On 26 February this year, the European Court of Justice ruled that French social charges are subject to European legislation on social security.
Given that EU legislation requires that social security only be paid in one EU member state, the recent ruling means France must reimburse those non-French residents who unduly paid social charges on unearned income, such as capital gains or rental income.
Last month, Budget State Secretary Christian Eckert confirmed that only social charges paid between 2013 and 2015 will be refunded.
Lacking clarity
However, director at international advice firm Blevins Franks Jason Porter, said there is a “lack of clarity” around the process and eligibility for claiming back social tax.
“It would appear the French authorities have grudgingly accepted that the social charges concerned are those imposed between 2012-14, but actually collected between 2013 and 2015.
“Repayment will need to be applied for, but there is no template form or document.”
One-off opportunity
Porter said it looks likely that the French Government will impose a similar charge for 2016, but will restructure it to remove any potential connection with social security.
“This may well then be a one-off opportunity to recover up to three years of social charges, before they are re-imposed in 2016 under a different guise,” he added.
Confusion
There has also been some confusion around the deadline for capital gains, such as the renting or selling of property. Porter pointed out that the deadline to claim back is the 31 December of the second year after the social charge has been paid on the property.
For other income, like bank interests, the deadline is the 31 December of the second year following the filing of the tax return.
“This would mean that social charges paid on capital gains in 2012 are not refundable, while it might be possible for bank interests, dividends and rental income to be reclaimed,” Porter said.
Losing out
France collects more for its revenues from social charges than through income taxes, and social charges are generally exempt from taxpayer allowances and reliefs.
“This explains why the French Government are so eager to introduce a replacement,” Porter said. “It cannot afford to lose out on so much revenue.”
