefund French social contributions to EU residents

On 26 February 2015, the European Court of Justice (ECJ) gave its long awaited ruling on the application of the French social contributions to EU residents who already contribute to the social security system of another EU country (case C-623-13-Mr De Ruyter).

Although the decision was based on a French resident who worked in another EU country and had been taxed to the French social contributions on his property income, it is anticipated that the ECJ’s ruling will be applicable to all EU residents who receive French source income and who are already contributing to the social security system in the country of their residence or the country of their professional activity.

Outcome of the De Ruyter case

The ECJ ruled that the French social charges must be regarded as social security contributions and not as income tax, as these contributions participate directly to the financing of compulsory French social security schemes.  These contributions are applicable not only to employment income but also to income from any assets and hence are not related to the carrying out of a professional activity in France.  These contributions do not give to the taxpayer any access to the French security system.

The Court referred to Article 13 (1) of EU Regulation 1408/71, which provides that an individual cannot be subject to national insurance laws of two EU States simultaneously.

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Therefore the ECJ concluded in favour of the taxpayer ie. as he was paying social security contributions in another EU state he did not pay the French ones too.

The ECJ’s decision is only a ruling and does not in itself override French internal legislation. However, the French High Court (Conseil d’Etat) is bound by it and will unavoidably rule that the application of the social charges to Mr De Ruyter on his property income is not compatible with EU legislation.

Scope of decision

In an encouraging move, the French Conseil d’Etat recently made a first application of the ECJ’s ruling in April (case reference CE 17-04-2015- n° 365511) and decided that the application of the French social contributions on the gain made on the sale of a French property by a French resident who is not subject to a compulsory French social security system infringes EU law. The case has been sent back to the French Court of Appeal for a final decision to be made on the facts and hence is not yet regarded as precedent.  However this recent decision is a further confirmation that the ECJ’s ruling has a scope wider than just French source income, extending to taxable gains made on the sale of French properties by EU residents which, since August 2012, have also been subject to French social contributions. An infringement procedure had already been launched against France by the EU Commission on that basis, in 2013, and it is expected that the French Government will also repeal its legislation for capital gains.


The French government has announced that it will take all adequate measures to ensure that French tax law complies with EU principles. In consideration of the pending claims, the likely impact on the French budget and the forthcoming issue of the income tax statements for 2014, it is anticipated that the legislation may be amended as soon as this summer in the Additional Finance Act for 2015.

If your clients have been subject to French social contributions on their French rental income or capital gains on the sale of a French property, they will want to consider securing a claim to obtain a refund of these levies as soon as the French government has repealed its legislation. 

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