Technical updates - Published 18th April 2015

“Illegal” French property tax opens the door for refunds by UK owners of French property.

Owners of French property who are not resident in France will be able to claim back social security taxes (known as CSG and CRDS) paid on income and capital gains. Since 2012, foreign property investors have had to pay a 15.5% social charge on French property rental income and on capital gains. The social charge applies in addition to income and capital gains taxes.

In the de Ruyter case, the Court of Justice of the European Union (CJEU) found that, where an individual was subject to the social security tax scheme in one EU country (in this case the Netherlands), they could not then be subject to taxes that have a direct link to the social security system in another EU country (in this case France). This amounted to unequal treatment because property owners resident in France were only subject to the French social
security taxes.

The CJEU ruling opens the doors for tax refunds from overseas owners of French property. Our contacts at French HLB International member firm Maupard Fiduciare, based in Paris, can assist with obtaining the refund of the reclaimable CSG / CRDS and have commented as follows:

“Almost 60,000 French or foreign individuals living outside France have been paying the CSG and CRDS for two years when renting or selling their real estate in France. They are entitled to be refunded the CSG/CRDS following the CJEU case as this relates to French or foreign non-resident individuals who own real estate in France but live outside of France. The CJEU concluded that France did not have the right to tax their French source real estate income through the CSG and the CRDS at a 15.5 % rate, since they do not benefit from French social security schemes.”

However, anyone seeking a refund will have to work quickly as the French government has put a time limit on claims. If the tax has been paid on rental income, the taxpayer has until 31 December of the second year following the year in which tax was paid. So landlords have until 31 December 2015 to reclaim tax paid in 2013 or later.

The time limit for reclaiming tax on capital gains is less favourable. Taxpayers only have until 31 December of the year following the year in which the tax was paid. So people who sold property and paid social taxes in 2014 or later have until 31 December 2015 to submit a claim.

Find out more about Menzies Property & Construction sector services.

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