News and Events

The Court of Justice of the EU sanctions the French tax regime imposed on non-residents

View profile for Loic Raboteau
  • Posted
  • Author

All income generated by assets held by individuals residing in France are subject to social contributions. The amended Finance Act for 2012 extended the scope of the payment of social charges to real income and real estate gains, from French sources received by non-resident individuals.

Since 2012, many non-French residents selling or letting their French properties had to pay those additional charges (15.5%) in addition to their capital gains or income taxes. This tax addition was highly criticised by the non-French residents as being discriminatory. A risk of double taxation was created on tax payers residing in a Member State.

The Court of Justice of the European Union (CJEU) in a judgment delivered on 26 February 2015, was asked to rule on the validity of the levy of social charges on patrimonial incomes perceived by a French-resident working in another Member State (Netherlands) of the European Union.

As expected, the Court has sanctioned the French tax regime entailing a cumulative application of social security legislation of two St ates. The court rules ruled this tax accumulation is contrary to European law, and therefore prohibited between Member States (European Regulation no 1408/71 whose purpose is to ensure the freedom of workers within the EU).

The court ruling is applicable to a French tax resident subject to the social security scheme of another Member State, and also applies to residents of another Member State when they are subject to social charges in France on their French property gains or incomes.

This decision should thus facilitate litigation cases already pending in France, opening the way for new claims for reimbursement of undue levies collected.

Disclaimer: These articles are for information purposes only and are not intended as legal advice. Professional advice should always be obtained before applying any information to particular circumstances.