Tax Alert: French social surtaxes on investment and rental income
French social surtaxes on investment and rental income: Opportunity to request a refund of surtaxes paid with regard to 2012 and 2013 income
Additional social taxes under French law
Taxpayers subject to French income tax (residents and non-residents) are liable to additional social taxes at a flat rate of 15.5% (8.2% CSG, 0.5% CRDS, 4.5% social withholding, 0.3% additional contribution and 2% solidarity tax) on their investment income.
This income includes rental income, interest income, dividend income, life annuities, capital gains on personal and real property and potentially equity income for shares/options granted before September 28th, 2012.
The decision rendered by the Court of Justice of the European Union and its tax consequences in France
The decision rendered by the CJEU on February 26th, 2015 upon request for a preliminary ruling introduced by the French “Conseil d’Etat” (administrative supreme court), states that investment income should not be subject to French additional social taxes when the taxpayer is affiliated to a non-French European social security scheme. This follows the single state legislation principle (article 13 of the EU regulation n° 1408/71), under which individuals are subject to the social security legislation of a single Member State only.
The “Conseil d’Etat” is now obliged to rule in accordance with the CJEU position.
Even before the final ruling is issued by the French court, we recommend that tax payers file claims for refunds of the overpaid French tax. Given the applicable statute of limitations, tax years 2012 and 2013 are open.
Of interest is the scope of the CJEU decision, which is not limited to the facts of the case at hand. Indeed, the decision applies to (1) French residents covered by a non-French European social security scheme and, (2) more broadly, any resident of a EU Member State covered by the social security scheme of any other Member State (notably non-residents of France who receive French source investment income).
Thus, we advise taxpayers (both resident and or non-resident of France) who have investment income and are affiliated to a European social security scheme other than France’s to file refund claims with the French tax authorities before December 31th, 2015 for income received in 2012 and before December 31, 2016 for income received in 2013.
We remain at your service to explore this opportunity with you and calculate its financial impact.